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Intellectual Property and Pharmaceutical Drugs: An Ethical Analysis

Published online by Cambridge University Press:  23 January 2015

Richard T. De George
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Abstract:

The pharmaceutical industry has in recent years come under attack from an ethical point of view concerning its patents and the non-accessibility of life-saving drugs for many of the poor both in less developed countries and in the United States. The industry has replied with economic and legal justifications for its actions. The result has been a communication gap between the industry on the one hand and poor nations and American critics on the other. This paper attempts to present and evaluate the arguments on all sides and suggests a possible way out of the current impasse. It attempts to determine the ethical responsibility of the drug industry in making drugs available to the needy, while at the same time developing the parallel responsibilities of individuals, governments, and NGOs. It concludes with the suggestion that the industry develop an international code for its self-regulation.

Type
Special Issue
Information
Business Ethics Quarterly , Volume 15 , Issue 4 , October 2005 , pp. 549 - 575
Copyright
Copyright © Society for Business Ethics 2005

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References

Notes

1. Unlike other property, intellectual property is infinitely shareable. It can be stolen, borrowed, copied, and one still has it. Intellectual property refers to some products of the mind. But arguably the most important products—ideas—cannot be claimed as one’s property. Only the expressions of ideas or their embodiment in some product or process can with any plausibility be said to constitute property in any sense. Even in these cases, no expression or invention is developed completely independently. In the realm of knowledge one always builds on what has gone and has been developed before and is part of the public domain.

2. See Lawrence C. Becker, Property Rights: Philosophical Foundations, Boston: Routledge & Kegan Paul, 1977, for an extended discussion of the foundations of property rights. See also Arthur Kuflik, “Moral Foundations of Intellectual Property Rights,” in Owning Scientific and Technical Information, ed. Vivian Weil and John W. Snapper, New Brunswick, N.J.: Rutgers University Press, 1989. This is not to deny that some philosophers use a Lockean approach to defend intellectual property.

3. For a sample of the economic arguments, see Frank R. Lichtenberg, “Cipro and the Risks of Violating Pharmaceutical Patents,” National Center for Policy Analysis (November 15, 2001), at http://www.ncpa.org/pub/ba/ba380/; and Henry Grabowski, “Patents, Innovation and Access to New Pharmaceuticals,” Journal of International Economic Law (2002): 849–60.

4. Common Cause, “PhRMA Wins Big After Spending More Than a Half Billion on Contributions, Lobbying and Ad Campaigns” (July 1, 2002), notes that the Pharmaceutical Research and Manufacturers Association (PhRMA) spent at least $558 million in past decade on political contributions and that between 1993 and 2000 it spent over $65 million on ads fighting legislative proposals it dislikes. See also Bill Hogan, “Pulling Strings from Afar,” AARP Bulletin (February 2003): 3–4, who claims that the pharma industry spends more on direct lobbying and front groups than any other industry.

5. See Peter J. Hammer, “Differential Pricing of Essential AIDS Drugs: Markets, Politics, and Public Health,” Journal of International Economic Law (2002): 888, on how “the rhetoric of strong intellectual property rights leading to innovation that meets social needs rings particularly hollow in this setting.”

6. The World Health Organization publishes an essential drug list (EDL). I do not mean this list when I use the term “essential life-saving drugs,” because the EDL does not include new, expensive drugs still covered by patent. It does not include, for instance, many of the AIDS drugs. The criteria for inclusion in the EDL are safety, efficacy, and reasonable price. As a result only a very few drugs that are not generic are included in the list. For information on the EDL, see http://www.twnside.org.sg/title/twr120c.htm.

7. The situation is very similar to the situation in 1948 when the UN Declaration of Human Rights was adopted. Philosophers and others had discussed the philosophical justification for human rights for three years and were unable to find one justification on which they all agreed. They found, however, that they could agree on the set of rights they enumerated in the Declaration, even though different philosophers justified those rights in different ways.

8. We start here because the Declaration is widely accepted worldwide.

9. Most of the philosophical literature is concerned with the right to health care, rather than the right to health. Three exceptions are Tom L. Beauchamp and Ruth R. Faden, “The Right to Health and the Right to Health Care,” The Journal of Medicine and Philosophy 4(2) (June 1979): 118–31; Nora K. Bell, “The Scarcity of Medical Resources: Are There Rights to Health Care?” The Journal of Medicine and Philosophy 4(2) (June 1979): 158–69; and Dan W. Brock, “Broadening the Bioethics Agenda,” Kennedy Institute of Ethics Journal 10(1) (March 2000): 21–38. But both of the first two articles place their emphasis on the right to health care.

10. Although the right to health care is widely accepted by philosophers as a valid right, there is considerable discussion about the proper way to justify it. John C. Maskop, “Rawlsian Justice and a Human Right to Health Care,” The Journal of Medicine and Philosophy 8(4) (November 1983): 329–38, considers whether Art. 25 of the UN Universal Declaration of Human Rights can be justified using Rawls’s theory. He argues that attempts by others (such as Ronald Green and Norman Daniels) fail, and even if other attempts succeed the defense would only be as strong as Rawls’s theory, which has been heavily attacked. Maskop suggests (following Joel Feinberg) considering health care a social ideal. Norman Daniels, “Rights to Health Care and Distributive Justice: Programmatic Worries,” Journal of Medicine and Philosophy 4 (June 1979): 174–91, argues that the right to health care can only be specified by reference to a general theory of distributive justice. David DeGrazia, “Grounding a Right to Health Care in Self-Respect and Self-Esteem,” Public Affairs Quarterly 5(4) (October 1991): 301–18, bases the right to health care on self-respect and self-esteem. Amartya Sen, “Elements of a Theory of Human Rights,” Philosophy & Public Affairs 32(4) (Fall 2004): 315–56, approaches rights from the point of view of capabilities.

11. The literature typically addresses the issues of fair allocation of resources and the obligation of the state towards its people in providing health care. Emphasis is on the system and how it should be changed in the United States rather than on other actors other than the state. See, for example, Norman Daniels, “Health Care Needs and Distributive Justice,” Philosophy and Public Affairs 10 (Spring 81): 146–79, as well as the articles in note 10.

12. I shall not enter here into a consideration of whether a system of socialized medicine is preferable, from a moral point of view, to a privatized system that relies on insurance. In either system the government bears responsibility for the system and for ensuring that medical care at least at the basic level is available to all its citizens.

13. Perhaps the best known statement and application of the principle with respect to alleviating hunger in the world is Peter Singer, “Famine, Affluence, and Morality,” Philosophy and Public Affairs 1(3) (Spring 1972): 229–43.

14. See, among others, Virginia Held, “Can a Random Collection of Individuals Be Morally Responsible?,” Journal of Philosophy 67 (July 23, 1970): 471–80; Collective Responsibility: Five Decades of Debate in Theoretical and Applied Ethics, ed. Larry May and Stacey Hoffman, Lanham, Md.: Rowman & Littlefield, 1991; R. S. Downie, “Collective Responsibility in Health Care,” Journal of Medicine and Philosophy 7 (February 1982): 43–56; Peter French, “Collective Responsibility and the Practice of Medicine,” Journal of Medicine and Philosophy 7 (February 1982): 65–88.

15. For an extended discussion of limits on health care, see Norman Daniels and James Sabin, Setting Limits Fairly (New York: Oxford University Press, 2002), which deals with issues of establishing priorities and rationing care and also with fairness of a system, such as the U.S., that leaves 45 million people uninsured.

16. For a more detailed discussion of the relation of social responsibility, moral responsibility, and legal responsibility, see Richard T. De George, Business Ethics, 6th ed., Upper Saddle River, N.J.: Prentice Hall, 2005, 198–206.

17. The pharmaceutical industry has not, on the whole, adopted the position of Milton Friedman that the only social responsibility of corporations is to increase profits for their shareholders (Milton Friedman, “The Social Responsibility of Business is to Increase its Profits,” The New York Times Magazine, September 13, 1970).

18. Johnson & Johnson: “Our Credo: We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.” Online at http://www.jnj.com/our_company/our_credo/index.htm. The principle is one worth following, whether or not Johnson & Johnson, or any other particular company, lives up to it in all cases.

19. See the Orphan Drug Act (as Amended) at http://www.fda.gov/orphan/oda.htm. Larry Stevens, “Orphan Drug Act at 20: Big Gains, Some Strains,” August 4, 2003, at AMNews (http://www.ama-assn.org/sci-pubs/amnews/pick_03/gvsa0804.htm), notes that the FDA places no control on pricing and provides no incentive to keep prices down or for developing a drug for one disease rather than another.

20. “Health Care and Intellectual Property: The Orphan Drug Act” at http://www.cptech.org/ip/health/orphan/joins others in citing as a defect of the Orphan Drug Act the fact that companies sometimes use the Orphan Drug Act to keep other companies from bringing drugs to market, that sometimes it is counterproductive and that some companies use the Act to cover a drug previously developed and now used for a new indication. See also “Excerpts from James Love, ‘Comments on the Orphan Drug Act and Government Sponsored Monopolies for Marketing Pharmaceutical Drugs’” at http://www.cptech.org/ip/health/orphan/orphan92.html, which argues that the Act needs more targeted incentives and more public accountability.

21. Thomas Maeder, “The Orphan Drug Backlash,” Scientific American (May 2003): 80–87. He notes that in the decade before the law the U.S. produced thirty-four orphan drugs, while in the two decades since then, American companies have produced 229 orphan drugs, treating 11,000,000 patients. Nonetheless, he is critical of the salami-slicing technique, which results from the FDA permitting “companies to parse diseases into ‘medically plausible subsets’” (87).

22. Developing World Bioethics 1(1) (2001) carried a “Symposium: Drugs For the Developing World” with essays by David B. Resnik, Norman Daniels, and Dan W. Brock. While Resnik put emphasis on the social responsibility of pharmaceutical companies, Daniels argued for the domestic and international action to address the problem of allocation, and Brock questioned the moral obligation of developing countries to respect patents when violating such patents is the only effective means of making needed medicines available to their people.

23. Public Citizen Congress Watch, “Drug Industry: Prices, Profits and R&D, Campaign Contributions & Lobbying,” at http://www.citizen.org/congress/reform/drug_industry/profits.

24. Mitch Miller, AIDSMedsd.com”Forum,” Aug 4, 2004, at http://www.aidsmeds.com/Fusetalk/messageview.cfm?catid=5&threadid=14483.

25. Public Citizen, April 18, 2002, “Pharmaceutical Industry Ranks as Most Profitable Industry—Again” at http://www.citizen.org/congress/reform/drug_industry/profits.

26. NIHCM, “Changing Patterns of Pharmaceutical Innovation,” p. 3 at http://www.nihcm.org/innovations.pdf.

27. Richard Laing, “Global Issues of Access to Pharmaceuticals and Effects of Patents,” pp. 4–5, at http://dcc2.bumc.bu.edu/richard/IH820/GenevaPresentation.

28. MSF Access to Essential Medicines Campaign “An advance for HIV/AIDS treatment access in the developing countries,” 2 July 2004 at http://www.accessmed-msf.org/prod/publications.asp?scntid=272004153542&contenttype=PARA&.

29. TRIPS is the Agreement on Trade-Related Aspects of Intellectual Property Rights, and is Annex 1C of the Marrakesh Agreement establishing the World Trade Organization and signed in 1994. The text of the original Agreement is available at http://www.wto.org/english/tratop_e/trips_e/t_agm0_e.htm. It has been modified and interpreted at subsequent meetings of the WTO.

30. See item 1, 5 (c) of the Doha WTO Ministerial “Declaration on the TRIPS agreement and public health,” 20 November 2001 (WT/MIN(01)/DEC/2, available at http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm.

31. Anup Shah, “Pharmaceutical Corporations and Aids” at http://www.globalissues.org/TradeRelated/Corporations/AIDS.asp#USThreatenedTradeSanctionsonSouthAfricaforTryingtoHelpitsPeople. See Hammer, “Differential Pricing of Essential AIDS Drugs,” 883–912, especially 900–03 for details of the about-face by U.S. drug companies in South Africa in 2000–2001.

32. For a discussion of other options, see F. M. Scherer and Jayashree Watal, “Post-TRIPS Options for Access to Patented Medicines in Developing Nations,” Journal of International Economic Law (2002): 913–39.

33. Among other sources, see CBS News, 60 Minutes, “Prescriptions and Profits” (August 22, 2004), at http://www.cbsnews.com/stories/2004/03/12/60minutes/main605700.shtml; and Bain & Company, “The Pharma Innovation Divide: The High Cost of Europe’s ‘Free Ride,’” at http://www.bain.com/bainweb/Consulting_Expertise/hot_topics/detail.asp?id=22.

34. In 2003, the prices of the thirty most-prescribed drugs to senior citizens increased, on average, 4.3 times the rate of inflation, with Combivent (used to treat chronic asthma) rising 13.2 times the rate of inflation, and Diovan (used to treat high blood pressure) rising 8.6 times the rate of inflation, among others, according to a Families USA Report, “Sticker Shock: Rising Prescription Drug Prices for Seniors,” at http://www.familiesusa.org/site/PageServer?pagename=Media_Sticker_Shock_Release.

35. Pharmacist.com, “FDA threatens penalties for ‘aiding’ importation of Canadian drugs,” March 13, 2003, at http://www.pharmacist.com/articles/h_ts_0232.cfm; Patricia Barry, “More North Americans Go North for Drugs,” AARP Bulletin (April 2003): 3–4.

36. See, among other sources, Marcia Angell, The Truth About the Drug Companies: How They Deceive us and What to Do About It, New York: Random House, 2004.

37. Ian Maitland, “Priceless Goods: How Should Life-Saving Drugs Be Priced?” Business Ethics Quarterly 12(4) (2002): 451–80, presents a good review of the arguments against the pricing of life-saving drugs by pharmaceutical companies. He tends to answer them in terms of the SQA, but he correctly states that “the real moral challenge of pricing medicines … is to determine how pricing medicines helps or hinders getting them to people who need them” (470).

38. According to the Fortune 500 Report, in 2001, the pharmaceutical industry was the most profitable industry again for several years running. In 2001 the profit of the top ten drug makers increased 33 percent, and drug prices increased 10 percent, even though the rate of inflation was only 1.6 percent. The Public Citizen (April 18, 2002, “Pharmaceutical Industry Ranks as Most Profitable Industry—Again” at http://www.citizen.org/congress/reform/drug_industry/profits) notes that “The drug industry maintains that it needs extraordinary profits to fuel risky R&D into new medicines. But companies plow far more into profits than into R&D. Fortune 500 drug companies channeled 18.5 percent of revenue into profits last year. Yet they spent just 12.5 percent of revenue on R&D.” It also reports that for 2002 the industry had return on assets of 14.1 percent (compared with a median of 2.3 percent for Fortune 500 companies); that it spent 30.8 percent of its revenue on marketing and administration, but only 14.1 percent on R&D; and that its direct-to-consumer advertising increased from $800 million in 1996 to $2.7 billion in 2001. (Public Citizen, Congress Watch, June 2003, “2002 Drug Industry Profits: Hefty Pharmaceutical Company Margins Dwarf Other Industries,” at http://www.citizen.org/congress/reform/drug_industry/r_d/articles.cfm?ID=9923).

39. Consider the difference between a method of doing business (such as Amazon.com’s one-click patent) and a life-saving drug, both of which are covered by the same patent law.

40. “Australian Pharmaceutical Patent Term Extension Database,” at http://www.drugterm.com/help.htm.

41. In July 2002 the FTC study “Generic Drug Entry Prior to Patent Expiration” recommended changes to the provisions of the Hatch-Waxman Act governing generic drug approval prior to patent expiration. The Report is available at http://www.ftc.gov/os/2002/07/genericdrugstudy.pdf.

42. Julie Appleby and Jayne O’Donnell, USA Today, “Consumers Pay as Drug Firms Fight Over Generics,” June 6, 2002.

43. Chris Adams and Gardiner Harris, “Drug Firms Face Growing Pressure Over Extensions of Their Patents,” Wall Street Journal (online), March 19, 2002, available at http://www.chelationtherapyonline.com/technical/p15.htm.

44. In 1988, over 170 members of the Chemical Manufacturers Association of the United States adopted industry wide Guiding Principles of a “Responsible Care” program. They were published in full-page ads in the New York Times and the Wall Street Journal on April 11, 1990. Since then companies in other countries have adopted the code. See De George, Business Ethics, 527.

45. Amir Attaran and Lee Gillespie-White, “Do Patents for Antiretroviral Drugs Constrain Access to AIDS Treatment in Africa?” Journal of the American Medical Association 286(15): 1886–92 (October 17, 2001) (at http:/mail.iipi.org/db/news/detail.asp?itemID=45), suggest that “Brand-name pharmaceutical companies might also consider adhering to a code of practice, in which they agree to voluntarily license patents for important medicines (antiretroviral drugs and others) to high-quality generic manufacturers willing to supply at low prices” (1891).