October 22, 2005
H5N1 and Tamiflu Patent “Confiscation”
I’m a little late on this, but Tyler Cowen of Marginal Revolution recently asked Should we confiscate Tamiflu property rights?. Tyler says no, and instead proposes to offer large prizes for speeding up Tamiflu production. This is not really any better than the proposal he counters.
Tyler’s motive is to change the incentives for Roche to manufacture more Tamiflu, and to emphasize the incentives for drug manufacturers in general to pour money into R&D of new drugs. Being an economist, Tyler understands the role of incentives.
Personally, I am afraid of any policy that reverses Roche’s patent. The argument runs that this is an emergency, so reversing a single patent in an emergency, which can help save lives, will have no effect on the incentives for drug companies to continue to throw money into R&D for new drugs.
But what’s getting missed is that mass-producing Tamiflu DOES NOT GUARANTEE AN END TO THE CRISIS. In fact, many experts are forecasting widespread resistance to Tamiflu should H5N1 or another strain mutate. In 12 months, any Tamilfu stockpile we have could be completely useless.
What does this mean? It means drug companies need to throw money into R&D for Tamiflu replacements, and/or into mechanisms by which Tamiflu or other anti-virals can be produced more efficiently/quickly. They need to do this now. But what is their incentive for doing so, if they know any patent claims to their results will be thrown out? That’s right: they have vritually no incentive.
Similarly, if governments offer large prizes for mass producing Tamiflu, guess what? Drug companies–even Roche’s competitors–will have little or no incentive to research and develop alternative, and possibly more effective, medicines. It’s clear to me, then, that while Tyler’s proposal might be ideologically purer, it’s still solving the wrong problem.
So what happens if, tomorrow, every member of the G8 decides to give every drug company free (or cheap) reign to mass produce Tamiflu (or large incentives for Roche to do so)? The result is we prepare for one scenario, at the risk of being massively underprepared for the other, say, 50% of likely scenarios.
From a risk avoidance perspective, I’d rather take my chances of being able to (a) avoid contact with others, and (b) acquire Tamiflu if I need it, in the scenario where Tamiflu remains effective, but is underproduced. That is preferrable to having a stockpile of Tamiflu that could be administered to every human on Earth, but have no alternative if and when the dominant flu strain becomes totally resistant.
And that’s to say nothing for the ability of governments to administer Tamiflu efficiently to those who need it even if we had a stockpile large enough for everybody. Or of the increased likelihood that the dominant flu strain will develop complete resistance should every government and health worker on Earth start administering Tamiflu–and often ineffectively–to every infected or potentially infected person.
I’m hoping that politicians from every nation understand this, are developing their strategies accordingly, and are not coerced into going along with everybody else. The result could very well be a host of different strategies applied in different regions, with the most effective winning out in the long run. Why? Because there’s not a single solution that will save the lives of 100% of infected persons, or prevent wasting valuable resources on solutions that turn out to be useless.