Given the powerful impact Intellectual Property has on the development of the pharmaceutical industry and the marketing of its products, it is worthwhile considering some of the more important aspects.
The Intellectual and Industrial Property systems arise, ultimately, as a type of «social agreement» between investigators and society through which the latter undertakes to «reward» research efforts through the concession of a monopolistic privilege in the exploitation of innovative products.
In the pharmaceutical Industry, patents are of the greatest importance since the higher cost of a new product is not properly linked to the «manufacturing cost», but rather to its previous development process, during which the effectiveness and safety of the product had to be demonstrated. The «copy» is in itself very simple, and it includes the identification of the product's ingredients. Without a patent regime, all «copiers» would simply wait for a new product to finish the entire development process and would launch their own version the very next day at a price that would only reflect direct manufacturing costs. The innovator would obviously be at a disadvantage with regard to competition.
To avoid such a situation, society grants the innovator the right to exercise an absolute monopoly in the exploitation of its product during a legally established time frame, at the end of which it is assumed that the global investment, representing the entire development process of the product, has been redeemed. It is then that patent protection ceases and society has access to the ownership of the new scientific discovery. As a consequence, any other manufacturer who demonstrates to have the required capabilities receives an authorization to manufacture the product in question.
Also in the pharmaceutical industry, the tendency towards the «privatization» of scientific research has been very pronounced. The society, which towards the middle of the century participated through public research entities in the scientific development of the pharmaceutical world, has practically abandoned this activity today, leaving all the research activity of this sector in the hands of the private industry. This fact has marked modern pharmaceutical development, with regards to the type of products being developed (and for which diseases), at what cost (and prices), how quickly, etc.
This situation has led industrialized countries (where the vast majority of the research activity is conducted) to press for stronger and more forceful control mechanisms over anything connected to intellectual property. For instance, it is quite irregular that, although the World Intellectual Property Organization (WIPO) existed, developed countries should have transferred the task of vigilance over intellectual property to the GATT, something that was done simply in order to condition the development of commercial agreements to the international respect of the intellectual property regulations.
The concept of Intellectual Property, which considered as an abstract concept would appear to be a true example of «fair play» between the society as a whole and the investigators, has shown recently an alarming evolution. This appears to reflect an excessive «lobbying» of powerful innovative businesses. We shall mention below some aspects which should deserve a careful follow-up since they refer to very sensitive issues.
• Patent life: Regarding drugs specifically, the period required to recover the investment on a new product is becoming shorter. This is due to the internationalization of the markets and the significant increase in the population's purchasing power which has caused a very fast growth of the global «pharmaceutical bill», and, particularly, of the new products. However, multinationals have managed to get increasingly longer periods of patent monopoly, to the point that what was previously considered the maximum limit (20 years) will now prevail in any negotiation.
• Mandatory Licences: The patent should essentially consist of the social acknowledgement that the innovator should recover the investment. Therefore, it should give an extra benefit to the new product developer, in order to cover liberally any investigational cost. Under these conditions, the option of monopolistic exploitation used today does not seem the most adequate, since it lends itself to all types of abuse on the part of the innovator. The latter can manipulate the market to suit himself during the entire process of patent protection: he may unilaterally establish prices, restrict supplies, select licensees (if that is what he wants), etc.
A mechanism more in accordance with «fair play» would be the generalized use of mandatory licences. This system would establish that all suitable manufacturers could demand the right to manufacture the product by paying adequate royalties. Society would be greatly benefited because the product would always be provided according to the principles of free market and competition. Also the innovator would benefit greatly since the wider the distribution of the product the greater the royalties received.
In any case, even if the system of mandatory licences were not generalized, it is still necessary to recognize certain minimal conditions that would allow to claim the right to a mandatory licence should the conditions of patent exploitation be detrimental to an adequate market operation, and to the right of the society to obtain the product in suitable supply conditions.
• Universal Exhaustion: Another one of the great recent controversies on intellectual property is whether or not import by an unauthorised third party of products manufactured in other countries by the owner of the patent or his licensee should be admitted. There are still strong «nationalistic» residues that compel many countries (USA amongst them) to support the prohibition to import under the above conditions. This infringes all the principles of free trade by recognising monopolistic advantages to local manufacturers over those from other countries.
• The concept of exploitation (production-marketing): A similar controversy arises over the concept of adequate patent exploitation. Many countries support the idea that adequate exploitation means that the product is manufactured locally, since otherwise they would be upholding protectionist policies contrary to free trade.
• Retroactivity?: Although it is theoretically possible that no country challenges the «sacred principle» of non-retroactive industrial property rights, recent access to the system by many countries has triggered numerous proposals to «recover» the time lost by patent owners. The most popular proposal is the so-called pipeline: a mechanism by which the new signatories to the industrial property system would accept to approve old patents, the only requirement being that the products in question should not have been effectively distributed in their markets. The origin of this situation is usually found in the time elapsed between acceptance of the patent and obtention of marketing approval for the product. This pipeline theory is a clear attack to the concept of novelty implicit in the intellectual property system.