Lives versus profits
By Joseph E. Stiglitz
Nobel laureate in economics, University Professor at Columbia University
The United States Supreme Court recently began deliberations in
a case that highlights a deeply problematic issue concerning
intellectual-property rights. The Court must answer the following
question: Can human genes - your genes - be patented? Put another
way, should someone essentially be permitted to own the right, say,
to test whether you have a set of genes that imply a higher than
50% probability of developing breast cancer?
To those outside the arcane world of intellectual-property rights,
the answer seems obvious: No. You own your genes. A company might
own, at most, the intellectual property underlying its genetic
test; and, because the research and development needed to develop
the test may have cost a considerable amount, the firm might
rightly charge for administering it.
But a Utah-based company, Myriad Genetics, claims more than that.
It claims to own the rights to any test for the presence of the two
critical genes associated with breast cancer - and has ruthlessly
enforced that right, though their test is inferior to one that Yale
University was willing to provide at much lower cost. The
consequences have been tragic: Thorough, affordable testing that
identifies high-risk patients saves lives. Blocking such testing
costs lives. Myriad is a true example of an American corporation
for which profit trumps all other values, including the value of
human life itself.
This a particularly poignant case. Normally, economists talk about
trade-offs: weaker intellectual-property rights, it is argued,
would undermine incentives to innovate. The irony here is that
Myriad's discovery would have been made in any case, owing to a
publicly funded, international effort to decode the entire human
genome that was a singular achievement of modern science. The
social benefits of Myriad's slightly earlier discovery have been
dwarfed by the costs that its callous pursuit of profit has
imposed.
More broadly, there is increasing recognition that the patent
system, as currently designed, not only imposes untold social
costs, but also fails to maximize innovation - as Myriad's gene
patents demonstrate. After all, Myriad did not invent the
technologies used to analyze the genes. If these technologies had
been patented, Myriad might not have made its discoveries. And its
tight control of the use of its patents has inhibited the
development by others of better and more accurate tests for the
presence of the gene. The point is a simple one: All research is
based on prior research. A poorly designed patent system - like the
one we have now - can inhibit follow-on research.
That is why we do not allow patents for basic insights in
mathematics. And it is why research shows that patenting genes
actually reduces the production of new knowledge about genes: the
most important input in the production of new knowledge is prior
knowledge, to which patents inhibit access.
Fortunately, what motivates most significant advances in knowledge
is not profit, but the pursuit of knowledge itself. This has been
true of all of the transformative discoveries and innovations -
DNA, transistors, lasers, the Internet, and so on.
A separate US legal case has underscored one of the main dangers of
patent-driven monopoly power: corruption. With prices far in excess
of the cost of production, there are, for example, huge profits to
be gained by persuading pharmacies, hospitals, or doctors to shift
sales to your products.
The US Attorney for the Southern District of New York recently
accused the Swiss pharmaceutical giant Novartis of doing exactly
this by providing illegal kickbacks, honoraria, and other benefits
to doctors - exactly what it promised not to do when it settled a
similar case three years earlier. Indeed, Public Citizen, a US
consumer advocacy group, has calculated that, in the US alone, the
pharmaceutical industry has paid out billions of dollars as a
result of court judgments and financial settlements between
pharmaceutical manufacturers and federal and state governments.
Sadly, the US and other advanced countries have been pressing for
stronger intellectual-property regimes around the world. Such
regimes would limit poor countries' access to the knowledge that
they need for their development - and would deny life-saving
generic drugs to the hundreds of millions of people who cannot
afford the drug companies' monopoly prices.
The issue is coming to a head in ongoing World Trade Organization
negotiations. The WTO's intellectual-property agreement, called
TRIPS, originally foresaw the extension of "flexibilities" to the
48 least-developed countries, where average annual per capita
income is below $800. The original agreement seems remarkably
clear: the WTO shall extend these "flexibilities" upon the request
of the least-developed countries. While these countries have now
made such a request, the US and Europe appear hesitant to
oblige.
Intellectual-property rights are rules that we create - and that
are supposed to improve social well-being. But unbalanced
intellectual-property regimes result in inefficiencies - including
monopoly profits and a failure to maximize the use of knowledge -
that impede the pace of innovation. And, as the Myriad case shows,
they can even result in unnecessary loss of life.
America's intellectual-property regime - and the regime that the US
has helped to foist upon the rest of the world through the TRIPS
agreement - is unbalanced. We should all hope that, with its
decision in the Myriad case, the Supreme Court will contribute to
the creation of a more sensible and humane framework.
Copyrights: Project Syndicate