Thursday, August 16, 2007

The New Venezuela in Asia

Thailand, once a case study in howa developing country can move forward through long-term economic growth, is nowmoving backward. The military coup last September marked the beginning ofthe U-turn, and the new government has since reversed many of the policies thathad helped to bring unprecedented prosperity to Thailand.

Particularly alarming has been thegovernment's decision, in November, to issue what's known as"compulsory licenses." These licenses authorize thegovernment to import or manufacture generic versions of medications that areunder patent by European and American-based companies. In short, the governmentconfiscated the intellectual property rights of four pharmaceuticalmanufacturers: Merck, which makes the AIDS medicine Efavirenz; AbbottLaboratories, which makes Kaletra/Aluvia, also for AIDS; and Sanofi-Aventis andBristol-Myers Squibb, makers of heart medicine Plavix.

Leftist activists applauded inBangkok and Geneva. For years the global socialist movement had beensearching for a leader to promote their agenda, which is geared toward theabolition of patents for medicine.

But this step was taken at a timewhen pharmaceutical companies were offering a pricing system, known as"tiered pricing," under which companies charge more for theirproducts in wealthy nations than in poor ones, so that the wealthy subsidizehealth care for those who cannot afford to pay.

Abbott is a case in point. In April the company decided to give the activists what they want. Through an agreement with the World Health Organization, Abbott reduced itsprice for Kaletra/Aluvia from $2200 to $1000 per patient per year for more than40 "middle-tier" developing countries. In wealthier countriessuch as the United States the price is many times higher. And thanks towhat the mid-tier and developed countries will pay, Abbott distributes theproduct for $500 in nearly 70 Least Developed Countries (LDCs), a price forwhich the company earns nothing.

Now the middle tier is gobbling upthe new offer. Earlier this summer another country hot to issuecompulsory licenses, Brazil, accepted Abbott's $1000 price point. But Thailand has so far refused, which calls into question whether this isreally about drug prices after all. On thequestion of whether Thailand can afford the new lower prices consider that thegovernment has increased the military budget by the equivalent of $1.5 billion. The anticipated savings from issuing compulsory licenses? Just $24 million.

Perhaps more telling, VichaiChokevivat, a Thai health official, responded to Brazil's acceptance bysaying that regardless of the eventual price, "the condition that we stopthe a condition we cannot accept."

Thailand refused lower drug pricesbecause they carry a condition of respecting property rights?

More proof that this issue is lessabout Thailand's health and more about the military government stealingproperty for its own benefits lies with the direct beneficiary of thecompulsory license: the state-owned, for-profit Government PharmaceuticalOrganization (GPO). The GPO has a long history of corruption andprofiteering, and it stands to profit from the decision to compulsory licenseWestern medicines.

Such a solution will certainly notimprove health in Thailand. The GPO's facilities have not passedthe World Health Organization's manufacturing standards, even as WHOspent millions to try to help the Thais through the approval process. Thegovernment maintains its drugs are safe, yet health officials in Thailand recentlypulled seven generic heart medications off the shelves because they failedsafety tests. Unfortunately this action came after the medicines weredistributed to patients.

The military-installed Thaigovernment is unpopular domestically. Since coming to power viacoup last year the military has pursued policies imposing censorship andcapital controls, consolidating industry and rapidly expanding its militarybudget. While it has won accolades from dictatorships such as Iran,it's quite clear that the government is attempting to win points at homeby bashing Western multinational drug companies.

The stakes are high. Aroundthe world the anti-globalization activists who prefer the socialism ofVenezuela and Cuba to free-market economics are agitating for other countriesto follow Thailand's lead. After an intense flirtation withcompulsory licenses, Brazil has accepted Abbott's price, but activiststhere would be only too happy to reverse that policy for the next drug.

This simmering leftism does notpromise better health care - since the real problem is not with drugprices, but with the country's health-care infrastructure -- and itcertainly does not promise economic growth. In chasing the approval ofthe Left, Thailand is drifting dangerously toward the failed and antiquatedLatin American model, and away from the Asian model which has brought itprosperity. Intellectual property rights are integral to that successfulmodel and companies have them, too. Taking these rights away for the useof government is a slippery slope away from the democracy the Left supposedlyholds dear. It is not too late for Thailand to do another U-turn andreturn to the policies that gave it increased living standards and hope for abetter tomorrow.

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