Pharmaceutical Innovation, Fair Following and the Constrained Value of TRIPS Flexibilities

Abstract

The Trade-Related Intellectual Property Rights (TRIPS) regime agreed by member nations of the World Trade Organization (WTO) provides public-health-protecting flexibilities to mitigate the negative externalities of diminished medicines access from cross-country harmonization of patent protection. This article analyses the expected benefits from invoking TRIPS flexibilities taking into account the real social costs and constraints of doing so. It highlights the concept of fair following and discusses why the optimal public policy leans towards free-riding by low-income countries only. It compares the welfare effects of alternative models of fair following: selective use of TRIPS flexibilities and the bilateral dependence solution. Faced with externally imposed political and macroeconomic constraints, the article argues why the bilateral dependence solution offers an alternative means of creating a high-volume low-price purchasing process that is expected to improve access to both on-patent and off-patent medicines. It notes that there is no easy, costless set of policy choices for low-income nations to follow. Even a policy choice of accepting bilateral trade deals (and using the bilateral dependence solution as a safety valve) may damage social identity trust (with fellow low-income nations) and collective bargaining leverage; and unravel the aggregation of “implementation experiences” needed for reforming the TRIPS regime.