Economics of Essential Medicines

Economics of Essential Medicines

The debate of access to essential medicines has come under increasing scrutiny over the past decade because of the perceived impact the Trade-Related Aspects of Intellectual Property Rights (TRIPS) has had on developing countries. In this memo, I will describe the TRIPS legislation the effect of drug pricing on developing countries, and the impact the Gates Foundation is having on altering the economics of essential medicines.

As described in the class readings and from what we have learned from class, there is a huge disparity in the burden of disease between the developed and developing world. A few statistics are especially relevant while highlighting this disparity:

• Between 80-90% of malaria deaths occur in Sub-Saharan Africa

• More than 70% of people worldwide living with HIV/AIDS live in Sub-Saharan Africa and 16% live in South and Southeast Asia

• 99% of the deaths that occur from HIV/AIDS occur in the developing world

• >95% of deaths that occur from vaccine-preventable diseases occur in the developing world

• WHO estimates that one-third of the world’s population does not have access to essential drugs. Over 50% of the population in Asia and Africa do not have access.

Many have pointed to the lack of access in the developing world as a market failure, and an outright failure by the pharmaceutical companies to lower prices due to abuse of market power and patent protection. Critics of TRIPS argue that it simply exacerbated this failure and incentivized pharmaceutical companies to charge higher prices to consumers in markets with the greatest need. In one of our course readings, Lippert argues, contrary to the opinion of many TRIPS critics, that patents do not present a market failure but that they may present a welfare loss.

The World Health Organization (WHO) has proposed potential market interventions as possible regulatory frameworks to help alleviate this burden. They include:

• Allowing developing...