The Market failure of the Patented Medicine Model Maybe It's Time To Test The Creative Capitalism Model
By Melvin J. Howard
The following, seemingly prophetic, quote from an 1851 edition of the The Economist describes perfectly the degenerative phase the patented medicine model has reached by the start of the 21st century."The public will learn that patents are artificial stimuli to improvident exertions; that they cheat people by promising what they cannot perform; that they rarely give security to really good inventions, and elevate into importance a number of trifles...no possible good can ever come of a Patent Law, however admirably it may be framed." This 1851 quote gives a good description of what has become of today's pharmaceutical sector when viewed from a global perspective. Patents have certainly provided "artificial stimuli to improvident exertions" or, put another way, wasteful spending. And there is no question that we have seen the elevation "into importance a number of trifles", namely blockbuster lifestyle drugs such as Viagra, Rogaine, and various anti-depressants, as well as unnecessary drugs that are virtually the same as a host of other drugs already on the market. All this takes places against the backdrop of a developing world HIV/AIDS crisis that has resulted into overwhelming death in some African counties, and is now starting its exponential growth throughout Eastern Europe, the former Soviet states, China and the rest of South-East Asia.
The West has remained largely unconcerned with the HIV/AIDS crisis in Africa. There have been some nice efforts from various quarters but so far the response has been woefully inadequate from those that can most afford to help. To put it bluntly, this is because the "self-interest" component just isn't there. Africa is only a minor trading partner with the West, and the West has relatively little economic interest in Africa. So far, all the help adds up to not enough, and the disease continues to outpace efforts to stop it. Out of a $13 billion-a-year request from the UN, the West can only bare to part with $2 billion to assist in dealing with the problem of HIV/AIDS in the developing world. And, compared to other drug investment, relatively little goes into finding a vaccine. If and when a vaccine is available, distribution of it will pose the next major hurdle.
But now, there are increasing reports detailing the spread of HIV/AIDS throughout the former or semi-communist, now market-directed, nuclear powered giants - RU.S.S.I.A and China. China's Titanic Peril" reveals the state of the problem of HIV/AIDS in China. With 1-3 million people infected today, infection rates have been increasing at more in than range between 10 and 20 million. The former Soviet states have seen a five-fold increase in infections in the past three years, have more than 1 million people infected, and the fastest spreading epidemic of all, according to a past UN Report. A survey from British scientists predicts that within 5 years, 1 in every 20 Russian adults will be infected.
Both China and RU.S.S.I.A are rapidly developing market economies. One is a major trading partner of the United States, the other has become one of the European Union. Lest you think this development will help, think about the African nation of Botswana. Botswana was the golden child of economic development of sub-Saharan Africa, financed largely by its mining industry after it gained independence. Its first AIDS case was detected in 1985, then HIV/AIDS built slowly for several years. By the 1990s it was spreading furiously throughout the general population so that by 2002 it affects almost 40 % of the population. Why so much worse than the less developed sub-Saharan region, you might be wondering? Largely because of the rapid economic development itself. The road networks that come with development, the mobility of labor away from home and families that comes with globalization, and men leaving wives to get work, all sped up the spread.
Now, many people in Africa think China and RU.S.S.I.A look a bit like their countries did five to ten years ago. But there's more. With Western style development comes rapid growth in drug use, teenage sex, commercial sex and poverty. These increases are being observed across China, Eastern Europe and RU.S.S.I.A and the relevant populations are showing huge increases in infection. In addition, the old social safety nets and health care systems have largely collapsed. In rural China, the poverty of farmers has forced them to sell their blood for trade on the lucrative national and international plasma markets. Millions of rural people participated in these plasmapheresis programs in return for cash payments to supplement their ever-dwindling incomes. In this process their blood was taken, pooled with that of lots of other people, and the plasma separated from the red blood cells. The plasma is sold on the plasma market and the now pooled red blood cells are then re-infused back into the pool of donors so that they can keep giving blood at a high frequency. In such a process, all it takes is for 1 person in a pool of 100 to have HIV and all 100 get it. This has greatly increased China's HIV problem. Add this to the fact that population pressures and the preference for male children has created a dangerously high and unnatural male to female ratio, plus the big taboo on discussion about sex in eastern cultures, and you see a growing number of catalysts for disease spread.
China is currently the second-largest trading partner of the U.S., likely to be the number 1 before too long, and with a strong chance of becoming number 1. With China joining the World Trade Organization there's tons of capital wanting to invest in China. As residents and consumers in the U.S., our lives are undeniably intertwined with those of the Chinese. So much of our own purchasing power and hence, quality of life, is a direct result of the relatively low cost of labor in China. As our population ages, more and more of the productive labor force we depend on will be in countries like China. In this case, the economic interests of the U.S. are very much tied up with the well being of the labor force of China. If the U.S. does for China's emerging epidemic what it did for Africa, which was not very much, the consequences on the U.S. economy could be quite severe. Maybe this self-interest component is the only thing that can get the U.S. to do what it can well afford to do about this crisis in the developing world. Then, I am sure, a vaccine could be found and distributed in no time at all. Similar arguments apply about the relationship between Western and Eastern Europe. The European Union has an added incentive. Since this is all happening right next door, the epidemic may very well stretch into Western Europe if they don't help do something about it in a hurry.
U.S. trading partners ($ in billions)
| Rank | Country | U.S. exports this much | U.S. imports this much | Total Trade |
| 1. | Canada | 248.8 | 276.5 | 525.3 |
| 2. | China | 91.9 | 364.9 | 456.8 |
| 3. | Mexico | 163.3 | 229.7 | 393.0 |
| 4. | Japan | 60.5 | 120.3 | 180.9 |
| 5. | Germany | 48.2 | 82.7 | 130.9 |
| 6. | United Kingdom | 48.5 | 49.8 | 98.3 |
| 7. | South Korea | 38.8 | 48.9 | 87.7 |
| 8. | France | 27.0 | 38.6 | 65.6 |
| 9. | Taiwan | 26.0 | 35.9 | 61.9 |
| 10. | Brazil | 35.4 | 23.9 | 59.3 |
| 11. | Netherlands | 35.0 | 19.0 | 54.0 |
| 12. | India | 19.2 | 29.5 | 48.8 |
| 13. | Singappore | 29.1 | 17.5 | 46.6 |
| 14. | Venezuela | 10.7 | 32.8 | 43.4 |
| 15. | Saudi Arabia | 11.6 | 31.4 | 43.0 |
| | Total, Top 15 Countries | 894.1 | 1401.3 | 2295.4 |
| | Total, All Countries | 1278.1 | 1912.1 | 3190.2 |
