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Developing and Distributing Essential Medicines to Poor Countries: The DEFEND Proposal

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  • Mattias Ganslandt
  • Keith E. Maskus
  • Eina V. Wong

Abstract

The poorest nations of the world suffer from extreme disease burdens, which go largely untreated because weak incomes and the prevailing system of intellectual property rights fail to provide sufficient incentives to develop new treatments and distribute them at low cost. Recent price reductions for HIV/AIDS drugs are encouraging but offer only a limited solution. We discuss the economic tradeoffs involved in supporting drug and vaccine research through exclusive rights and distributing the fruits of that research to poor countries. We offer a proposal to overcome these incentive problems. Our DEFEND ("Developing Economies' Fund for Essential New Drugs") proposal would work within the existing international legal structure but significantly would raise the returns to R&D in critical medicines and expand distribution programs. A public international organization would purchase the license rights for designated areas and distribute the drugs at low cost with a required co-payment from local governments. Furthermore, governments would restrict parallel trade to support desirable price discrimination. Costs would be funded largely by increased foreign assistance from the developed nations, but these costs would be low in relation to current aid budgets. We believe a strong program could be mounted for $8 billion to $12 billion per year and would be an extremely effective use of foreign aid.
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Suggested Citation

  • Mattias Ganslandt & Keith E. Maskus & Eina V. Wong, 2001. "Developing and Distributing Essential Medicines to Poor Countries: The DEFEND Proposal," The World Economy, Wiley Blackwell, vol. 24(6), pages 779-795, June.
    • Handle: RePEc:bla:worlde:v:24:y:2001:i:6:p:779-795
    DOI: 10.1111/1467-9701.00382
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    References listed on IDEAS

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    1. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, September.
    2. Keith E. Maskus, 1993. "Intellectual property rights and the Uruguay Round," Economic Review, Federal Reserve Bank of Kansas City, vol. 78(Q I), pages 10-25.
    3. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. Carsten Fink, 2001. "Patent Protection, Transnational Corporations, and Market Structure: A Simulation Study of the Indian Pharmaceutical Industry," Journal of Industry, Competition and Trade, Springer, vol. 1(1), pages 101-121, March.
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    1. Ramesh Govindaraj & Gnanaraj Chellaraj, 2002. "The Indian Pharmaceutical Sector : Issues and Options for Health Sector Reform," World Bank Publications - Books, The World Bank Group, number 15231, December.
    2. Frank Müller-Langer, 2009. "Does Parallel Trade Freedom Harm Consumers in Small Markets?," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 11(1), pages 11-41, April.
    3. Börner, Kira, 2004. "Political Economy Reasons for Government Inertia: The Role of Interest Groups in the Case of Access to Medicines," Discussion Papers in Economics 313, University of Munich, Department of Economics.
    4. Padmashree Gehl Sampath, 2010. "Economic Aspects of Access to Medicines after 2005: Product Patent Protection and Emerging Firm Strategies in the Indian Pharmaceutical Industry," Working Papers id:3336, eSocialSciences.
    5. Panle Jia & Pinelopi K. Goldberg & Shubham Chaudhuri, 2006. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," American Economic Review, American Economic Association, vol. 96(5), pages 1477-1514, December.
    6. Hernán Jaramillo Salazar & José Manuel Restrepo Abondano & Catalina Latorre Santos, 2003. "Mercado de Medicamentos, Regulación y Políticas Públicas," Borradores de Investigación 4328, Universidad del Rosario.
    7. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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