July 14, 2013, 9:04 pm
How
Intellectual Property Reinforces Inequality
In the war against
inequality, we’ve become so used to bad news that we’re almost taken aback when
something positive happens. And with the Supreme Court having affirmed that
wealthy people and corporations have a constitutional right to buy American
elections, who would have expected it to bring good news? But a decision in the
term that just ended gave ordinary Americans something that is more precious
than money alone — the right to live.
At first glance, the case,
Association for Molecular Pathology v. Myriad Genetics, might seem like
scientific arcana: the court ruled, unanimously, that human genes cannot be patented, though synthetic DNA, created in the laboratory, can be. But the real
stakes were much higher, and the issues much more fundamental, than is commonly
understood. The case was a battle between those who would privatize good
health, making it a privilege to be enjoyed in proportion to wealth, and those
who see it as a right for all — and a central component of a fair society and
well-functioning economy. Even more deeply, it was about the way inequality is
shaping our politics, legal institutions and the health of our population.
Unlike the bitter battles
between Samsung and Apple, in which the referees (American courts), while
making a pretense at balance, seem to consistently favor the home team, this
was a case that was more than just a battle between corporate giants. It is a
lens through which we can see the pernicious and far-reaching effects of
inequality, what a victory over self-serving corporate behavior looks like and
— just as important — how much we still risk losing in such fights.
Of course, the court and
the parties didn’t frame the issues that way in their arguments and decision. A
Utah firm, Myriad Genetics, had isolated two human genes, BRCA1 and BRCA2, that
can contain mutations that predispose women who carry them to breast cancer —
crucial knowledge for early detection and prevention. The company had
successfully obtained patents for the genes. “Owning” the genes gave it the right
to prevent others from testing for them. The core question of the case was
seemingly technical: Are isolated, naturally occurring genes something that can
be patented?
But the patents had
devastating real-world implications, because they kept the prices for the
diagnostics artificially high. Gene tests can actually be administered at low
cost — a person can in fact have all 20,000 of her genes sequenced for about
$1,000, to say nothing of much cheaper tests for a variety of specific
pathologies. Myriad, however, charged about $4,000 for comprehensive testing on just two genes. Scientists have argued that there was nothing inherently special or
superior about Myriad’s methods — it simply tested for genes that the company claimed to own, and did
so by relying on data that was not available to others because of the patents.
Hours after the Supreme Court’s ruling in favor of the plaintiffs — a group of universities, researchers and
patient advocates, represented by the American Civil Liberties Union and the Public Patent Foundation — other laboratories quickly announced
that they would also begin offering tests for the breast cancer genes, underlining the fact that Myriad’s “innovation” was identifying existing
genes, not developing the test for them. (Myriad is not done fighting, though,
having filed two new lawsuits this month that seek to block the companies Ambry
Genetics and Gene by Gene from administering their own BRCA tests, on the
grounds that they violate other patents that Myriad holds.)
It should not be very
surprising that Myriad has done everything it can to prevent its tests’ revenue
stream from facing competition — indeed, after recovering somewhat from a 30
percent drop in the wake of the court ruling, its share price is still nearly
20 percent below what it was beforehand. It owned the genes, and didn’t want anybody trespassing on its property.
In obtaining the patent, Myriad, like most corporations, seemed motivated more
by maximizing profits than by saving lives — if it really cared about the
latter, it could and would have done better at providing tests at lower costs
and encourage others to develop better, more accurate and cheaper tests. Not
surprisingly, it made labored arguments that its patents, which allowed
monopolistic prices and exclusionary practices, were essential to incentivize
future research. But when the devastating effects of its patents became
apparent, and it remained adamant in exerting its full monopoly rights, these
pretensions of interest in the greater good were woefully unconvincing.
The drug industry, as
always, claimed that without patent protection, there would be no incentives
for research and all would suffer. I filed an expert declaration with the court (pro bono), explaining why the industry’s arguments were
wrong, and why this and similar patents actually impeded rather than fostered
innovation. Other groups that filed amicus briefs supporting the plaintiffs,
like AARP, pointed out that Myriad’s patents prevented patients from obtaining
second opinions and confirmatory tests. Recently, Myriad pledged it would not block such tests — a pledge it
made even as it filed the lawsuits against Ambry Genetics, and Gene by Gene.
Myriad denied the test to
two women in the case by rejecting their Medicaid insurance — according to the
plaintiffs, because the reimbursement was too low. Other women, after one round of Myriad’s testing, had to make
agonizing decisions about whether to have a single or double mastectomy, or
whether to have their ovaries removed, with severely incomplete information —
either Myriad’s testing for additional BRCA mutations was unaffordable (Myriad
charges $700 extra for information that national guidelines say should be
provided to patients), or second opinions were unattainable because of Myriad’s patents.
The good news coming from
the Supreme Court was that in the United States, genes could not be patented.
In a sense, the court gave back to women something they thought they already
owned. This had two enormous practical implications: one is it meant that there
could now be competition to develop better, more accurate, less expensive tests
for the gene. We could once again have competitive markets driving innovation.
And the second is that poor women would have a more equal chance to live — in
this case, to conquer breast cancer.
But as important a victory
as this is, it is ultimately only one corner of a global intellectual property
landscape that is heavily shaped by corporate interests — usually American. And
America has attempted to foist its intellectual property regime on others,
through the World Trade Organization and bilateral and other multilateral trade
regimes. It is doing so now in negotiations as part of the so-called
trans-Pacific Partnership. Trade agreements are supposed to be an important
instrument of diplomacy: closer trade integration brings closer ties in other
dimensions. But attempts by the office of the United States Trade
Representative to persuade others that, in effect, corporate profits are more
important than human lives undermines America’s international standing: if
anything, it reinforces the stereotype of the crass American.
Economic power often speaks
louder, though, than moral values; and in the many instances in which American
corporate interests prevail in intellectual property rights, our policies help
increase inequality abroad. In most countries, it’s much the same as in the United
States: the lives of the poor are sacrificed at the altar of corporate profits.
But even in those where, say, the government would provide a test like Myriad’s
at affordable prices for all, there is a cost: when a government pays monopoly
prices for a medical test, it takes money away that could be spent for other
lifesaving health expenditures.
The Myriad case was an
embodiment of three key messages in my book “The Price of Inequality.” First, I
argued that societal inequality was a result not just of the laws of economics,
but also of how we shape the economy — through politics, including through
almost every aspect of our legal system. Here, it’s our intellectual property
regime that contributes needlessly to the gravest form of inequality. The right
to life should not be contingent on the ability to pay.
The second is that some of
the most iniquitous aspects of inequality creation within our economic system
are a result of “rent-seeking”: profits, and inequality, generated by
manipulating social or political conditions to get a larger share of the
economic pie, rather than increasing the size of that pie. And the most
iniquitous aspect of this wealth appropriation arises when the wealth that goes
to the top comes at the expense of the bottom. Myriad’s efforts satisfied both
these conditions: the profits the company gained from charging for its test
added nothing to the size and dynamism of the economy, and simultaneously
decreased the welfare of those who could not afford it.
While all of the insured
contributed to Myriad’s profits — premiums had to go up to offset its fees, and
millions of uninsured middle-income Americans who had to pay Myriad’s monopoly
prices were on the hook for even more if they chose to get the test — it was
the uninsured at the bottom who paid the highest price. With the test
unaffordable, they faced a higher risk of early death.
Advocates of tough
intellectual property rights say that this is simply the price we have to pay
to get the innovation that, in the long run, will save lives. It’s a trade-off:
the lives of a relatively few poor women today, versus the lives of many more
women sometime in the future. But this claim is wrong in many ways. In this
particular case, it is especially wrong, because the two genes would likely have
been isolated (“discovered,” in Myriad’s terminology) soon anyway, as part of
the global Human Genome Project. But it is wrong on other counts, as well. Genetic researchers have
argued that the patent actually prevented the development of better tests, and so interfered with the advancement of science. All knowledge is
based on prior knowledge, and by making prior knowledge less available,
innovation is impeded. Myriad’s own discovery — like any in science — used
technologies and ideas that were developed by others. Had that prior knowledge
not been publicly available, Myriad could not have done what it did.
And that’s the third major
theme. I titled my book to emphasize that inequality is not just morally
repugnant but also has material costs. When the legal regime governing
intellectual property rights is designed poorly, it facilitates rent-seeking —
and ours is poorly designed, though this and other recent Supreme Court
decisions have led to one that is better than it otherwise would have been. And
the result is that there is actually less innovation and more inequality.
Indeed, one of the
important insights of Robert W. Fogel, a Nobel Prize-winning economic historian
who died last month, was that a synergy between improved health and technology
accounts for a good part of the explosive economic growth since the 19th
century. So it stands to reason that intellectual property regimes that create
monopoly rents that impede access to health both create inequality and hamper
growth more generally.
There are alternatives.
Advocates of intellectual property rights have overemphasized their role in
promoting innovation. Most of the key innovations — from the basic ideas
underlying the computer, to transistors, to lasers, to the discovery of DNA —
were not motivated by pecuniary gain. They were motivated by the quest for
knowledge. Of course, resources have to be made available. But the patent
system is only one way, and often not the best way, of providing these
resources. Government-financed research, foundations, and the prize system
(which offers a prize to whoever makes a discovery, and then makes the
knowledge widely available, using the power of the market to reap the benefits)
are alternatives, with major advantages, and without the inequality-increasing
disadvantages of the current intellectual property rights system.
Myriad’s effort to patent
human DNA was one of the worst manifestations of the inequality in access to
health, which in turn is one of the worst manifestations of the country’s
economic inequality. That the court decision has upheld our cherished rights
and values is a cause for a sigh of relief. But it is only one victory in the
bigger struggle for a more egalitarian society and economy.
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