Innovation Policy and Health in Developing Countries (2001 title: Intellectual Property...)

Intellectual Property and Health in Developing Countries (2001; summary) chapter by Jean Tirole.

I’ve had this text open since Tirole was awarded the Nobel prize last October for “analysis of market power and regulation.” According to Tirole, intellectual property presents regulatory challenges very similar to natural monopolies, and briefly explains this in the chapter linked above and at the end of his Nobel lecture. Several other Tirole papers are of direct interest (see titles mentioning ‘patents’ or ‘open source’). Eventually I hope to summarize those papers and overall lessons from Tirole pertinent to this site…feel free to help!

Regarding this short (11p) and non-technical chapter, Tirole gives a fairly lucid overview of the economics of supplying drugs and vaccines needed by people in poor countries; as such equality is embedded in the inquiry (cf. copyright, where this line is still novel). The following paragraph (emphasis added) is prompting me to post abut the chapter:

Historically, a substantial, although not very visible, share of the redistribution from rich to poor countries has operated through free (or low-price) IP transfers. Technologies developed in rich countries reach poor countries, after a delay, when they go off-patent. And on-patent technologies have in the past not been covered by IP protection, a situation that is modified by the TRIPS agreement, although, as we have noted, countries can still threaten compulsory licensing in order to obtain very favorable deals from IP owners. It is perhaps unsurprising that substantial transfers have occurred in-kind through the IP system while there have been very few in cash. For one thing, knowledge transfers are much less dependent on the cooperation of rich countries’ governments. And they don’t confront quite the same delivery problems as cash transfers. But the fact that IP transfers are an important source of redistribution to low- and middle-income countries in a world desperately in need of worldwide redistribution does not imply that existing transfers are fair or efficient, as we will observe.

Is there any quantitative work on characterizing how substantial IP transfers are as a mechanism for redistribution, and as the most interesting subset of this, commons-based production as a mechanism for obtaining a more equal initial distribution?

Tirole describes two policy interventions to make IP transfers from rich to poor countries work better, both relying on more multilateral coordination and better information than available in 2001. A far as I know the situation is not fundamentally changed in either regard. Pointers to a more up to date ‘taking stock’ of this topic would be most welcome.

The first intervention is rule-based compulsory licensing. The second, with a much briefer description, is a prize mechanism for neglected disease treatments. This ordering, detail, and indeed the title of the paper, in a way summarizes the defect of the vast majority of scholarship on innovation policy: tweaking freedom infringing regimes (i.e., intellectual property) is primary (often exclusive; this chapter is better), figuring out freedom respecting provisioning an afterthought. As I’ve stated many times, “IP” scholars ought to refocus on innovation policy, of which property is one of many levers, and ideally re-imagine themselves as commons scholars.

I suspect one outcome of such re-imagination could be to explore solutions which build capacity for innovation in the global south, rather than ones that only consider poor countries as innovation consumers with variable bargaining power. I’m sure that Tirole could imagine the positive externalities of doing so.