Fears of an avian flu pandemic has once again highlighted the complex issue of how to deal with intellectual property rights when tackling a potential or actual health crisis.

The international community last visited this theme with HIV/AIDS anti-retrovirals when public campaigns prodded the pharmaceutical industry to experiment far more extensively with tiered pricing: providing drugs at deep discounts to people in low-income countries who could not otherwise afford them. This is an outcome that seems both fair and efficient, given the relatively low marginal costs of producing drugs.

Tiered pricing in middle-income countries is a thornier issue for pharmaceutical companies, since they may fear more of a knock-on effect on their wealthy markets, which are essential to generating a return on their vast research and development sunk costs. One concern, for instance, could be that that lower prices in these countries seep through into the complex set of benchmarks and external references that some rich country governments use to negotiate drug purchases. Even if pharmaceutical companies can get governments in rich countries to refrain from this, they cannot stop individual politicians stirring things up.

And sometimes, even tiered pricing may not go far enough. When a health crisis threatens to overwhelm existing production capacity, more dramatic moves may be necessary. Governments, for instance, can invoke their right to compulsory license a patent when they believe their citizens are at risk. Pharmaceutical companies, however, should not want things to get this far. In HIV/AIDS, some voluntary licenses have been negotiated. True, the royalty payments are still likely to be low, but at least the drug company can retain some influence over the production. Such moves may have seemed outlandish several years ago, but they are part of the landscape now.

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