In basic terms, a public good is defined by two characteristics: 1) non-rivalrous, meaning that the use of a good by one person doesn’t decrease the availability of the good for other people, and 2) non-exclusive, meaning that no one can exclude another person from using the good. A very basic example is air. One person breathing in air doesn’t make air any less available for other people, and an individual cannot effectively exclude other people from breathing air. Other examples could be national defense and public roads (public goods are generally provided by the government).
Pharmaceutical drugs are typically not public goods; drug manufacturers can exclude people who cannot afford the cost of the drug from having access to them. But in the context of the global AIDS epidemic, the moral quandary of denying people access to life-saving drugs because they cannot afford them throws this traditional framework into question (although it’s only a moral quandary because the aggregate wealth in the world is enough to afford life-saving drugs for anyone who needs them). Hoen et al discuss this issue in “Driving a Decade of Change.” The paper addresses the tension between enforcing pharmaceutical patents globally while also making life-saving ARVs available to patients in developing countries.
Hoen et al outline the efforts that governments, international organizations and NGOs have taken to increase access to drugs. These include applying public pressure on pharmaceutical companies to sell licenses to generic manufacturers in countries such as India, as well as delaying the implementation of patent protection in developing countries. The authors also advocate for a global Medicines Patent Pool that would coordinate and streamline the selling of patent licenses for developing nations.
The efforts outlined by Hoen et all clearly suggest that globally, AIDS treatments are increasingly viewed as public goods that should be available to anyone who needs them, regardless of whether they can afford them. Going forward, the question is: what is the best framework for providing life-saving AIDS treatments to those who need them?
Ideally, pharmaceutical companies would just give these drugs away to patients who need them to survive but can’t afford to pay for them. In theory, this wouldn’t really hurt drug companies that much because the costs of actually manufacturing the physical drugs is low – most of the costs are front-loaded into development and regulatory approval – and since the patients can’t afford them anyway, the drug companies, in theory, were never going to make revenues selling the drugs to them.
However, giving drugs away in poor countries could be used by drug companies as an excuse to charge higher prices in developed countries, which would essentially turn the increased prices into a form of foreign aid. Another incentive for drug companies to raise prices in developed countries while giving drugs away in poor countries is that, in giving drugs away, companies are closing themselves out of major markets because the vast majority of AIDS patients are in poor countries, particularly Africa. I’m ambivalent about whether this would or does happen, but given that drug companies can charge monopoly prices in the United States and Western Europe, they certainly could.
In terms of patent protections in developing countries, it seems that the ideal solution would be to grant strong patent rights as a baseline and then work with them to create exceptions in situations where it’s socially necessary. This seems to be the approach of the patent pools. This protects drug companies’ investments because a significant number of the drugs they develop are not lifesaving, and as such, should not be treated as public goods. If Pfizer wants to charge super-high prices for Viagra in the developing world, they should be able to. Another issue is which countries loosened patent protections should apply in; there are major wealth discrepancies between developing countries. China and Zimbabwe are both “developing”, but the former is flush with cash while the latter is in pretty dire straits.