VERDIN Doriane _Master's Thesis 2014_Access to healthcare in India and China

GRENOBLE ECOLE DE MANAGEMENT – IRIS SUP’
Pharmaceutical industry: why
industrial development in India and
China does not ensure access to
health for local people?
International Business / International Relations – Master’s thesis
Doriane VERDIN
19/09/2014

2
ABSTRACT
India and China have experienced unprecedented growth during these last few years.
China is now the second largest economy in the world, and India the tenth. Their
populations represent the sixth of the global population: both countries now have a
considerable influence on the international scene. However, economic development seems
to have occurred at the expense of public health, which has, for long been neglected, both in
India and in China. Although a large pharmaceutical industry has developed in the two
countries, as a result of rising demand for cheaper drugs and of patent laws flexibilities,
providing generic affordable drugs for the local market, the Indian and Chinese populations
still lack access to basic health services.
This paper intends to show how the Indian and the Chinese pharmaceutical industries
emerged as a response to the lack of access to drugs in developing countries. They indeed
massively used the flexibilities of their national patents laws, and later, of the international
framework applying to intellectual property rights, to become what we now call “the
pharmacies of the world”. The drop in drugs prices, incurred by the local production has
significantly improved access to health for Indian and Chinese populations as well as for the
rest of the developing world. However, it has not guaranteed the right to health for every
individual. Access to health is indeed part of a larger sphere, which goes beyond the simple
affordability of drugs. India and China are now both trying to build comprehensive
healthcare systems but the reforms and policies aimed at implementing it only are at their
first stages. This paper will therefore try to understand and analyze the rationale lying
behind the Indian and the Chinese healthcare systems, their key success factors and their
flaws, to better understand the reasons why, despite a promising pharmaceutical industry
development, Indian and Chinese people still lack access to health.

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Acknowledgements
I have been privileged to enjoy the assistance, guidance and support of many people. I am
grateful to all of them. I would like to express my deep gratitude to these people who
contributed to the realization of this present document, and especially to:
Delphine Abramowitz, who accepted to supervise my project, for her help, and for
being patient enough to read this paper,
Alexandru Zgardan, for stirring my curiosity about intellectual property rights and the
World Trade Organization, during an international law course last year,
Fanny Chabrol, for her advice and her time and for sharing her experience in
Botswana and Cameroon,
James Arkinstall, who enabled me to learn more about the Médecins Sans Frontières
Access Campaign and drugs availability in the world, for his patience and for the knowledge
he provided me with,
Sreedhar Subramanian, for his kindness and enthusiasm, for his constructive advice
and for sharing his personal views regarding the Indian overall healthcare system,
All the survey participants, for their help and their time, and for providing me with a
better understanding of the existing healthcare systems around the world,
IRIS Sup’, my teachers there and the administration team, for encouraging me to get
a more detailed insight on topics I have always been interested in, through writing this
Master’s thesis,
Grenoble Ecole de Management, the MIB Beijing teachers and my classmates,
friends, and family, who have been of great support in this project.
I would finally like to spare a thought for HIV/AIDS researchers and activists who
perished in a plane crash in July, heading to the 20th
International AIDS conference, for their
amazing work, involvement, and commitment to such a global cause.

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Contents
Acknowledgements................................................................................................................................. 3
List of abbreviations ................................................................................................................................ 5
Introduction............................................................................................................................................. 9
1- India and China: from difficulties to access patented drugs to the development of local
technologies.......................................................................................................................................... 13
A – Patents, a barrier to access new drugs and medicines in the developing world..................... 13
The logic of patents: commercialization of research and science ................................................ 13
Patents: a research stimulus, an impediment to public health .................................................... 14
Health as a public good, science should serve the general interest: the example of HIV/AIDS and
international mobilization............................................................................................................. 21
B – Promoting innovation while promoting general interest: the international regulatory
framework......................................................................................................................................... 26
Introduction of the TRIPS agreement, to strengthen intellectual property rights........................ 26
The Doha Declaration: public health prevails ............................................................................... 27
C – India and China, a developing pharmaceutical industry: the emergence of generic
manufacturers................................................................................................................................... 32
The pre-TRIPS period: new flexibilities in the Indian Patent Act to stimulate local innovation and
to promote access to affordable drugs within local population................................................... 33
A flourishing local pharmaceutical industry and the emergence of a generic drugs hub............. 33
TRIPS and implications .................................................................................................................. 36
Thanks to the production of affordable drugs in India and China, an enhanced access to
medicines for local populations .................................................................................................... 39
2- But lack of efficiency of health policies prevents local population from accessing health services
............................................................................................................................................................... 44
A – India and China, undertaking the first step to reform their healthcare system ...................... 45
China, towards universal health coverage .................................................................................... 45
India: slow progress towards a comprehensive healthcare system ............................................. 51
B – Access to healthcare for everyone in India and China, still a long way to go ......................... 55
Disparities jeopardize “health for all” ........................................................................................... 56
An urgent need for public funding to reduce out-of-pocket payments........................................ 61
Medical staff: a key pillar for healthcare provision....................................................................... 63
C – Access to health: global action for a global concern, the emergence of global health............ 65
Conclusion ............................................................................................................................................. 71
Bibliography........................................................................................................................................... 76

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List of abbreviations
ACHAP African Comprehensive HIV/AIDS Partnership
AIDS Acquired Immunodeficiency Syndrome
CGHS Central Government Health Scheme
CIA Central Intelligence Agency
CNY Chinese Yuan
DIPP Department of Industrial Policy and Promotion
DPCO Drugs Price Control Order
ESIS Employees State Insurance Scheme
EUR Euro
FDA Food and Drug Administration
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
HIV Human Immunodeficiency Virus Infection
ICAAP International Congress on AIDS in Asia and the Pacific
INR Indian Rupee
IPR Intellectual Property Rights
JAS Jan Aushadi scheme
JSY Janani Suraksha Yojana
MFA Medical Financial Assistance
MSF Médecins Sans Frontières
NEDL National Essential Drug List
NGO Non-governmental Organization

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OECD Organization for Economic Co-Operation and Development
NLMEI National List of Essential Medicines of India
NRCMS New Rural Cooperative Medical Scheme
PEPFAR President’s Emergency Plan for AIDS Relief
SIPO State Intellectual Property Office
TRIPS Trade-Related Intellectual Property Rights
UEBHI Urban Employee Basic Health Insurance
URBHI Urban Resident Basic Health Insurance
USD United-States Dollar
WHO World Health Organization
WIPO World Intellectual Property Organization
WTO World Trade Organization

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“People have to figure out that they don’t have to accept a
pessimistic crappy future. They can change things. You can change
things, I can change things, we can change things”
Zachie Achmat, founder of the Treatment Action Campaign

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Pharmaceutical industry:
why industrial development in India
and China does not ensure access
to health for local people?
Introduction
The health sector is one of the key pillars of the United Nations’ development goals for
the millennium: these goals are calling for the developing world to review its health
strategies and policies and to implement effective health systems and healthcare coverage.
These goals also imply a major change regarding the international framework to regulate the
health sector and especially, may call for greater flexibility regarding international patent
laws. There have been, over the last few years, significant improvements in healthcare:
global life expectancy keeps rising, which reflects sharp increase in medicine, infrastructure
access, sanitation and nutrition. Prevention and treatment have also made strong advances
in recent decades: protection through vaccines is now mainly accessible everywhere, basic
drugs and antibiotics are available (96% of the drugs listed under essential medicines by the
World Health Organization (WHO) are not currently protected by patents1
), medical services
coverage and networks are extending, and new treatments are discovered at high pace.
However, there still exist large disparities regarding access to healthcare between and within
the world different countries.
1
WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO), “Patents and Health: comments received from
members and observers of the standing committee on the law of patents (SCP)”, Standing Committee on the
Law of Patents (18th session), May 25
th
, 2012.

10
India and China (appendix 1) represent a sixth of the global population and both
experienced considerable growth during the last few years. However, they still account for a
significant part of the global burden of disease. The Human Development Index ranks China
91 out of 187 countries, whereas China is the second largest economy in the world. India still
lags far behind and is ranked 135, just after Tajikistan and Kiribati, and just before Bhutan
and Cambodia2
. Despite the good overall economic performance of both countries, much of
their population is still lacking access to basic healthcare services.
Drugs and medicines availability and affordability is often presented as a key pillar for
access to healthcare. In December 2013, the Food and Drug Administration (FDA) approved
a new treatment for hepatitis C: Sovaldi (sofosbuvir), developed by the United-States based
biotechnology company, Gilead Science. The treatment could save lives of an estimated 130-
150 million people in the world living with chronic hepatitis C virus infection3
. Up to 500,000
deaths per year are actually caused by the disease. The release of this new treatment was
therefore considered as a key milestone for science and health, and was highly welcomed by
both scientists and individuals from all around the world. However, this discovery, which
presents cure rates of over 90%, has been tempered by key challenges, the first of which
being the astronomic cost of the new treatment. Gilead Science is indeed charging USD
84,000 for a twelve-week course of treatment in the United-States, which makes the new
drug inaccessible for most people. Even if you add up research and development costs for
the new drug (considering that many drugs actually fail to enter the market), the selling price
of Sovaldi is still ten times as high as its actual final manufacturing cost. In August 2014, the
British National Health System refused approval for a new breast-cancer treatment, Kadcyla,
developed by the Swiss pharmaceutical company Roche, and sold for more than EUR
150,000 per patient and per year. The refusal was not on grounds of efficiency of the
treatment (it is one of the most efficient treatment for aggressive forms of breast cancer),
but on price grounds4
. The British National Health System could actually not afford such a
2
UNITED NATIONS DEVELOPMENT PROGRAMME (UNDP), 2014 Human Development Statistical Tables,
(http://hdr.undp.org/en/data). The Human development index calculation combines three major dimensions:
life expectancy at birth, education (mean years of schooling and expected years of schooling) and standard of
living (gross national income per capita).
3
WORLD HELATH ORGANIZATION (WHO), Hepatitis C fact sheet,
(http://www.who.int/mediacentre/factsheets/fs164/en/)
4
PLUMRIDGE H, “UK health service panel rejects Roche cancer drug on price grounds”, The Wall Street
Journal, August, 8
th
, 2014.

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treatment. Such refusal could actually set a precedent for drugs disapprovals in developed
countries, because of their expensive price, that healthcare systems cannot cope with.
Having to face such excessive amounts for accessing new drugs, developed countries are
eventually addressing problems South countries are regularly facing to treat their
populations: life-saving drugs are not made available at affordable price, endangering the
lives of millions. Since the 1970s, the World Health Organization (WHO) has been promoting
“the right to health”, in order, among other things, to increase the accessibility of essential
drugs for populations. Since 1977, WHO therefore publishes a list of essential medicines,
which are intended to be available at all times, “at a price that the individual and the
community can afford”5
. A key priority regarding access to healthcare is actually to offer
affordable drugs for people who need treatment. However, both Gilead Science and Roche,
claim that the price tag reflects the high costs of development of new drugs. One of the main
challenges actually is to make services affordable for the consumer, but at the same time
viable for the companies providing it, so they would keep trying to innovate and improve
people lives around the world. The issue of the accessibility of medicines for the developing
world dates back to years, but has been widely covered by the media since the 1980s only,
to focus on the HIV/AIDS outbreak and on access to antiretroviral drugs6
. “The right to
health” actually questions the patented status of life-saving drugs. It is therefore important
to discuss the influence of intellectual property rights (IPR) evolution on drug accessibility in
developing countries, and to understand how raising concerns about public health
transformed into new flexibilities within strong IPR regimes.
These flexibilities have enabled India and China to become leading hubs for production
of generic low-cost and efficient drugs for both the developing and the developed world. The
local pharmaceutical industry production exploded in both countries, and the local market
was flooded with affordable medicines for the population. However, has access to health for
local people benefited from this industrial development? Access to drugs does not seem to
5
WHO, The right to health factsheet (www.who.int) “The WHO Constitution enshrines the highest
attainable standard of health as a fundamental right of every human being. The right to health includes access
to timely, acceptable, and affordable healthcare of appropriate quality”.
6
WHO, Use of antiretrovirals for treatment and prevention of HIV infection, July, 2014
(http://www.who.int/hiv/topics/treatment/en/). “Standard antiretroviral therapy (ART) consists of the
combination of at least three antiretroviral (ARV) drugs to maximally suppress the HIV virus and stop the
progression of HIV disease”

12
be the only problem the developing world has to face regarding the overall health of its
population: even when drugs are made affordable and available for patients, many
developing countries lack basic health infrastructure to distribute them. Moreover, most
healthcare solutions for instance are focused on providing services in urban areas.
Considering that about two-third of the population of India lives in rural areas, access to
healthcare services and infrastructure there is paramount to build a comprehensive
healthcare system. Therefore, although many generic manufacturers emerged in such
countries as China or India, local population in these countries still carry a high proportion of
the global burden of disease7
. Is “big pharma” the only one to blame regarding access to
health in these countries? Or should other factors be considered, such as availability and
affordability of healthcare services, or training of medical staff?
This paper will focus on emerging countries, and especially on India and China. It will
analyze their attempts to improve health among their population. We will discuss, in a first
part, the impact of patent laws on access to healthcare and to affordable drugs, both in India
and China and in the rest of the world. We will see how India and China emerged as key
players to answer the lack of access to affordable drugs in developing countries, and how
they positioned themselves as generic drugs hubs. In a second part, we will try to show that
access to affordable drugs is not enough. Indeed, many people in India and China still lack
access to basic healthcare services. The pharmaceutical industrial development in India and
China offers cheaper drugs for the population, but because of flaws in the overall healthcare
system in both countries, people have not been able to fully benefit from this opportunity to
improve their overall health.
To support our analysis, I conducted a survey about access to health, among 135
participants from different countries around the world, based on a questionnaire (appendix
7). Any person could take part in the survey, regardless of their age, country of origin, etc.
The survey findings are presented throughout the following pages to illustrate some of our
arguments, and are detailed in the appendices (appendices 7 to 11).
7
WHO, Global burden of disease (http://www.who.int/topics/global_burden_of_disease/en/)

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1- India and China: from difficulties to access patented drugs
to the development of local technologies
A – Patents, a barrier to access new drugs and medicines in the
developing world
The logic of patents: commercialization of research and science
Both Kadcycla (the breast cancer drug developed by Roche) and Sovaldi (the hepatitis C
treatment developed by Gilead Science) are issued from biotechnology research and
development. As Gary Pisano points8
, a new business model was introduced in the scientific
field with the emergence of biotechnologies, highly impacting pharmaceutical industry: a
science-business model. Biotechnology is a very profitable business segment. With patents
on pharmaceutical blockbusters coming to an end, scientific players all try to benefit from
additional value created by biotechnologies. Therefore, while research and business used to
be part of two very distinct spheres in science, with universities and public laboratories
carrying research and companies and firms involved in commercialization, research in
science and commercialization of science are now more and more interconnected.
Multinational firms are now implied in scientific research, and universities and public
institutions are active participants in the commercialization process of the science they
developed. It is estimated that Columbia University patents on recombinant DNA brought
the university about 400 million dollars in revenues over twenty years. Science is not only
driven anymore by major discoveries and improvements in health outcomes, and is more
and more profit-driven.
The emergence of biotechnologies was therefore perceived as a major scientific
achievement, which would radically improve lives of millions of people. At the same time,
the emergence of biotechnologies offered a source of high potential revenues for the
scientific sector; hence the growing number of private research contracts with public
laboratories, interests groups between public institutions and multinational firms, etc. The
science business model is mainly based on monetization of patents. Genentech, the first
8
PISANO G.,“Can Science be a Business, lessons from biotech”, Harvard Business Review, October 2006,
13p.

14
biotechnology firm, was founded in 1976, by Robert Swanson, a businessman and Herbert
Boyer, a teacher at the University of California. The firm developed a market for knowledge
and innovation, on which small research companies could grant existing companies with
their intellectual property rights, in exchange of funding. In 1978, Genentech and Eli Lilly (a
major pharmaceutical company) signed an agreement: Eli Lilly would fund the development
of recombinant insulin, and pay Genentech royalties on its sales, in exchange of production
and marketing rights. This was the first time a pharmaceutical company outsourced its
research and development activity to a lucrative company. This is now common practice.
This monetization of patents breaks down one of the highest barriers to entry for small
firms on the pharmaceutical sector: astronomical costs for many years to develop a new
drug. The emergence of this new business model, however, perfectly illustrates the conflict
between patents and ethics. Science, by becoming more and more commercialized, and by
attracting profit-driven entrepreneurs, tends to move from its initial goals and public
interests, and not to focus on its core objective anymore: improving people’s lives.
Patents: a research stimulus, an impediment to public health
By being more and more profit-driven, and by tending to achieve commercial goals,
science might therefore become an impediment to public health. “My idea of a better
ordered world is one in which medical discoveries would be free of patents and there would
be no profiteering from life or death”, declared Indira Gandhi, at the World Health Assembly
in 1981. Therefore, are patents promoting research and innovation, or are they jeopardizing
public health?
Drugs are very expensive to develop. Indeed, the pharmaceutical industry is one of the
most research-intensive sectors. The ratio of overall research and development expenditure
to total revenue is about 5% in chemicals, compared to 13% in pharmaceutical industry, and
more than 40% in the biotechnology sector9
. Therefore, scientific actors created a business-
oriented model to finance research and development costs for new drugs. Indeed, it costs on
average USD 4 billion for a company to get a drug into market, and this amount can reach
9
BURONNE E., Les brevets au coeur de l’industrie de la biotechnologie, WIPO
(http://www.wipo.int/sme/fr/documents/patents_biotech.htm)

15
USD 11 billion. Moreover, the research and development process is time-consuming: on
average, it takes a company more than 10 years to develop a new drug (exhibit 1).
Drug development lifecycle
Exhibit 1 – Drug development lifecycle
Therefore, without the inventor being rewarded, no one would probably take the risk of
developing a new drug, and no one would ever innovate, especially when the research and
development period is so long than in the pharmaceutical sector, and when the failure rate
in drugs development is over 95%: more than 9 out of 10 drugs fail during the clinical trials
stage, since most of them are not safe or effective for human-beings10
. Patent laws are
therefore promoting innovation, and aim at promoting social well-being at the same time,
through encouraging pharmaceutical companies to carry out research for developing better
treatments11
. Research and development costs are therefore passed on to the drug selling
price.
However, the drawback is that since pharmaceutical companies bear the research and
development costs, patents guarantee them monopolies and exclusive rights. This has at
least two noxious consequences on research and development of new drugs, and on
10
HERPER M., “The truly staggering cost of inventing new drugs”, Forbes, October 2
nd
, 2012
11
According to the World Health Organization, “a patent is a title, granted by the public authorities,
conferring a temporary monopoly for the exploitation of an invention on the person who reveals it, furnishes a
sufficiently clear and full description of it and claims this monopoly”.

16
availability of drugs, the first of which being the high prices of patented drugs, which are
often many times the price of a generic drug. Patent laws typically give the inventor of a
medicine a legal monopoly for its production and sales for twenty years. As a consequence,
the inventor would take this opportunity to maximize his profits, by setting high price tags
for the medicines he developed. This results in new drugs being unaffordable and out of the
reach for a large part of the world population for at least twenty years, since generic drugs
cannot theoretically be produced as long as the generator product is under patent. Yusuf
Hamied, chairman of Cipla, an Indian pharmaceutical company, in an interview, gives the
example of AZT, the first drug for AIDS: AZT was discovered in 1963. It has first been used as
a treatment for HIV in 1985, and a patent monopoly was granted to GlaxoSmithKline at that
time, running until 2005. The drug was sold for USD 10,000 per year and per patient in 1987,
whereas even in a developed country such as the United-States, more than 35% of HIV-
positive people did not have any health insurance to pay for their drugs12.
Just before
GlaxoSmithKline patent on AZT expired, the pharmaceutical company declared that AZT, in
order to be efficient for HIV-treatment, should be used in combination with Zeffix
(lamivudine), which patent has been granted until 2017. Yusuf Hamied therefore concludes
that GlaxoSmithKline has benefited from a 54-year monopoly over AZT, the first
antiretroviral drug, since its invention in 1963.
The pharmaceutical industry, like any other private business industry is indeed there to
make money and to maximize shareholders revenues. A second consequence of the patents
monopoly is the fact that pharmaceutical companies, in order to make profits, only develop
drugs for the developed world: they target solvent markets able to afford expensive drugs,
therefore generating high revenues. These markets are therefore targeted on commercial
grounds, such as the size of the market or the purchasing power of potential consumers
(exhibit 2), rather than on health conditions grounds. The patent system therefore is a
severe impediment to the research and development for new drugs to cure developing
world diseases, such as ebola, malaria, sleeping sickness or even tuberculosis. Profit
expectations for the development of tuberculosis drugs are indeed very low, since the
disease mostly affects poor people in developing countries, who will not be able to afford
expensive treatments. As Neil Schluger, Professor at Colombia University puts it, “drug
12
The New-York Times, “AZT’s inhuman cost”, The New-York Times, August, 28
th
, 1989

17
companies want to make drugs for chronic diseases that people in Western countries are
going to take for the rest of their lives”, such as cancer drugs. Indeed, the continent of Africa
as a whole accounts for just 1% of drugs sales, whereas the United-States market represents
half the revenue from sales of pharmaceutical companies (exhibit 3). An article, published in
2003, revealed that 80% of drugs (in value) were consumed by only 20% of the global
population13
.
Projected expense on drugs in developed and pharmaceutical emerging countries
Exhibit 2 – Projected per capita expense on drugs in 2016 in developed and pharmaceutical emerging
countries. Source: IMS Market Prognosis, May 2012.
Exhibit 3 - Global drug industry sales (in revenue). Source: Fire in the Blood documentary
13
MONTASTRUC J., M’BONGUE B, “Le médicament, une marchandise pas comme les autres”, Pratiques, n°
21, April, 2003

18
Some pharmaceutical companies, however, are seeking to improve their image, and are
making more and more efforts to benefit the developing world as well. Johnson and
Johnson, for instance, accepted to conduct research and development for tuberculosis, while
other pharmaceutical industries were just closing their tuberculosis research section. The
British company AstraZeneca, for instance, shut its Indian laboratory in January 2014, where
it was conducting research over tuberculosis, malaria, and other tropical diseases,
mentioning reduced research and development budgets. One of the top executives at
Johnson and Johnson, Paul Jannssen, has been extremely involved in tackling tuberculosis
since the death of his sister, as a result of the disease. Consequently, the pharmaceutical
company invested huge amounts for research and development of new drugs, and Sirturo
(bedaquiline) was eventually approved last year as a treatment for multi-drug resistant
tuberculosis, and will probably save many lives in the future. Wim Parys, at the research and
development department of Johnson and Johnson declared: “We have been extremely
fortunate that we have people right to the top level of the company who have supported
this product, not for any commercial reason, but because it was the right thing to do”. But
this is an exception. Indeed, pharmaceutical companies are private companies that owe
good results to their shareholders.
In 1997, due to the fact that most drugs were unavailable for the developing world (cf
high prices and pharmaceutical companies strategic policies), Nelson Mandela took a key
decision: to answer lack of access to affordable drugs for local population, and to tackle the
AIDS outbreak in South Africa as the President of South Africa, he passed a Medicine Act,
aimed at enabling the government to import or manufacture generic versions of patented
drugs. However, feeling threatened by such a change in South African patent laws, thirty-
nine multinational pharmaceutical companies sued the government of South Africa. Even
though the pharmaceutical companies, facing pressure from individuals and non-
governmental organizations (NGO) from all over the world such as Médecins Sans Frontières
(MSF) eventually dropped the case in 2001, this international dispute has stressed the profit-
driven nature of the pharmaceutical industry14
.
In 2000, thanks to high drug prices, the ten biggest pharmaceutical companies on the
Fortune 500 list profits amounted to USD 35.9 billion. This figure was bigger than the
14
SEN S., “British NGOs support Pretoria against pharmaceutical firms”, Inter Press Service, April 16
th
, 2001

19
combined profits of all the other 490 companies (USD 33.7 billion). Although the
pharmaceutical companies claim that high-drugs prices are mainly due to research and
development costs, only 1.5% of drugs revenues on average is actually allocated to research
and development for new drugs15
. Even if Peter Rost, former vice-president of Pfizer gives
more optimistic figures (he estimates that 20% of pharmaceutical companies revenues go to
drug development), he is also critical of the pharmaceutical sector and stresses that at least
40% of the revenues go to marketing, towards healthcare providers and direct users. He
therefore describes the pharmaceutical industry as a marketing-driven machine, with
research and development foundations, and compares it to the mafia: both are making a
fortune, and apply policies that kill enormous amounts of people16
. The pharmaceutical
industry keeps justifying its pricing policies and its profits citing high research and
development costs for developing new drugs. But in reality, 88% of worldwide research for
the development of new drugs is actually funded by government and public sources, through
governmental laboratories for instance. Pharmaceutical companies only fund 12% of drugs
research and development.
Therefore, although granting the inventor a patent monopoly could be totally justified,
to cover research and development costs and to finance new drugs development programs,
there are obviously some abuse from drug developers regarding patents monopolies use.
Innovators should definitely be rewarded for their contributions, but when it comes to
health, which is often considered as a public good and a fundamental right, alternative
rewards should be considered. An example of alternative reward, suggested by James
Arkinstall (appendix 6), could be for the states to provide the inventor of a new drug, with an
initial prize, or grant, proportional to its contribution to humanity (the inventor of a new
drug to cure tuberculosis would receive a more significant prize than the inventor of a new
drug to prevent hair loss, therefore rebalancing targeted markets). This package, or prize,
would reward the inventor for its contribution and would defray research and development
costs. The invention would then be placed directly in the public domain for other firms to
use it to manufacture cheaper drugs, or pursue further innovation. The underlying question
15
ANGELL M., The truth about the drug companies: how they deceive us and what to do about it?, Random
House Trade Paperbacks, August, 2005, 319 p
16
ROST P., Pfizer Former Vice-President, Short Hills, New Jersey, extended interview for Fire in The Blood.
Peter Rost is the author of The Whistleblower: confessions of a healthcare hitman, in which he describes the
unethical practices of the pharmaceutical companies he worked for.

20
is the following: who would pay for the prize that has to cover research and development
costs? And according to James Arkinstall, the answer is actually quite easy to figure out:
taxpayers. Indeed, taxpayers are already paying for the development of new drugs, through
governmental research funds, but also through the high price tag of the drugs they buy. This
alternative system, would use public sources for the granting of the initial prize, but after
that, given that the invention would be in the public domain (and would not be protected by
a monopoly), drugs would actually be sold at a much lower price, enabling taxpayers to pay
less for their medicines.
Another alternative to make science focus on its primary goals (improve people’s health)
rather than on profits, according to Michael Porter and Mark Kramer, would be to promote
the creation of “shared value”. Pharmaceutical companies, as of today, seem to be
prospering at the expense of the society, thanks to the patent system. But according to
Porter and Kramer, production of shared value would enable them to innovate and to grow.
Shared value could be defined as the creation of “economic value in a way that also creates
value for society”. Shared value is often driven by the economic environment in which the
companies are working: clusters, implying both actors from the private sector (multinational
pharmaceutical companies, trade associations, etc.) and from the public sector (institutions,
universities, public laboratories, etc.), may favor the creation of shared value and knowledge
sharing: science could build its model on knowledge-sharing rather than on competition.
Therefore, the governments should impulse the creation of clusters, in order to make
companies act for the overall well-being. An example of cluster in the health sector is the
example of Singapore biocluster. In 2000, the government of Singapore declared it would
create a hub for innovation and technology. Five key-priority clusters were first developed,
including the biotechnology cluster. Moreover, the government took several measures to
promote the development of closer ties between the different actors. Singapore biocluster is
still at its early development stage, but is already very promising for the future of the
population health.

21
Health as a public good, science should serve the general interest: the example of
HIV/AIDS and international mobilization
If there is one disease that has been at the epicenter of the patent dilemma these
last few years, it is for sure HIV/AIDS. AIDS was first scientifically observed in 1981, but had
caused many deaths before in Africa and Haiti. The virus entered the United-States, and
eventually spread so fast that it finally stopped being unnoticed. AIDS caused over 10 million
deaths between 1996 and 2003. In the early 1990s, in many provinces in China, a lot of
farmers, encouraged by the local government, started selling blood for money. Due to poor
disinfection and isolation work, many villages were infected with the HIV virus. In Wenzhou,
a village located in Henan province, 60% of the population had been infected with the HIV
virus.
Thanks to the introduction of AZT and other antiretroviral treatments, individuals who
have access to good pharmaceutical care are now unlikely to die prematurely from
HIV/AIDS. But antiretroviral drugs are very expensive: patented drugs used to sell for more
than USD 10,000 per capita and per year, far beyond the reach of millions of people. Rich
communities, with strong universal health care systems may have been able to bear the
costs, but this is not the case for most individuals in developing countries. Moreover, a
patent used to make it illegal for others to make, sell or import unpatented generic drugs,
which typically cost much less. Pfizer launched Diflucan (fluconazole) in 1990, a drug to ease
pain on patients suffering from AIDS-related infections. The drug, sold at USD 30 a capsule,
was under patent in South Africa, which guaranteed Pfizer a total monopoly on the market.
In 2000, the average weekly wage in South Africa, the richest country in Africa, was USD 68.
A generic version of the drug was made in a government factory and available at USD 0.5,
but this was in Thailand. And because of the Pfizer patent, it was considered illegal for South
Africa to import the generic drug from Thailand. The only solution for people unable to
afford patented drugs to get treatment for their HIV condition was to use smuggled generic
drugs.
Unlike other diseases (such as tuberculosis), HIV/AIDS, also affects significant numbers in
rich nations, hence a growing interest of the global community about access to health for
HIV-positive people. HIV-positive people from the developed economies indeed joined the

22
developing countries cause to protest against unaffordable drugs: they were concerned by
the disease, and felt that if drugs were made available for them, they should also be made
available for every people living with HIV. Fire in The Blood is a documentary about the fight
of many people against the patent monopolies of pharmaceutical companies, to promote
access to antiretroviral drugs for everyone. The documentary portrays several activists who
have taken part in this fight, including the Constitutional Court of South Africa judge, Edwin
Cameron, or the Treatment Access Campaign founder, Zackie Achmat. Protestors started to
stand against pharmaceutical companies: life-saving drugs, though available, were just way
too expensive. “We are never going to stop, until everyone in Africa, everyone in Asia,
everyone in Latin America has access to drugs. But we will also not forget the poor people in
Europe and the poor people in North America” declared Zackie Achmat during the 13th
International AIDS conference held for the first time in Africa, in Durban, in July 2000. “Why
should I have the privilege of purchasing my life and health when thirty-four million people
in the resource-poor world are falling ill, feeling sick to death and are dying”, asked Edwin
Cameron, at the same summit (exhibit 4).
Exhibit 4 – Political cartoon: Aids drugs for the third world, by Zapiro, published in Sowetan on July, 7th,
1999
While some developing economies, such as Thailand or Brazil had begun addressing the
issue of access to affordable drugs by locally producing low-cost generic drugs, governments
in other developing countries seemed to refuse challenging Western patents on drugs,
arguing that this would definitely harm their economy: indeed, the United-States

23
government and the Western pharmaceutical companies were threatening developing
countries of severe measures, in case they would allow imports of low-cost generics. Zackie
Achmat, as an internationally-renowned activist, therefore announced that he would
boycott antiretroviral drugs until they would be made available to everybody: “I won’t buy
life while others die”, he declared. Nelson Mandela himself got involved in the issue and
asked Achmat to take his drugs.
To address this issue, Cipla, an Indian pharmaceutical manufacturer, based in Mumbai,
founded in 1935 and headed by Yusuf Amid, developed a USD 1 per day therapy. Cipla had
begun making generic drugs in the early 1990s, over the Indian government instructions. The
idea of India producing its own medicines goes back to Gandhi himself, who had promoted a
self-reliant India, through the swadeshi movement17
. According to Fire in The Blood, Yusuf
Hamied was the one who convinced Indira Gandhi to amend India’s Patent Act in order to
have more flexible patent laws in India. Before the amendment, India indeed had some of
the highest drug prices in the world, and its average life expectancy was very low. Thanks to
the Patent Act amendment, India was able to produce cheap generic versions of patented
medicines, and therefore, to save millions of lives in the developing world.
With the introduction of antiretroviral generic versions of patented drugs in India, and
the following drop in prices of antiretroviral drugs, Western pharmaceutical companies
started launching large advertising campaigns against counterfeit drugs, therefore
suggesting that generic drugs could actually be counterfeit drugs and substandard (exhibit
5). India fought back with a campaign presenting itself as the Pharmacy of the World, and its
drugs as high-quality drugs, similar to its Western pharmaceutical industry products.18
And
actually, many of the active ingredients for branded drugs sold in Western countries,
including in the United-States, were outsourced in India, and produced in the same
laboratories than generic drugs for the Indian market and for other developing countries.
17
The Swadeshi (a Hindi word meaning self-sufficiency) movement is part of the independence movement,
and was a key focus of Gandhi political vision
18
TAYLOR N., “Indian minister rails against anti-generics smear campaign”, In-Pharma, May 9
th
, 2012

24
Exhibit 5 - Pfizer advertising campaigns to fight counterfeit drugs. Source: Pfizer Counterfeit Drugs
Brochure, 2009
However, many developing countries governments still refused to import generic
antiretroviral drugs from India or China, due to commercial pressure from the United-States.
But just after 9/11, the United-States realized that they were vulnerable to patents
monopolies as well: a series of fatal anthrax attacks occurred. Bayer had a patent monopoly,
valid until 2003, on Cipro (ciprofloxacin), the only efficient antibiotic to treat anthrax. For a
moment, the United-States government was afraid about access to medicines, the attacks
sparking fears of a global wave of infections, and pressed the German pharmaceutical
company to relax its patent on Cipro for “public health emergency”. At that time, seventy-
eight Indian drug manufacturers were already producing the antibiotic for one thirstiest of
Bayer’s drug price, and the United-States considered importing some19
. Following this
episode, the Ugandan government came to the point that the United-States government
would not blame Uganda for doing something similar to what they had themselves
considered regarding Cipro. The government therefore eventually allowed imports of
antiretroviral generic drugs. Most of the imported drugs actually came from India.
Following Uganda example, many other countries started importing generic
antiretroviral drugs under “public health emergency”. Soon after, in 2002, Kofi Annan, the
United-Nations Secretary, launched the Global Fund to Fight AIDS, tuberculosis and malaria.
In 2003, George W. Bush, in his State of the Union address, asked the Congress to commit
USD 15 billion during the next five years to fight AIDS in the developing world, through the
President’s Emergency Plan for AIDS Relief (PEPFAR), aiming at buying generic drugs from
India and China and distributing them to those who needed them most. Indeed, as Bush
stressed during his speech, the price of a treatment for HIV/AIDS had dropped from USD 12,
000 a year to less than USD 300 a year: the program would therefore save millions of lives.
19
HERPER M., “Cipro, Anthrax, and the perils of patents”, Forbes, October 17
th
, 2001

25
However, because of the pharmaceutical industry powerful lobbying, the appointed person
responsible for leading PEPFAR program was Randall Tobias, chief executive officer of the
pharmaceutical company Eli Lilly, from 1993 to 1999. He probably is the one who decided to
use the PEPFAR money to buy branded drugs rather than generic drugs. According to
PEPFAR statements, in 2004 and 2005, the program allocated 95% of its antiretroviral drugs
budget to branded medicines, and only 5% to generic drugs20
. But progressively, the price
gap between generic drugs and branded ones became so broad that PEPFAR eventually
committed to buying generic antiretroviral drugs.
The battle to access antiretroviral drugs has seen a widespread mobilization around the
world. However, despite the success of the HIV/AIDS battle, other diseases, such as
tuberculosis have been totally forgotten: resources are indeed mainly allocated to global
diseases rather than to diseases that only affect the developing world. Despite HIV and
tuberculosis bearing similar deaths toll, the United-States National Institutes of Health
spending for research on HIV/AIDS in 2013 was eleven times higher on HIV/AIDS than on
tuberculosis21
.
With HIV/AIDS battle though, individuals started to realize the extent of the issue, and
fought for greater healthcare access, and for the availability of cheap generic versions of
branded drugs. Health should be considered as a public good, and should be made available
to everyone. Contrary to other products or services, health should have nothing to do with
business, and should not be subject to market-forces only, since it is a fundamental right.
As we have seen, the main challenge regarding patent laws is to find a balance between
encouraging research for the development of new drugs that could cure new diseases and at
the same time, privileging society and science as a whole. Patents should actually benefit
both the inventor and society. For society, the main challenge is to guarantee access to new
efficient drugs and treatments and to promote a large diffusion of these inventions, so that
they can benefit everyone. For the inventor, the challenge is to benefit from a distribution
monopoly, in order to be able to recover research and development investments and to
20
ISMALL A., “PEPFAR policy hinders treatment in generic terms”, The Center for Public Integrity,
December 13
th
, 2006
21
FINANCIAL TIMES, “Killer of the poor now threatens the wealthy”, Financial Times, March 24
th
, 2014.
United-States National Institutes of Health spent USD 266 million for research on tuberculosis and USD 2.9
billion for research on HIV/Aids in 2013

26
finance further costs. These opposing, or at least diverging interests are at the heart of
patent laws evolutions and modifications.
B – Promoting innovation while promoting general interest: the
international regulatory framework
Introduction of the TRIPS agreement, to strengthen intellectual property rights
Under the United-States and Western pharmaceutical companies pressure, and to
ensure innovation and the ability of the pharmaceutical industry to develop new drugs,
patent protection was strengthened in the whole world with the ratification of the trade-
related intellectual property rights (TRIPS agreement) in April 1994 in Marrakech, at the end
of the World Trade Organization (WTO) Uruguay Round (1986-1994). To get more details
about the functioning of the WTO, please refer to appendix 3. The international framework
for patents is therefore no longer managed by the World Intellectual Property Organization
(WIPO) but by the WTO. Reaching a consensus for the TRIPS agreement was not easy-task.
Developed nations promoted the need for an international strong IPR regime protecting the
patents of multinational companies, while developing countries argued that intellectual
property aspects were definitely not a trade-related issue and should not be part of the
WTO. The very fact that IPR, including IPR on drugs and medicines are part of the WTO
appeared as a paradox for numerous people: indeed, WTO main goal is to promote free-
trade, and imposing IPR seems at the opposite of free-trade. The Indian-American economist
Jagdish Bhagwati is very critical towards the WTO framework, stressing that it includes non-
trade topics, and wrote in an article that “intellectual property does not belong in the WTO,
since protecting it is simply a matter of royalty collection”22
. Joseph Stiglitz, economist and
Nobel laureate emphasizes that intellectual property stands as a restraint on trade, and that
the monopolies induced raise prices and restrict production23
.
Eventually, the TRIPS agreement introduced a strong IPR regime, by regulating patents
for both products and process and by extending patent-life to twenty years and patent
22
BHAGWATI J., "From Seattle to Hong Kong", Foreign Affairs, September 2014
23
STIGLITZ J., Economist and Nobel Laureate, Colombia University, New-York, extended interview for Fire
in the Blood

27
applicability to all WTO signatories. All member-countries of the WTO have to adapt their
own legislation to comply with this international framework24
. Article 7 of the TRIPS
agreement (“Objectives”) states that “the protection and enforcement of intellectual
property rights should contribute to the promotion of technological innovation and to the
transfer and dissemination of technology, to the mutual advantage of producers and users of
technological knowledge and in a manner conducive to social and economic welfare, and to
a balance of rights and obligations”25
. So that from January, 1st
, 1996, developed countries
had to adapt their national legislations over patents in order to comply with the TRIPS
agreement. The developing countries, however, have had 10 years to align legislation and
policies to the TRIPS agreement (therefore adapting their legislation on January, 1st
, 2006),
and the least developed countries benefited from a 20-year moratorium.
The Doha Declaration: public health prevails
To fit public health challenges and priorities, some flexibilities were introduced as
provisions in the TRIPS agreement, so that patents could be circumvented in particular
situations and would not impede public health priorities. These flexibilities include parallel
imports: a country can purchase patented drugs in another country, and sell it on its
domestic market, without the patent holder’s consent. This flexibility can prove extremely
useful for developing countries when a particular drug is overpriced on the domestic market
compared to other markets: Bayer’s Cipro (ciproflaxin) for instance, sells for USD 740 for 500
mg in Mozambique, whereas the price-tag in India for the same quantity is USD 15 (due to
local manufacturers’ competition). Therefore, Mozambique can import the product from
India without Bayer’s permission, under TRIPS flexibilities26
.
24
WTO, Members and Observers, June 26
th
, 2014
(http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm). WTO includes 160 member-states and 24
observer-states, that are to start the accession negotiation process Countries that are neither members nor
observers and that are part of the United-Nations are the following: Eritrea, Federal States of Micronesia,
Kiribati, Marshall Islands, Monaco, Nauru, North Korea, Palau, San Marino, Somalia, South Sudan, Timor-Leste,
Turkmenistan and Tuvalu.
25
WTO, The Uruguay Round Agreements, Annex 1C: agreement on trade-related aspects of intellectual
property rights, WTO, pp319-351
26
WHO, Parallel imports (http://www.who.int/trade/glossary/story070/en/)

28
TRIPS flexibilities also include experimental use exception: since the ability to innovate
mainly depends on existing products and former innovations and technologies, scientists can
have free access to already existing drugs for instance, for research or any other scientific
purpose.
Another TRIPS flexibility is related to compulsory licenses: according to article 31 of the
TRIPS agreement, in the case of a national emergency or other circumstances of extreme
urgency, a country can issue a compulsory license to use the rights conferred by a patent,
without any authorization from the holder and enables a pharmaceutical company to
produce a generic drug. However, the notion of “national emergency” has not been clearly
defined in the TRIPS agreement, which means that countries can get their own definition of
what a national emergency actually is.
Therefore, developing countries encountered some difficulties in making effective use of
flexibilities provided by the TRIPS agreement, mainly due to the imprecision surrounding
some provisions, hence the Doha Ministerial Declaration. In 2001, WTO members reaffirmed
that TRIPS Agreement should be implemented in a way that supports public health27
, by
promoting both access to existing drugs and treatments and the creation of new ones. The
declaration also stresses the governments’ rights to use the TRIPS Agreement flexibilities.
However, as some African countries highlighted, some countries were still unable to grant
compulsory licenses, because of poor local pharmaceutical manufacturing capabilities.
Therefore, in August 2003, an amendment to the TRIPS agreement was adopted, enabling
members to import medicines under compulsory licenses, and not necessarily to produce
them locally. A country like Botswana can now issue a compulsory license and ask a firm,
established in a foreign country to produce generic drugs and export them to Botswana.
I had the chance to meet James Arkinstall (appendix 6), Head of Communications of the
MSF campaign for access to essential medicines, who explained me how MSF has tried to
encourage developing countries to use the TRIPS flexibilities, in order to guarantee a better
access to drugs and medicines for their populations. Just after MSF won the Nobel Prize in
1999, MSF Access Campaign was created, against the backdrop of the WTO Seattle round,
27
Declarartion on the TRIPS agreement and public Health, adopted on November, 14
th
, 2001: “we affirm
that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members'
right to protect public health and, in particular, to promote access to medicines for all”

29
during which protesters of an anti-globalization movement demonstrated, questioning WTO
trade policies. People started to question the design of an international framework regarding
intellectual property, applicable to every country, regardless their level of economic
development. MSF Access Campaign was therefore aimed at promoting a reliable access to
drugs and medicines and the use of the TRIPS flexibilities for the developing world to ensure
the enhancement of their population health. Therefore, MSF Access campaign is lobbying
developing countries governments that have strong IPR regimes to make them use the TRIPS
flexibilities and build advantageous national legal framework which would enable them to
use such flexibilities. And that is what they did with Thailand for instance: Thailand indeed
has a more favorable framework for action than other developing countries such as China.
Indeed, its civil society is strong and highly involved. Moreover, the legal framework in
Thailand already guaranteed public health. Finally, Thailand benefits from a local production
capacity of drugs, thanks to its public laboratory, the Government Pharmaceutical Office.
Thanks to MSF Access campaign lobbying and to the role of the civil society, Thailand was
the first country in the world to use compulsory licenses under the TRIPS agreement, and it
used it massively. In 2006, the government issued two compulsory licenses for antiretroviral
drugs: Stocrin (efavirenz) developed by the German pharmaceutical company Merck and
Kaletra (lopinavir + ritonavir) developed by the American pharmaceutical company Abbot. In
2007, a compulsory license was issued for a blood thinner, used to treat cardiovascular
diseases, Plavix (clopidrogel) developed by the French pharmaceutical company Sanofi-
Aventis. Finally, three cancer drugs compulsory licenses were issued between 2007 and 2008
for the following drugs: Taxotere (docetaxel), used to treat breast and lung cancers,
developed by Sanofi-Aventis; Tarceva (erlotinib), used to treat lung, ovarian and pancreatic
cancers, developed by the Swiss pharmaceutical company Roche; Femara (letrozole), used to
treat breast cancer and developed by the Swiss pharmaceutical company Novartis.28
The introduction of these TRIPS flexibilities and their use by countries such as Thailand or
India, has of course faced much criticism from the big pharma companies: therefore,
developing countries tend not to take full-advantage of flexibilities offered by the TRIPS
agreement. National patent offices are very cautious regarding granting of compulsory
licenses, probably because they feel threatened by potential repressions from the Western
28
RIVIERE P., “La Thaïlande ose les génériques”, Le Monde Diplomatique, February 3rd 2007

30
pharmaceutical industries: they might fear that repeated issuance of compulsory licenses
may drive away multinational pharmaceutical companies’ investments from their countries.
One example in history has significantly imprinted people’s minds: in Thailand, following the
compulsory license granting for Kaletra, the antiretroviral drug, in 2006, Abbot decided to
withdraw further versions of its drugs from Thailand’s market. One further version of the
drug did not need to be refrigerated (which represents an important feature, given that the
average temperature in Thailand is very hot and that a limited number of people has access
to a fridge), but Abbot first refused to commercialize it in Thailand before giving up under
NGOs oppression29
. The drug was vital for many people living with HIV/AIDS in Thailand and
Abbot’s move therefore had severe consequences on the population health.
Moreover, developing countries might fear that the use of TRIPS flexibilities might
impact their trade relationships: developing countries may fear that the United-States would
take away trade preferences if they use TRIPS flexibilities for instance; India may fear that
repeated court cases could damage its reputation, etc. India has already been accused of
discrimination against American pharmaceutical companies by the United-States trade
representative last February30
, which worsened already strained-relationships between the
two countries (the countries have already been fighting in many bilateral WTO disputes31
).
India, however, decided to block the United-States investigators over its IPR regime. Both
countries have interest in maintaining good business relations. Bilateral trade in goods and
private services measured USD 93 billion in 2012, and India is the first foreign drugs supplier
of the United-States, hence the sometimes cautious approach of the Indian Department of
Industrial Policy and Promotion (DIPP) regarding compulsory licenses.
The MSF Access Campaign is therefore acting to urge developing countries governments
to adopt flexible IPR national frameworks, and to use their flexibilities, despite the United-
States and the pharmaceutical companies’ pressure. TRIPS flexibilities are legal, and
29
ACCESS CAMPAIGN, “MSF denounces Abbot’s move to withhold medicines from people in Thailand”,
Access Campaign, March 15
th
, 2007 (http://www.msfaccess.org/about-us/media-room/press-releases/msf-
denounces-abbott%E2%80%99s-move-withhold-medicines-people-thailand)
30
COONEY P. and KUMAR M., “US to announce trade enforcement action linked to India”, Reuters,
February 10
th
, 2014
31
WTO, US files dispute against India over measures relating to solar cells and solar modules, February
11
th
, 2014 (http://www.wto.org/english/news_e/news14_e/ds475rfc_11feb14_e.htm). The most recent WTO
dispute between India and the Unied-States is a dispute over India’s solar program.

31
governments should therefore take the opportunity to use them and to improve their
populations’ health.
Recently, the German pharmaceutical company Bayer has filed a claim against the
Controller General of Patents, Designs and Trade Marks in India, which had granted its first-
ever compulsory license in March, 2013, to NATCO, a local drug maker, to produce and sell a
generic version of patent-protected cancer drug, Nexavar. Indeed, Bayer claims it has spent
more than USD 114 billion in research to develop the drug and that the issuing of a
compulsory license by the Indian government would make it impossible for Bayer to recover
its initial investment. The Bombay High Court, however, eventually ruled in favor of the
Controller General of Patents, arguing that there were no legal obstacles to issue
compulsory license since the patented drug was not available to the public at affordable
price. This court decision has actually set a precedent for allowing the sale of generic
versions of patented drugs in developing countries, and was a major illustration of what the
Doha Declaration was aiming at: public health prevails. According to the judges, “public
interest is and should always be fundamental in deciding a legal dispute between the
parties”32
. NATCO will actually be able to sell the drug for 175 USD per month, whereas the
cost of one-month treatment of Bayer’s drug is USD 5,500. In return, NATCO has to pay 7%
royalty payment on net sales to Bayer.
The TRIPS Agreement is therefore not merely governed by an unconditional protection of
IPR, but rather intends to implement a flexible protection of IPR that fits with public health
priorities. And as the Doha Declaration stresses, public health must prevail over IPR.
However, the TRIPS agreement has faced much questioning and criticism, especially among
developing countries. Can healthcare actually be considered as other “traded” goods, and
can it be regulated by the World Trade Organization? Should IPR apply in developing
countries? We will now focus on the very successful example of India, which established a
strong but flexible IPR system, which reconciled protection of innovation and public health
promotion. India indeed succeeded in both developing local technologies and
pharmaceutical industry and in significantly reducing drug prices and increasing drugs
accessibility for its own population.
32
SHIBU T. “High court’s Nexavar ruling strikes a blow for patient’s rights in India”, Times of India, July 17
th
,
2014

32
C – India and China, a developing pharmaceutical industry: the
emergence of generic manufacturers
India used to have a very strong intellectual property system with patents on both
products and processes regulated by the Indian Patent Act of 1856, which was amended in
1911. The term of patents was sixteen years as from the date of the application, and it could
be extended up to twenty-six years if the inventor considered that he did not earn enough
money to cover the costs of research and development.
As a result of this strong IPR regime, following independence in 1947, India’s
pharmaceutical industry was almost nonexistent and was dominated by multinational
companies who took advantage of the legal framework to heavily patent drugs in the
country. India was therefore highly dependent on external supply for drugs. Many blamed
the strong intellectual property system for actually not being able to stimulate innovation,
industrial development and general interest. Indeed, the system was only benefiting big
multinationals, which were able to establish monopolies and to sell their products at
prohibitive prices. In 1957, multinational companies hold about 99% of the drugs patents in
India, therefore having monopolistic control of the market33
. In the 1960s, the high-blood
pressure drug propranolol, developed by the British multinational company ICI
Pharmaceuticals, was not made available to Indian people, due to its very expensive price.
The members of the Indian’s Drug Manufacturer’s Association, created in 1961 to support
local pharmaceutical producers, including Yusuf Hamied (founder of Cipla), campaigned to
promote the production of an affordable local generic version of the drug, and presented
their case to Prime Minister Indira Gandhi, urging her to do something. The Association
members later declared: “we said to her that this drug is life-saving, and why should millions
be deprived of it just because the patent holder doesn't like the colour of our skin?”.
Following this episode, Indira Gandhi eventually approved a major change in the
pharmaceutical intellectual property laws34
.
33
ZAMBAD S., LONDHE B., “To study the scope and importance of amended patent act on Indian
pharmaceutical company with respect to innovation”, Procedia Economis and Finance, vol. 11, 2014, pp 819-
828
34
JACK A., « The man who battled big pharma”, Financial Times, March 29
th
, 2008

33
The pre-TRIPS period: new flexibilities in the Indian Patent Act to stimulate local
innovation and to promote access to affordable drugs within local population
Therefore, the Indian Patent Act was amended in 1970 and became more flexible:
from 1972, the new intellectual property system only regulated patents on processes.
Regarding the pharmaceutical industry, patents on processes could only be delivered for
seven years, and final drugs (products) could not be patented anymore. Since processes only
could be patented, it became possible for local Indian manufacturers to copy molecules
developed by the multinational companies in the North, by innovating in the process only.
Indian companies were therefore able to commercialize low-cost generic drugs that were
patented elsewhere. The amendment also introduced the concept of compulsory license: if
the government estimated that general interests and needs were not met, it could issue a
compulsory license and enable a local industrial pharmaceutical company to produce a copy
of the patented drug and to sell it at a more reasonable price. Finally, through the
introduction of the Drugs Price Control Order (DPCO, issued by the Government of India in
1970), drugs prices were regulated to both maximize drugs accessibility for local
populations, and cover research and development costs for the pharmaceutical industry.
Prices were fixed to ensure the manufacturing company a profit margin of 75% for essential
medicines, and a profit margin of 150% for non-essential medicines.
A flourishing local pharmaceutical industry and the emergence of a generic drugs
hub
Exhibit 6 – Evolution of Indian Pharmaceutical Sector. Source: India Brand Equity Foundation (IBEF),
Presentation on Pharmaceuticals, March 2014

34
According to Samira Guennif35
, the Indian Patent Act flexible amendments and
institutional initiatives have given rise to a flourishing pharmaceutical industry in India and
increased the country sanitary self-sufficiency (exhibit 6). Indeed, the country’s legal and
institutional environment limited patent protection to processes, which allowed India to
produce affordable local versions of expensive patented drugs legally and to sell them, both
nationally and internationally. In the 1950s, the Indian pharmaceutical industry was
composed of 1752 companies. In 2005, 20,000 companies were part of this sector36
. Drugs
production increased a lot as a result, and India is now one of the biggest producers of drugs,
and exports its production in the whole world (exhibit 7). These factors greatly influenced
the accessibility of medicines for local populations: in 2003, drugs sales in India represented
4.3 billion USD and 75% of the volume was realized by national firms37
.
Exhibit 7 – Local pharmaceutical production capacity, 2004. Source: The World Medicines Situation,
published by the World Health Organization (Thailand started producing drugs locally in 2006 only, while the
map was edited in 2004)
35
GUENNIF S. and CHAISSE J. “L’économie politique du brevet au sud : variations indiennes sur le brevet
pharmaceutique”, Revue internationale de droit économique, 2007, pp 185-190
36
FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND INDUSTRY (FICCI), Competitiveness of the
Indian Pharmaceutical Industry in the New Patent Regime, March 2005, 16p (www.ficci.com)
37
SAMPATH P. Economic Aspects of Access to Medicines after 2005, product patent protection and
emerging firms strategies in the Indian pharmaceutical industry, Institute for New Technologies, United Nations
University, 2005, 111p.

35
India pharmaceutical industry is mainly-based on generic drugs and spends very little on
high-risk research and development (exhibit 8), although this might change soon. The
industry has indeed acquired much experience and is now able to further innovate. Generic
drugs do not incur huge costs of research and development, and India can therefore offer
generic versions of patented drugs at a much lower price than the drug initial price.
Exhibit 8 – Indian Pharmaceutical Industry Overview, 2014. Source: IBEF
From the 1980s, more and more Indian generic manufacturers have emerged, producing
generic treatments and drugs, including antiretroviral drugs. In India, antiretroviral drugs
production began in 1991, with the commercialization of AZT: Cipla, the Indian
pharmaceutical firm, thanks to basic manufacturing processes was able to offer the drug on
the market at a much lower-cost than its initial price-tag, making it the cheapest
antiretroviral drug. The pharmaceutical company later engaged in the production of more
complex treatments. Other firms, such as Rambaxy, Hetero Aurodindo or Cadina followed
the same path. Market entry of Indian generic manufacturers for antiretroviral drugs
resulted in a significant fall in prices for many treatments, including AIDS treatments. In
2001, Cipla offered to sell its 3-drug combination (tri-therapy) antiretroviral treatment to
NGOs for USD 350 per year and per patient, while patented three-drug combination
antiretroviral treatments were sold for USD 931 at the same period. In March, 2001, the
patented drug combination price therefore fell to USD 727. Moreover, competition between
Indian generic manufacturers further pushed prices down. Two months after Cipla
announcement regarding its USD 350 treatment, Hetero declared selling the same treatment

36
for USD 347 and Rambaxy offered to sell the treatment for USD 295. Since then, the price for
antiretroviral treatments keeps decreasing38
(exhibit 9).
Generic drugs competition - The international market lowest price (in USD per patient and per
year) for antiretroviral tri-therapies (stavudine, lamivudine and nevirapine), from 2000 to 2006
Exhibit 9 – Generic drugs competition. Source: Untangling the Web, published by Médecins sans Frontières
and Presses de Sciences Po
Undoubtedly, the emergence of generic drugs resulted in a significant decrease in drugs
prices, and not only for antiretroviral drugs: competition from generic companies is
therefore the key to affordable drugs for the population. And paradoxically the good
performance of the Indian pharmaceutical industry in the health sector can mainly be
attributed to India patent system, and its flexibilities, according to Samira Guennif. By
introducing flexibilities in its intellectual property system, India has succeeded in stimulating
local pharmaceutical development while producing affordable generic drugs.
TRIPS and implications
India was a founder member of the General Agreement on Tariffs and Trade (GATT),
which became the WTO in 1995 and therefore had to meet WTO requirements. It benefited
from the 10-year moratorium for developing countries to adapt its legislation under the
TRIPS agreement, and took full advantage of this transition period. To comply with its
obligations, including making patents available for both products and process, India
eventually amended its Indian Patent Act in 1999, 2002 and in 200539
. In 2006, India granted
its first patent for a product under the new IPR regime, to Roche, for its chronic hepatitis
treatment, Pegasys.
38
DOCTORS WITHOUT BORDERS, Untangling the web of price reductions: a pricing guide for the purchase
of ARVs for developing countries, Médecins sans Frontières (MSF), 17
th
edition, July 2014
39
WIPO, India Patents (Amendment) Act, 1999 (http://www.wipo.int/wipolex/en/details.jsp?id=7622)
June, 2000 March,
2001
December,
2002
April,
2004
July, 2006
Originator drug 10,439 727 No data No data 556
Generic drug 2,767 350 201 168 132

37
However, contrary to what one could think, the post-TRIPS period has not implied a
weakened local pharmaceutical industry: indeed, India chose to maintain a wiggle room to
keep producing generic drugs. Despite pressures from the multinational companies, India
opted for a narrow interpretation of patentability: “the invention should be novel, involve an
inventive step, and be capable of industrial application”40
. Patenting therefore remains
limited to “new chemical entities” and is not applicable for incremental innovations41
, which
pharmaceutical companies often use as a circumvention to avoid giving up their patent
monopoly rights. Innovations such as changes on the coating of an existing drug or small
variations on existing active ingredients are not patentable under the Indian Paten Act.
Because India has been able to create such a comprehensive national legal framework and
to take full advantage of the TRIPS flexibilities, the domestic pharmaceutical industry kept
presenting strong performance and growth following changes in the IPR international regime
(exhibit 10).
Top 7 pharmaceutical companies in India by revenue
Exhibit 10 – Top 7 pharmaceutical companies in India by revenue, 2010. Source: Market Access
Opportunities in India, published by Kinapse Consulting. The seven top pharmaceutical companies are Indian,
and not foreign branches of Western pharmaceutical companies.
40
GUENNIF S., Protection du brevet et promotion de la santé publique selon les accords de libre-échange
états-uniens : surenchères autour des standards minimums de l’ADPIC au Sud, Centre d’Economie de
l’Université Paris Nord, 2007, 18 p
41
An incremental innovation can be defined as a minor improvement to an already existing product.
In INR billion In USD billion
Cipla 63.18 1.33
Ranbaxy 56.72 1.20
Dr. Reddy’s Laboratories 53.04 1.12
Lupin 45.09 0.95
Aurobindo Pharma 41.33 0.87
Sun Pharmaceutical 31.05 0.66
Cadila Healthcare 29.20 0.62
GlaxoSmithKline 23.74 0.50
Ipca Laboratories 18.81 0.40
Aventis Pharma 11.60 0.24

38
Indeed, India has been able to use TRIPS flexibilities to further develop its
pharmaceutical industry. The provision of compulsory licenses, for instance, acted since the
Indian Patent Act of 1970 has been internationally recognized by the TRIPS agreement, and
in March 2012, India issued its first-ever compulsory license under the TRIPS agreement, to
locally produce Nexavar (sorafenib), a kidney and liver cancer drug. China, which became a
member of the WTO on December, 11th
, 2001, followed India’s move, and introduced
legislative changes to its patent law in 2012, allowing China’s State Intellectual Property
Office (SIPO) to issue compulsory licenses as well, and to export medicines to other countries
in case of emergency. Since then, India has been considering other compulsory licenses:
after India’s government considered issuing a compulsory license for Herceptin
(trastuzumab), a breast cancer treatment, on February, 2013, Roche eventually decided not
to pursue its patent application for the drug in India, therefore enabling the manufacturing
of a cheaper version by the Indian drug manufacturer Biocon. More recently, the Health
Ministry in India filled a case at the DIPP, a part of the Commerce Ministry, to grant a
compulsory license for Sprycel (desatinib). Sprycel is a leukemia (leukemia is a group of
cancers) drug, manufactured by the American Bristol Myer Squibb’s. In two previous
attempts, the DIPP rejected The Ministry of Health requests, arguing that it was not satisfied
with the Ministry arguments for granting a compulsory license: in the first attempt, for
instance, the DIPP stated that the local company did not do enough efforts to be granted a
voluntary license. Moreover, the DIPP stressed that the absence of concrete definition of
“national emergency” within TRIPS agreement, was just making things more complicated.
However, this third attempt seems likely to be approved. The patented version of the drug is
indeed out of reach for a large number of patients in India and costs around INR 160,000
(USD 2,625) for a one-month treatment: manufacturing a generic version of it can therefore
be considered as a national emergency. A generic version of the drug would only cost INR
8,000 (USD 130)42
.
China, in 2013, did not address the problems of access to antiretroviral drugs and
hepatitis B treatments by issuing a compulsory license though, but by revoking the patent of
Gilead Science drug Viread (tenofovir), part of the WTO list of essential medicines, claiming
that the drug lacked novelty, and therefore enabling the pharmaceutical local companies to
42
THE PHARMA LETTER, “Indian Health Ministry seeking compulsory license for B-MS’ Sprycel”, The
Pharma Letter, August, 19
th
2014

39
manufacture generic versions of it. This action was made possible by the comprehensive
legal framework China adopted to comply with the TRIPS agreement, which like India’s
national framework, reflects a narrow interpretation of the international framework.
Viread’s patent had also been declared invalid in Brazil and India43
.
Thanks to these locally-produced generic versions of patented drugs in India and in
China, drugs and medicines have become more easily accessible for the local populations. In
our survey, people receiving healthcare services in India and China ranked the availability of
the drugs and medicines they needed 3.3 out of 4 on average, compared to 3 out of 4 in
other developing nations (appendix 8).
Thanks to the production of affordable drugs in India and China, an enhanced
access to medicines for local populations
The use of TRIPS flexibilities to locally produce generic-drugs in India and China has
enabled to enhance access to medicines for local populations, even though a large part of
the local production is meant for export. Indeed, there are two kinds of pharmaceutical
research and production going on in India and China:
- Many local companies are part of what is called “contract research”. This means that
you have Indian and Chinese pharmaceutical companies doing research and
producing drugs, mainly for Western markets. These companies therefore are export-
oriented, and India and China account for a large part of generic drugs global exports
(exhibit 11).
43
ELLIS S. “China revokes Viread Patent ; pricing was at issue”, Bioworld, August 7
th
, 2013

40
Imports of Indian drugs and medicines
Exhibit 11 – Major importers of Indian drugs and medicines (by value), 2014. Source: Infodrive India
(http://www.infodriveindia.com/india-export-data/pharmaceutical-export-data.aspx)
- The other set of Indian and Chinese companies are the ones meant for local markets.
They mainly produce affordable generic drugs that doctors in India and China tend to
prescribe to their patients, because they are much cheaper.
In addition to the increased production of generic drugs for the local market, Indian and
Chinese governments have taken measures to ensure an access for their population to the
locally-produced efficient and affordable drugs and to prevent from irrational drug use
(counterfeit drugs, in-excess prescription of antibiotics, etc.). In 2012, Manmohan Singh, the
former prime minister of India, announced the introduction of a “free medicine for all”
program: essential drug-supplies would be free of charge for patients in public facilities
across India. The program has been modeled on already existing programs such as those of
Tamil Nadu, Rajasthan, Kerala or Bihar. The system has not been expanded yet to other
states, but will probably benefit millions of patients, by reducing the financial burden of
healthcare services and promoting greater use of generic medicines instead of costly and
irrational drug prescriptions44
. The pillar of this scheme will therefore be the National List of
Essential Medicines of India (NLMEI), revised in June 2011, and including 348 medicines
covered by the DPCO (compared to 74 medicines under the 1995 DPCO).
44
SREEJA VN, “India’s generic drug healthcare policy to benefit millions of poor patients”, International
Business Times, July 7
th
, 2012

41
A similar list, the National essential drug list (NEDL) has also been issued by the Chinese
government in 2009. An updated version of the list was released in April, 2013 (National
Essential Drug List 2012). The revised list contains 520 molecules (compared to 307 in the
2009 list), including 317 chemical medicines and 203 traditional Chinese medicines45
.
Provinces can supplement the list, according to their specific needs. However, the 2012
NEDL introduced some restrictions to provincial supplements in order not to get distinctive
provincial essential drug lists that could contribute to greater inequities in terms of access to
healthcare. The National Development and Reform Commission is tasked with defining
market price ceilings for these essential medicines. Moreover, according to the central
government guidelines, state governments should organize public bidding for these
medicines, in order to get the lowest procurement price possible. These drugs are then
supplied to primary healthcare institutions (the scheme will probably expand to private
providers and hospitals soon), which are required to stock them and to sell them at cost
(procurement price plus a fixed distribution cost). In an article of The Lancet, Yu Fang and
colleagues analyzed the impact of the national essential medicine policy on access to drugs
and medicines for Shaanxi Province population46
. They found out that between 2009 (when
the Chinese government introduced its healthcare reform) and 2011, the price of twenty-
nine generic medicines decreased by 5.2% in the public sector and by 4.7% in private
pharmacies.
Another example of initiatives to enhance locally-produced affordable drugs access is the
Jan Aushadi scheme (JAS), in India. It was launched in 2008, through a public-private
partnership (with stakeholders such as the department of pharmaceuticals, state
governments, NGOs, charities, government bodies, pharmaceutical companies, etc.). The
scheme aims at opening pharmacies in every district to provide patients with quality and
affordable generic drugs (exhibit 12). As of today, as many as 157 Aushadhi stores have
already opened across the country, enabling the local population to benefit from a strong
flourishing network of generic-drugs local manufacturers. Drugs have been made affordable
45
CHINA FOOD AND DRUG ADMINISTRATION, National Essential Medicine List (2012 edition) released,
March, 19
th
, 2013 (http://eng.sfda.gov.cn/WS03/CL0757/79154.html)
ZHANG M., LU J., LIU J., ZHANG S., “Exploring Impacts of the revised EDL and Associated policies”, IMS
Consulting group, April 2013
46
FANG Y., WAGNER A., YANG S., JIANG M., ZHANG F., ROSS-DEGNAN D., “Access to affordable medicines
after helath reform: evidence from two cross-sectional surveys in Shaanxi Province, western China”, The
Lancet, vol 1, October, 2013, pp 227-237

42
by the emerging generic pharmaceutical industry and actually benefit the local populations,
providing them with cheaper drugs.
Average branded-drug prices comparison with Jan Audashi Scheme drug prices
Drugs category and name
of the active ingredient
Price of a pack of 10 tablets
branded drugs (in INR)
Jan Aushadhi 10 tablets
price (in INR)
Antibiotic:
Ciproflaxin
54.79 12.89
Painkiller
Diclofenac
60.40 4.20
Common cold:
Cetrizine
18.10 2.75
Fever:
Paracetamol
9.40 3.03
Pain and fever:
Nimesulide
39.67 3.16
Exhibit 12 – Jan Aushadhi drug prices, 2014. Source: Ministry of Chemicals and Fertilizers, Department of
Pharmaceuticals: Jan Aushadhi, a campaign to ensure access to medicines for all
However, in their research paper, Yu Fang and colleagues also found that the availability
of some essential medicines in China had significantly decreased between 2009 and 2011,
both in the public sector and in private pharmacies. Price reductions of drugs are essential to
ensure affordability of essential medicines for the population, but they mean little if the
cheaper drugs are actually not available. As Hans Hogerzeil and Sun Jing notice, “if maximum
prices for some medicines are imposed, local manufacturers might simply move production
capacities towards products for which the prices are not controlled”, such as non-essential
medicines, or simply focus on products for exportation. The massive production of generic
drugs in India and China might therefore not be sufficient to ensure access to healthcare for
local populations. Access to healthcare is not just about affordability of drugs. It is also about
much more factors that often do not seem to be taken into account. If hospitals keep being
financially dependent on the sales of drugs for instance (which approximately represent 40%
of the hospitals revenue in China), doctors will keep overprescribing irrational drugs, often
not included in the reimbursement list (local social insurance schemes in China are required
to provide higher coverage for listed drugs than for non-listed drugs). This would generate

43
considerable out-of-pocket expenses for the patients, therefore endangering their “right to
health”. It is essential to consider access to healthcare not only in terms of drugs
affordability, but in terms of overall health care system. As Neil Schluger, from the World
Lung Foundation stresses, “even if you have new drugs, you need the public health
infrastructure to diagnosis patients, deliver the drugs and ensure adherence to the
treatment”47
.
HIV-positive activists protest against Novartis in New-Delhi, urging the company to withdraw a case against
the Indian government, 2007 (Photo: Krishnan V.)
47
WARD A., “Killer of the poor now threatens the healthy”, Financial Times, March 24
th
, 2014

44
2- But lack of efficiency of health policies prevents local
population from accessing health services
The right to health for all is a fundamental right worldwide, and led to the creation of the
WHO in 1948. The WHO first conference, the International Conference on Primary Health
Care in 1978 resulted in the signing of the Alma-Alta declaration, by the 194 member-states
of the United-Nations. This declaration stresses the need for coherent action at the national
and international levels in order to protect and promote the health of people worldwide.
More recently, the WHO stressed the importance of achieving universal health coverage,
during, among other summits, Mexico International Forum on Universal Health Coverage,
held in April 2012. Universal health coverage can be defined as a mean to ensure people
access to the health services they need 48
. Therefore, several attempts to build
comprehensive healthcare systems emerged around the world.
Some systems, like the ones implemented in Great-Britain or in Sweden, offer free access
to basic health services for everyone, financed by the government. Healthcare facilities there
are public, and health personnel wages are paid by the central government or by local
communities. Although these systems have proved very successful, they often imply long
waiting lines: in 2001, 22% of British patients declared they had to wait more than three
months to get a hospital appointment. Other countries, such as France, Germany or Japan,
chose to implement a system mainly based on health insurance schemes, in which the offer
emanates from both public and private actors. Finally, some countries, among which Central
Europe countries and the United-States, decided to build systems mainly based on the
private sector, that some would call “non-systems”. In the United-States for instance,
companies co-finance health insurance contracts from private organizations for their
employees. Two out of three employees are insured this way, but employees working in
small companies have to subscribe individual health insurance policies which are often way
more expensive. Most of people who do not have full-time jobs in big companies are
therefore uncovered by insurance schemes. Pensioners of more than 65 years old are
covered by Medicare, which finances a small amount of private health insurance schemes.
48
WHO, Health financing for universal coverage (http://www.who.int/health_financing/en/)

45
The poorest people are covered by Medicaid. However, given the rising number of
unemployed people in the United-States, the system is under strain49
.
We will now try to understand the healthcare systems being implemented in India
and China, and to identify their success and flaws.
A – India and China, undertaking the first step to reform their
healthcare system
China, towards universal health coverage
China’s healthcare system is just in its starting years but is already very promising,
and China will probably achieve universal health coverage quite soon.
According to the Republic of China’s first national census (the 1953 census), in the 1950s,
China’s population of 600 million people, was mainly rural (only 13.5% of the population was
living in urban areas), and poor. Sixty years later, however, the population profile is totally
different: Chinese 1.36 billion citizens are ageing (21% of the population is over 55 years old,
and only 17% below 15), half urban citizens (51% of the total population lives in urban areas)
and belong to the second largest economy in the world by gross domestic product (GDP),
with per capita GDP in purchasing power parity terms of over USD 9,800. Life expectancy has
increased from less than 40 in 1949 to over 75 years old in 201350
. How has China been able
to adapt its healthcare system to such a changing population?
Back to the Mao era (1950s-1970s), China’s population had good access to basic health
services: urban population was covered by the Labor Insurance System or by the
Government Insurance system, while rural population access to health was secured through
cooperative medical schemes. Moreover, from the late 1960s, “barefoot doctors” began
providing basic medical services and health prevention campaigns in the countryside.
Although the standards of healthcare were not very high, significant health improvements
49
BULARD M., “Comment fonctionnent les systèmes de santé dans le monde ?”, Le Monde Diplomatique,
February 2010
50
CENTRAL INTELLIGENCE AGENCY (CIA), The World Factbook, China, 2014
(https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html)

46
occurred during that period, thanks to widespread availability of drugs (including Chinese
traditional medicines), and easy access to basic health services and healthcare facilities,
hence a sharp increase in life expectancy, from 40 in the 1940s to approximately 65 in 1980.
From the 1980s, China’s socialist economy transformed into a market-economy, at the
expense of public health which has been neglected since then. Following the dissolution of
rural cooperatives, insurance coverage indicators dropped to 7% in rural areas51
. The
Chinese government therefore had to face growing public discontent, stemming from
difficulties for the population to access healthcare services. The outbreak of severe acute
respiratory syndrome in China in 2003 exposed the public health system flaws and focused
the government’s attention on health. As a consequence, on April 2009, the government
launched its healthcare reform plan (the Healthy China 2020 plan), and committed to
spending CNY 850 billion from 2009 to 2012, to provide universal health coverage for the
whole Chinese population by 2020. Public spending in healthcare is now much higher in
China than in many developing countries, and even than in some developed countries
(appendix 2). The reform plan includes five main components: expanding healthcare
coverage, establishing a national essential medicines system to meet the population needs
for affordable drugs, build a comprehensive network of health facilities especially focusing
on the primary care delivery system to provide basic health care, addressing inequities by
making public health services accessible to the whole Chinese population, and finally,
conducting public hospitals reforms. The proposed plan spans from 2009 to 2020 and is
illustrated along with its five key components, in the following chart (exhibit 13):
51
EGGLESTON K., “Health Care for 1.3 billion : an overview of China’s health system”, The Walter H.
Shorenstein Asia-Pacific Research Center, Stanford University, January 9
th
, 2012

47
Exhibit 13 - Chinese healthcare reform blueprint through 2020. Source: Opportunities in China’s
pharmaceuticals market, published by Deloitte
Additionally, in its 12th Five-Year Plan (2011-2015) announcement, the Chinese government
focused on increasing medical personnel and controlling costs.
Expanding healthcare coverage
The cost of healthcare increased a lot in China in the 2000s, and China’s health reform
between 2003 and 2008 has therefore focused on extension of healthcare coverage52
. The
New Rural Cooperative Medical Scheme (NRCMS) was launched, and was mainly financed by
the government. 95% of farmers were covered by the scheme in 2012. In 2007, the
government established the Urban Resident Basic Health Insurance (URBHI), to cover the
urban population that was not covered by the Urban Employee Basic Health Insurance
(UEBHI). The UEBHI, jointly funded by employers and employees, indeed only covered about
30% of the population. Finally, the government launched a Medical Financial Assistance
system (MFA) to cover the poorest citizens that currently covers medical services for more
than 68 million people. The four systems (NRCMS, UEBHI, URBHI and MFA) complement
each other and greatly expanded health care coverage for the Chinese population (exhibit
14).
52
YIP W., HSIAO WC. CHEN W. HU S., MA J., MAYNARD A., “Early appraisal of China’s huge and complex
health-care reforms”, The Lancet, 2012

48
Exhibit 14 – China’s main medical insurance scheme. Source: China’s healthcare system, published by the
Swedish Agency for Growth Policy Analysis, April, 2013
As of today, about 95% of the Chinese population is covered by basic medical insurance,
which represents a huge progress compared to just ten years ago53
: in 2004, 70% of the
Chinese population did not receive any formal financial protection to cover their healthcare
expenditures54
. In our survey, four out of four participants receiving healthcare services in
53
LI KEQIANG, As China’s healthcare reform deepens, progress and challenges (speech) November, 16
th
,
2011
54
HE JINGWEI A. “China’s Ongoing Healthcare Reform: reversing the perverse incentive scheme”, East
Asian Institute, pp 39-48, 2010

49
China are covered by a health insurance, including participants who do not have the Chinese
nationality (appendix 8). Very significant progress has therefore already occurred regarding
healthcare insurance coverage, especially in rural and less-developed areas (such as Western
and Central provinces), thanks to the launch of the NRCMS in 2003 (exhibit 15).
Health insurance coverage within the Eastern, Central and Western provinces in China
Exhibit 15 – Health insurance coverage within the Eastern, Central and Western provinces in China.
Source: Trends in access to health services and financial protection in China between 2003 and 2011, by Qun
Meng and colleagues
Establishing a national essential medicines system
The central component of the national essential medicines system is the NEDL, discussed
earlier.
The undergoing public hospital reform
Public hospitals in China, contrary to India and other developing nations (appendix 11),
play a major role in providing health care services. Indeed, health services are mainly
provided by the public system, and public hospitals beds account for 90% of the total
number of beds in hospitals in China. 75% of our survey respondents who receive healthcare
services in China declared public facilities were the healthcare facilities they trusted more
(appendix 8). Moreover, in addition to inpatient care and tertiary services, public hospitals in

VERDIN Doriane _Master's Thesis 2014_Access to healthcare in India and China

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