As the chair of the commission whose report Professor Scherer has reviewed, I am delighted to find myself spared any fundamental criticism. What can I say?

Most important, I appreciate Professor Scherer’s comments on the report, particularly his point that the report is remarkable. It derives, in fact, from a remarkable situation: the British Government created a group that had various perspectives but could work together well, supported us with the resources we needed to do a thorough job, and gave us genuine independence. I want once again to express my gratitude for this extraordinary opportunity to the members of the commission, to its staff, and to the British Government.

I’m also fascinated by Professor Scherer’s speculations about whether this commission could have been effective—indeed, whether it could have been organized—in the United States. I think the traditions of policy debate are different in the two nations, as are the roles that commissions are expected to play in such debates. Furthermore, the current National Academy of Sciences committee has the task of puzzling out what to do about intellectual property law in a developed nation, a task very different from ours.

I’d like to make the heart of my response a suggestion for two commission-type studies (in the U.S. or elsewhere), that would explore important issues not resolved by our commission and unlikely to be resolved by the NAS committee.

The first study would look at future issues in access to medicines. In Doha in 2001, World Trade Organization members agreed that poor nations could use compulsory licensing to provide affordable access to medicines—poor nations could require pharmaceutical companies to license their patented drugs to generic manufacturers at low royalties. But production of a patented product under compulsory license requires the producing firm to learn how to produce a particular product, carry out the necessary quality control, including possible bioequivalence testing, and get a production facility running efficiently. This requires significant expense that must ultimately be covered by those using the product, or by the world public sector.

Article 6 of the Doha Declaration on TRIPS and Public Health recognized that nations with insufficient capabilities to manufacture generics needed additional means of access such as importing generics manufactured elsewhere. The Doha Declaration initiated negotiations over this issue. Such negotiations have been taking place, although they have been in deadlock since the start of the year.

Unfortunately, as our report points out, resolving the technical legal issue will do nothing about the real-world economic problem. After 2005, when all nations will be required to have patent systems for pharmaceutical products, generic industries around the world will not be allowed to make generic substitutes for on-patent products. The Indian generic industry, a source of cheap anti-retrovirals for Sub-Saharan Africa, will have to restrict itself, like the U.S. generic industry, to products whose patents have expired. Hence it will not be possible to rely on the global generic industry to bear the expense of starting up generic production.

There is no clear response to this problem, and several directions should be explored. One solution would be to maintain a kind of “standby” generic industry, in which there is some mechanism to spread the start-up costs of producing a new product to consumers outside of poor nations. A second possibility is a public sector approach, perhaps one based on the pattern of public sector pharmaceutical production in Brazil, where the government produces copies of brandname AIDS drugs. A third option is to obtain strong enough commitments from the pharmaceutical industries to provide medicines at low prices, so that alternative production capabilities are not needed. Finally, the public sector could buy products from the pharmaceutical industry at prices that cover a substantial share of the R & D costs. Each direction has its economic and political pros and cons; several require some form of public subsidy. The choice deserves careful exploration, and it cannot reasonably be made without taking into account the interaction between this issue and the objective of encouraging new research on developing-country disease and bioterrorism, neither of which will attract adequate funding on a purely commercial basis.

Another issue that deserves serious discussion is the impact of patents on scientifically-sophisticated developing nations. For the commission report, we concentrated on the world’s poorest countries, but developing nations that do have scientific capability, like India and Brazil, face a different set of problems. For these nations, IP systems are likely to help encourage domestic innovations, and for larger countries, or those in appropriate regional groupings, such systems may encourage outside innovation focused on the special needs of the particular nations. But these nations must find a way to enable their research-based firms to participate in a global business community. In today’s world, the leading firms in that community—almost always firms from the developed world—hold strong IP positions that may be used to defend their market positions against new competitors. It is hard, for example, to see how a new firm, from anywhere in the world, could gain a substantial share of the market in semiconductors or agbiotechnology when the existing majors hold so many patents in these fields. Certainly, firms within such nations can enter the market as licensees or strategic allies of global majors, or perhaps find niche markets, but can they ever become more independent industrial competitors? The already substantial difficulty of entering markets dominated by multinational oligopolies is compounded by the international IP system.

GATT and the WTO have given the world the benefit of substantially free trade, but they have deprived developing nations of approaches based on infant industry protection. Similarly, TRIPS has deprived these countries of approaches based on imitation. Of course, production economies of scale today rise far beyond the national level and markets must be global, so the traditional infant-industry or imitation industrialization strategies may no longer be practical anyway. Does a new nation have a chance without a new technology, such as the steel and rail technologies that were central to the way the United States and German competed with Great Britain, or the move to semiconductors and computers that played such an important role in East Asia? What are the right development and business strategies for these scientifically-sophisticated nations and their firms? Do they look different in areas like pharmaceuticals as compared with, say, computer production, software writing, or consumer electronics? We need to think about these strategies, and perhaps to rethink intellectual property and antitrust rules, as well, if these nations are to enjoy new opportunities.