Resident Fellow Roger Bate

The new Thai government is following the path of its predecessors, breaking drug patents and not spending enough on health. It's a recipe for ill-health and international trade battles. It doesn't have to be this way. Thai leaders can improve trade relations and public health by taking the following steps.

First, they must accept that breaking patents saves very little money. Thailand's former labor minister, Apai Chanthanajulaka, admitted this fact when the government was in its more conciliatory phase three months ago. At around the same time the public health minister, Chaiya Sasomsup, said he would review the benefits of patent breaking. But after coming under attack from influential foreign and local anti-patent activists, Mr. Sasomsup flip-flopped and said last month that he must do all he can to help the poorest patients, including patent breaking.

Mr. Sasomsup should continue what he started in February: a full review of previous patent breaking. He will find that breaking the patent on drug company Merck's HIV drug Efavirenz has most likely cost his government money.

Various Thai governments have paid over the odds for drugs made by their own poor performing and historically corrupt drug company, the Government Pharmaceutical Organisation. For several years, the GPO sold a copy of Efavirenz, into the Thai health system at prices often far higher than better Indian generic copies and sometimes not much cheaper than the price charged by the patent holder.

The GPO's copy was also not perfect. This has encouraged viral resistance, dangerously undermining the efficacy of Merck's original product, causing patients to suffer--some may have died as a result--and costs to escalate. Only a full review of these costs can determine whether, as I suspect, they have proved higher than would have been the case had Merck continued to supply the drugs. Furthermore, due to drug resistance all future costs will be higher, too, as newer therapies will be required for all patients.

Yet because the review of patent breaking has ceased, the assumption remains that the patent breaking has saved money. Before the current Thai government truly embraces breaking patents--and insiders tell me its populist patent-breaking position is not heartfelt--it should restart the review. If not it will break patents on other drugs, imminently on cancer and heart disease drugs, on a false assumption.

Second, the GPO is currently being overhauled, since its products were widely and correctly seen as substandard. Before it comes back online, probably in October, the health minister must get his fellow ministers to agree that all future tenders involving drugs, which the GPO can supply, are done in a transparent manner, with no bias in favor of GPO. If the GPO cannot make good quality drugs cheaply, then the Thai government should close it down and import drugs, like many mid-income countries.

Third, the government must start serious dialogue with international pharmaceutical companies. If it doesn't many companies may simply pull out of the country in the future if patents are not protected and they are not ensured reasonable profits. At the moment, the Thai government gives the impression of having no real idea what it wants to do. It is moving forward with patent breaking alongside insincere negotiations with Western companies, which is neither helping patients nor doing its international reputation any good.

Finally, and most importantly, the government must spend more on health. The patent problems above have largely come about because of the need of an underfunded health department to squeeze budget savings wherever possible. Thailand spends only 3% of GDP on health, which is far less than any neighboring countries, apart from the military junta in Burma. The regional average is about 4.5% of GDP. If Thailand's government allocated another 1% of its GDP to health it would still be below the regional average, but its health department would have well over $2 billion of additional funding to spend on all aspects of health, not just drug procurement.

In other words, if the Thai government allocated resources away from its bloated military, which has increased spending by $30 billion in the recent past, health would be improved significantly. It would not have to break patents and incur trade arguments and perhaps sanctions from the U.S. and governments in the European Union. More importantly it would remain on friendly terms with those researching and developing the best new drugs, which Thai patients would then have greater access to.

A health budget increase of $2 billion is easily affordable by the Thai government. Such an investment would clearly aid Thailand's sick and end the necessity for all the damaging patent breaking.

Roger Bate is a resident fellow at AEI.