The return of democracy to Thailand has not been universally welcomed. Some Thais are disgruntled by the resurgent influence of their allegedly corrupt former prime minister, Thaksin Shinawatra. Others, including foreign NGOs such as Doctors Without Borders and Oxfam, are mourning the demise of the military junta because it issued compulsory licenses for the production of cheap replica versions of branded drugs used to treat HIV, heart disease, and cancer. Although the replica drugs were of dubious quality, they offered the junta enticing possibilities for graft and were popular with local media and foreign NGOs. They also boosted Thailand’s international reputation in some quarters: Brazil explicitly mentioned Thailand when it issued its compulsory licenses on HIV drugs last year, and Indonesia, the Philippines, and India may do likewise in the coming months.

When the new Thai health minister, Chaiya Sasomsup, announced that he would review the compulsory licenses for cancer drugs, he was bombarded with protests. Activists at his office in Bangkok forced him to host some meetings offsite. Meanwhile, members of Act-Up, an AIDS activist organization, protested outside the Thai embassy in Paris, and myriad groups urged Chaiya not to review the drug licenses.

They have a point, since the World Trade Organization allows for governments to break a patent after “efforts to obtain authorization from the right holder on reasonable commercial terms and conditions” have failed, or in cases of “national emergency.”

It appears doubtful that the Thai government fulfilled the first requirement. Under threat of compulsory licenses, manufacturers in previous price negotiations with Thailand all offered substantial price reductions. One company, Novartis, eventually won a reprieve after agreeing to supply Glivec, a leukemia medicine, to 900 patients free of charge under its philanthropy program. But offers made by other companies (such as Sanofi-Aventis, Abbott Laboratories, and Merck) were all rejected, as the Thai government instead chose to contract with Indian manufacturers making replica products.

The Thai junta spent a pitifully small amount on healthcare: 3.3 percent of GDP. In 2004, two of Thailand’s poorer neighbors, Cambodia and Vietnam, spent 6.7 percent and 5.4 percent of GDP, respectively.

The issue of a “national emergency” is more problematic. Thailand has assumed (correctly, so far) that it would be given the benefit of the doubt: a sovereign government should be allowed to determine when such an emergency situation exists. But if there is indeed a health emergency, the Thai government has failed its people miserably. The military regime justified its compulsory licensing as necessary to defend Thailand’s universal healthcare program, which covers 48 million of Thailand’s 64 million people. Lower drug prices would help any healthcare program, but the Thai junta spent a pitifully small amount on health: 3.3 percent of GDP, less even than the Thaksin administration, which spent 3.5 percent in 2004. By comparison, two of Thailand’s poorer neighbors, Cambodia and Vietnam, spent 6.7 percent and 5.4 percent of GDP, respectively, in 2004. Thailand was even outspent by poor African countries such as Botswana and Senegal.

The junta’s desire to produce drugs domestically at Thailand’s state-owned Government Pharmaceutical Organization (GPO) may even have proved financially harmful. The Asia Sentinel, a Thai newspaper, has observed that, “by importing generic AIDS drugs from WHO-approved factories in India, Thailand is eligible to use money from the Global Fund for Aids, Tuberculosis, and Malaria to pay for them.” But if the GPO were to make them, “it would have to foot the bill itself.” As it is, we do not know precisely what the GPO has made and supplied—one hopes not very much—since the GPO cannot manufacture drugs that comply with World Health Organization standards, and it facilities will not be upgraded for at least another year.

To its credit, Thailand’s recently elected government seems to be reassessing the costs and benefits of patent breaking. The new Thai labor minister told The Bangkok Post last week that relatively little money was saved by issuing compulsory licenses on HIV medicines. And because Thailand’s HIV-prevention program has been so successful—new infections are now running at 6,500, down from nearly 21,000 in 2005—the problem of providing drugs is becoming less acute.

By issuing compulsory licenses so frivolously, Thailand has sabotaged its trade relations with Europe and the United States. It currently appears on the U.S. Trade Representative’s (USTR’s) “Priority Watch List” of countries that have abused intellectual property rights, and it has been stripped of certain trade privileges. When the USTR’s Annual 301 Report on intellectual property comes out in April, Thailand could be demoted even further and named as a “Priority Foreign Country,” which would bring more adverse trade consequences.

There are worrying aspects to the new government: for example, the new head of Thailand’s Food and Drug Administration resigned on Monday due to corruption allegations. Until this week, it looked as though the new regime would not enforce the existing compulsory licenses. But now it is sending mixed signals. On Tuesday, the health minister said that Thailand may actually enforce the compulsory licenses for certain cancer drugs.

Hopefully Thailand’s patent fight will increase global awareness of the problem. Western pharmaceutical companies need to tier prices for all drugs, not just high-profile ones. Meanwhile, Asian governments must push for fair—not extortionately low—drug prices and ensure that the lower-priced products their citizens receive from Western companies are not resold in wealthier markets, which would undermine the tiered pricing system.

Roger Bate is a resident fellow at the American Enterprise Institute.