Alternative Access Strategies

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Alternative Access
Strategies
Peter Maybarduk / UAEM
Decal 98/198
Spring 2007
Questions
:
How can society most efficiently
purchase research and
development, and hence create
lifesaving medicines?
What is the proper balance of
private incentive and public
benefit?
Social Purpose of IP
To provide incentives for private parties
to research, develop and market new
ideas and technologies for public use.
Quid pro quo: private profits for public
dissemination of innovative
technologies.
How well does IP accomplish its social
objectives?
Critiques of IP
Unnecessary
Monopoly pricing
Prices set to maximize financial return,
rather than maximize number of patients
treated (Hubbard/Love)
Limited research incentives for
diseases of the poor
Anticommons effects
Concentrating power in the hands of
the powerful
Alternative Access Strategies
(As in, alternatives to relying solely on strict
intellectual property enforcement to promote
R&D and provide medicines)
Flexibilities in intellectual property rules
Pooling intellectual property
Alternatives to intellectual property
Flexibilities - Compulsory
licensing
Think of compulsory licensing as:
Breaking a patent
Withdrawing a patent for limited purposes
A government order to share the rights to use a
technology
Medicines:
Issuing compulsory licenses allows governments to:
Produce and distribute the medicine on its own
Allow a generics manufacturer to produce and
distribute the medicine
Compulsory licensing
Creates price competition between
brand-name and generic manufacturers
- a victory for consumers
Thanks to generic competition, 1.5
million people have access to
antiretrovirals that did not ten years
ago.
International Law
World Trade Organization’s
Agreement on Trade Related Aspects
on Intellectual Property (WTO’s
TRIPS) governs international
intellectual property law
TRIPS article 31 permits compulsory
licensing
Compulsory licensing as a
default regime
 TRIPS and other trade agreements (not yet in
force in lowest-income countries) require
countries to honor 20-year patents
 But, the Doha declaration (2001) provides, “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.”
International Law
Doha Declaration paragraph 5(b):
members “have the right to issue
compulsory licenses and the freedom to
determine the grounds upon which such
licenses are granted.”
A Perception Problem
Belief that CLs may only be issued in cases of
public emergency
Wrong: government’s discretion. Emergency
simplifies requirements.
Belief that CLs require prior negotiation:
Only in certain circumstances. Government use
and emergencies require no prior negotiation.
A Perception Problem
Belief that no compulsory licenses have been
issued under Article 31
Poppecock! Lies and deceit!
Zambia, Malaysia, Indonesia, Eritrea, Mozambique,
Zimbabwe, South Africa, Thailand
Import and local manufacturing: drugs delivered in
all but Zimbabwean case
More than AIDS, more than emergency
Thai case: efavirenz CL imports could enable
treatment of 83,000 more people
USTR vs. CPTech
Challenges to compulsory
licensing
USTR, pharmaceutical companies and
Free Trade Agreements
Restrict CL to emergencies, broader
negotiation requirements, broader royalty
requirements, other restrictions
Compulsory licensing as a
default regime
Countries would choose as a rule not to
honor patents essential to lifesaving
medicines
Issue compulsory licenses automatically
Lump-sum payments to patent holders
Compulsory licensing as a
default regime
Criticisms and constraints:
If this approach spread to enough
countries with sizable markets, it
could hinder research incentives
Brazil, India, China
May depend on size of royalties
Flexibilities - Parallel
Importation
Parallel importation allows countries to
seek the best prices for medicines by
shopping on the world market
When companies charge higher prices
in one country than another,
governments can respond by
purchasing drugs at the low prices
available abroad.
Parallel Importation
For example, a Namibian company or
government agency might purchase
HIV/AIDS drugs in France, and resell them in
Namibia.
Because drug prices vary country to country,
and many are prohibitively expensive, parallel
importation helps countries with high drug
prices provide affordable medicines to their
people.
Parallel Importation
TRIPS Article 6 (“Exhaustion”) and
Doha paragraph 5(d) give countries
absolute right to parallel import
But U.S. and pharmaceutical companies
try to restrict this right through FTAs
Parallel Importation
Criticisms:
Perhaps rich countries should not import products
made available at discounts in poor countries
If drugs sold at discounts in Africa were imported
into USA as a matter of policy, the companies
would simply end the discounts.
Parallel importation is sound policy for poor
countries, perhaps less so for wealthy countries.
Pooling Intellectual Property
Sharing intellectual property and
sharing information about intellectual
property
If IP is equivalent to fences in a field,
pooling makes a common set of rules
for accessing what’s within all fences
Pooling Intellectual Property
Patent Pools
an agreement between two or more
patent owners to license patents to one
another or third parties.
the aggregation of intellectual property
rights which are the subject of crosslicensing
Ex: Aircraft Manufacturers, WWI
Pooling Intellectual Property
Patent pools
Reduce transaction costs
Clear blocking positions
Eliminate the holdup game
Pooling Intellectual Property
Case study: Essential Patent Pool for
AIDS Treatment (Love)
Holders of patents essential to the
treatment of HIV/AIDS commit their
patents to a single portfolio
Third parties license the portfolio in
developing and marketing new drugs
Patent pools
 Norvir (Abbott)
 essential component of many protease-inhibiting AIDS medicines.
 Initially developed through NIH.
 2003 - Abbott issued 400 percent price increase, forcing up the
prices of competitor medicines while maintaining the price of its
own Norvir-based treatment, Kaletra.
 Consumers were forced to pay high prices for an essential
medicine their tax dollars helped invent.
 EPPA would prevent this by fixing low royalty rates
Patent pools
EPPA would petition companies to commit
licenses voluntarily, seek compulsory
licenses when that fails
Patent holders may contribute patents
voluntarily because:
Consensus on importance of treating AIDS
PR benefits may outweigh licensing revenue
Reduced transaction costs and licensing fees
for all, allows for rational planning, market
predictability
Pooling intellectual property
Information / IP clearinghouses:
 Case study: Public Intellectual Property Resource
for Agriculture (PIPRA)
 Alliance of institutions sharing information and access to
intellectual property rights pertaining to agriculture
 “An initiative by universities, foundations and non-profit research institutions
to make agricultural technologies more easily available for development and
distribution of subsistence crops for humanitarian purposes in the developing
world and specialty crops in the developed world.”
 Socially Responsible Licensing Clearinghouse
Alternatives to Intellectual
Property
If exclusive rights (patents and
the risk of monopoly pricing they
create) are the problem, why not
investigate alternatives to such
complete exclusive rights?
Alternatives to Exclusivity
 “A 20-year marketing monopoly on a
patented invention is only one way to
finance R&D.” (Hubbard/Love)
 “An enormously inefficient means of
purchasing R&D…”
 Approx. 10% of drug sales go to R&D
 Approx. 2% of drug sales invested in R&D for
medically necessary technologies (debated
standard)
Alternatives to exclusivity
Medical Innovation Prize Fund
Global R&D Treaty
Compulsory licensing
as a default regime
Just don’t patent
Public and private
funding of research
Medical Innovation Prize Fund
Organizations compete for prizes
awarded for creating successful
drugs / treatments
Rewards may be issued all at once
(lump sum) or over time based on
evidence of use and efficacy
Medical Innovation Prize Fund
 Market model (promotes competition)
 Works with or without patents
 In a patent regime, governments would issue compulsory
licenses in exchange for the reward
 Similar to APCs, could be used to stimulate R&D in targeted
sectors
 Greater rewards for innovators, lesser for “me-too”
drugs
Medical Innovation Prize Fund
Criticisms and constraints:
Who determines how we allocate prizes?
More or less accurate than market forces?
How do we fund it?
Global R&D Treaty (HubbardLove)
Global treaty binding signatories to
contribute a certain percentage of
gross domestic product (GDP) to a
research and development fund
Global R&D Treaty
Currently, most countries (both high
and low-income, with some variation)
spend close to 1% of GDP on drugs
Approx. 10% goes back into R&D
Countries could instead agree to devote
0.1% of GDP or more to R&D
Global R&D Treaty
Meeting this obligation = no
longer “free-riding”
Countries then free to procure
0.1% from any source - they can
maintain current system of
honoring patents, or contribute
directly through a fund
Global R&D Treaty
Public funding for treaty could be
acquired by any means
Perhaps a small tax on each
pharmaceutical purchase
Simply part of national health care
expenditure
Global R&D Treaty
 Because treaty would not require countries to
honor patents, drug prices could be
comparatively low - the savings from generic
competition are likely to be much greater than
costs of the tax
 Countries have the option to trade high costs
of monopoly pricing for low cost of a tax
Global R&D Treaty
Moneys collected could be
contributed to R&D through
either domestic or international
prize or research grant system
Certain countries might not have
research capacity to effectively
spend R&D domestically
Global R&D Treaty
R&D fund could spur domestic R&D, where
previously money was effectively invested
in foreign companies
But, this could mean inefficient spending
as infant or small-scale R&D programs
might not produce results comparable with
more developed programs
Global R&D Treaty
Criticisms and constraints:
Corruption, pilfering of funds
Inefficiency of a centrallyplanned system
Enforcement
Risk of free-riding through
countries foregoing patent system,
but not meeting R&D commitment,
either.
Global R&D Treaty
Response:
Competing and regulated R&D funds
 Akin to pension funds
 Manage R&D assets on behalf of consumers
 Individuals / employers required to make minimum
contributions, but can choose who would receive
funds
 Allows funds to compete on basis of efficiency,
transparency and funding priorities
Global R&D Treaty
Criticisms and constraints:
Political will: can we make it happen?
Just don’t patent
Return to “share and share-alike”
academic perspective
Options:
Don’t patent at all
Commit idea to public domain
Patent, but partially cede rights
Open use for R&D/health purposes
Patent, but not in LMI Countries
TRIPS
UAEM - Equitable Access License
Just don’t patent
Criticisms and constraints:
Inventor may have little or no control
over patenting decisions
This a technology-by-technology
solution, i.e., one rights holder choosing
not to patent does not prevent patenting
of the next life-saving technology
But, we can try to change minds by example
Direct public funding of
research
Options:
Government:
NIH already a key player in drug
development ($27 billion/year). Many
of these innovations passed to private
firms for further development (Norvir).
Direct public funding of
research
Government:
Walter Reed Army Institute of
Research:
Historically a funder of neglected disease
research due to concerns for U.S. troops in
tropical countries
“Two highly effective antimalarial drugs and
vaccines to prevent hepatitis A, meningococcal
meningitis, and adenovirus caused respiratory
disease were developed at WRAIR.”
http://wrair-www.army.mil/
Direct public funding of
research
Options:
PHARMA
Initial research grants rather than prizes for
successful development
Universities
Non-profits
Medicines for Malaria Venture, Global Alliance
for TB Drug Development, International AIDS
Vaccine Initiative, Institute for One World
Health
Direct public funding of
research
These options allow us to discriminate
based on who we think will spend the
money best.
High profit margin of private sector vs.
bureaucracy of government vs. limited
capacity of non-profits
Can also be used to incentivize alliances
across sectors
Direct public funding of
research
Gives us a say in final use of technology
Allows us to determine licensing practices,
negotiate prices
Case study: California’s Stem
Cell Research Fund
Administered by California Institute
for Regenerative Medicine (CA govt)
Approved by California Proposition 71
Grant-based. Moneys provided for
research, and not conditioned on
success.
Initial funds from $3 billion in state bond
sales
Direct public funding of
research
Criticisms and constraints:
Can we efficiently manage a grant-based
system? Will we accurately assess which
potential recipients are likely to develop a
successful drug?
Can we raise the money?
Private grants to private firms
Bill & Melinda Gates Foundation
$100 million for vaccine development through
Malaria Vaccine Initiative
Funds risky, early development
Large donations to fund public health in
vogue
Creates a market for vaccines, essentially stands
in for the money that developing world consumers
don’t have
Criticism: Can society as a whole rely on
philanthropy, or do we need a structural
situation?
Public grants to private firms
Advance purchase commitments
Tax incentives
R&D Funds - Prizes and grants
 See Direct Funding and Alternatives to Exclusivity
Public Grants to Private Firms
Primary focus probably on NDs
If the problem is insufficient
market incentives to create
new technologies, then let’s
provide the incentives through
public money.
Advance Purchase
Commitments
Donors (often governments) agree in
advance to purchase effective
vaccines
This creates a market for NDs
Kremer, Harvard economist: “Making
Markets for Vaccines”
Donors need not pay unless effective
treatments are developed
Advance Purchase
Commitments
Proving persuasive:
G8 considering APCs for AIDS,
malaria, TB, rotavirus (diarrhea in
children), HPV (cervical cancer),
pneumococcus (pneumonia).
Vaccines for a New Millenium Act of
2005 (Kerry-Lugar)
Advance Purchase
Commitments
Criticisms and constraints:
Companies have significant incentive to be
first, but little incentive to be best.
Farlow, Oxford economist
Standards for payment must be highly precise
We might prefer improvements on the first
vaccine
Response:
Tiered payments
Tax Incentives
Provide private firms tax breaks for
developing ND treatments or for
providing free/low-cost drugs to needy
populations
Criticisms / constraints:
Must be a whopping tax break in order to
make up for neglected disease R&D
Might be more efficient to fund research
directly
Public grants to private firms
Airline tax:
France, Brazil, Chile, Norway, UK, Germany
Negotiating reduced prices from
pharmaceutical companies in partnership
with Clinton Foundation
Public grants to private firms
Ethical complaint:
We are already providing intellectual
property protection ostensibly in
exchange for public availability of new
technologies. Do we really want to
offer further rewards so the private
sector will uphold its end of the
bargain?
Question:
How can society most
efficiently purchase research
and development, and hence
create lifesaving medicines?
Two primary frameworks:
Patents (indirect R&D purchase)
R&D Funds (direct purchase)
Prize funds
Public grants / direct funding
Alternative Access Strategies
Private models
Patents
Public models
Public funding of govt / public research
Mixed models
Advance purchase commitments
Prizes/grants to public or private
entities
Alternative Access Tools
Treaties
Public R&D Funds
Equitable access licensing (UAEM)
Compulsory licenses
Private-public partnerships
Patent pools / clearinghouses
Your turn
Which approaches do you find
convincing? Less convincing?
How might we improve on
some of these ideas?
What role can universities play?
What role can we play as
individuals?
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