New%20Intellectual%20Property%20Regimes%20and%20New%20Business%20Models%20for%20Funding%20R

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New Intellectual Property Regimes and New
Business Models for Funding RD

• James Love
• Consumer Project on Technology
• 20 March 2003
• The Human Genome and Africa
• Stellenbosch, South Africa

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introduction

• The development of new tools to diagnose and
  treat health care problems will present enormous
  ethical and practical dilemmas for society. We
  will have to determine which public policy
  instruments are adequate for financing the costs
  of the research and development that is needed
  for progress, and we will have to decide if these
  new technologies will be accessible to the poor,
  or if they are affordable to middle income
  persons.

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How do we fund RD?

• Public and Donor Funds
• Direct
• Indirect
• Research Mandates
• Intellectual Property Rights
• Patents
• other exclusive marketing rights

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Intellectual property
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Scope of patentability in WIPO Substantive
Patent Law Treaty (SPLT)

• Article 12(4) Industrial Applicability/Utility
  A claimed invention shall be industrially
  applicable (useful). It shall be considered
  industrially applicable (useful) if it
• Alternative A can be made or used for
  exploitation in any field of commercial
  activity. Alternative B can be made or used
  in any kind of industry.  "Industry" shall be
  understood in its broadest sense, and shall not
  be limited to industry and commerce proper, but
  include agricultural and extractive industries.
  Alternative C has a specific, substantial
  and credible utility.

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Who obtains patent protection?PCT Patent
Filings, 2002
 
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Rate of investment in RD for new products
pharmaceutical industry

• 1997 8.0 percent
• 1998 7.9 percent
• 1999 8.8 percent
• Source James Love, What do US IRS tax returns
  tell us about RD investments? Van ontwikkelen
  tot slikken, Pharma Selecta congres, January 16,
  2003

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The pharmaceutical market was estimated at 406
billion in 2002. North America, Europe, Japan
and Latin America accounted for 85 of the
worldwide pharmaceutical market.

• IMS estimates Africa will account for only 5.3
  billion in sales, 1.3 percent of the global market

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Strong IPR regimes are controversial because they
lead to disparities in access
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Tim Hubbards demand curve problem
Cost
People treated
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Changes in Prices for Fluconazole in Thailand,
following the introduction of competition in 1998

• Fluconazole was sold as monopoly by Pfizer for
  200 baht per pill, and was too expensive to treat
  cyptococcal meningitis
• The introduction of competition was a major
  victory for Asian AIDS activists

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Generic competition and social activism has
driven down the price of AIDS drugs in Africa
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Nevirapine3TCd4T HAART Regimeannual cost
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February 2003 demonstrations in Korea over
pricing of Glivec, a Norvartis drug to treat
leukemia
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Doha Declaration On The Trips Agreement And
Public Health

• 5(a) Each Member has the right to grant
  compulsory licences and the freedom to determine
  the grounds upon which such licences are granted.

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Paragraph 4 Doha Declaration on TRIPS

• We agree that the TRIPS Agreement does not and
  should not prevent Members from taking measures
  to protect public health. Accordingly, while
  reiterating our commitment to the TRIPS
  Agreement, 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.
• In this connection, we reaffirm the right of
  WTO Members to use, to the full, the provisions
  in the TRIPS Agreement, which provide flexibility
  for this purpose.

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How does one promote access to medicines for all?

• Is marginal cost pricing best for the poor?
• Is the right to health equal to the right to copy?

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Are Access and RD competing policy objectives?
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WTO/TRIPS is limited and problematic framework
for addressing global RD

• TRIPS does not address the problem of free riding
  for the creation of global public goods, such as
  research that enters the public domain.
• Small return for non-profit and educational
  institutions
• There are insufficient private incentives to
  invest in many important RD projects.
• Exclusive rights on RD may not be the most
  efficient mechanism to finance RD.
• Patent can be barriers to conducting research
• Private benefits are not equal to social benefits
• Excessive investment in drugs with incremental
  benefits, insufficient investments in many areas.
  
• Strong IPR protection can and does lead to access
  problems
• HIV, Glivec/Leukaemia, Singulair/Asthma

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Global brainstorming on intellectual property

• Open Source/GPL models for software development
• Peer to peer technologies and social organization
  models
• UK Commission on Intellectual Property Rights
• TACD IP agenda
• Royal Society brainstorming on IPR
• OECD IPR studies
• US National Academies of Science
• US Federal Trade Commission / Department of
  Justice hearings on competition and intellectual
  property.
• MSF Working groups on IPR/DND

• IETF working group on IPR
• UNDP Human Development Report 2001
• Blur/Banff discussions on music
• Rockefeller Bellagio meetings / collective
  management of intellectual property rights
• World Business Council for Sustainable
  Development Project on Intellectual Property
  Rights
• Aventis Radical IPR scenarios
• Ransom / Matching Funds model
• WIPO access to genetic resources / traditional
  knowledge and folklore
• WHO/Harare proposal

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Do we need a new global framework for funding RD?
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Models for RD treaties

• The Treaty of Europe RD as a development tool
• Landmine treaty Humanitarian de-mining
  technologies
• Koyto Climate Treaty Energy efficient
  technologies
• G8 Negotiations over funding vaccines and drugs
  for neglected diseases
• John Barton Vaccines, public domain, technology
  transfer
• Discussions on access to scientific journals
• Human Genome Project Clinton/Blair Agreement

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Decentralized decision making on RD

• Treaty requires minimum national contribution to
  RD, and transparency of investment flows
• Countries free to fund RD in a variety of ways.
• Range of options allowed
• Strong IPR, high prices
• Research mandates
• Weak IPR regimes (non-exclusive rights liability
  models)
• Public Funding
• No IPR open source development regimes, marginal
  cost pricing
• Each countrys system is without prejudice to
  claiming IP in other countries regimes, subject
  to non-discrimination

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Possible approach

• Divide countries into group by income
• For each group, minimum support for RD is
  percentage of GDP
• Contributions can be funded in a variety of ways
• Purchases of patented products
• Direct or indirect public expenditures on
  research
• Research Mandates

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Initial health care RD target for developed
economies

• .1 percent of GDP?
• .15 percent of GDP?
• Could be adjusted higher to increase rate of
  innovation

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One could have weighting of expenditures when
determining acceptable funding levels

• 10 percent of purchase of patented products
• Based upon evidence of industry (or firm)
  reinvestment rates
• 100 percent of public expenditures on public
  sector research
• Premium for open source research (125 percent?)
• 150 percent of public expenditures on development
  of vaccines and drugs for neglected diseases

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WHO Harare Proposal for funding RD

• Proposal from August 2001 WHO/Afro region meeting
  on intellectual property rights, trade agreements
  and public health, attended by health and trade
  officials from 16 African countries.
• Compulsory licenses for all essential health care
  products
• Royalties are paid into national RD fund
• Patent owners are shareholders in RD fund
• Fund invested in African country
• Patent owners benefit from global returns on
  commercial discoveries

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Advantages of the Harare Proposal

• Brings prices closer to marginal costs
• Increases access for the poor
• Keeps royalty income in the country
• Level of compensation to patent owners is
  transparent
• Builds research infrastructure
• Universities
• Domestic private sector
• Provides domestic employment in important
  technology sector

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For more information

• Consumer Project on Technology
• james.love_at_cptech.org
• http//www.cptech.org
• Subscribe to ip-health