IPRs, Public Health and the Pharmaceutical Industry Issues in the Post-2005 TRIPS agenda Benjamin...

IPRs, Public Health and the Pharmaceutical Industry

Issues in the Post-2005 TRIPS agenda

Benjamin Coriat * and Luigi Orsenigo**

Universitè Paris XIII, Villetaneuse

**University of Brescia and KITeS, Bocconi University, Milan Italy

IPD, Manchester June 2009

Bio-pharmaceuticals• this sector brings the trade-offs and issues

involved in patent theory to their extreme consequences

• an industry where patents are actually very important mechanisms of private appropriability

• a science-based, innovation-intensive industry• A “strategic” industry:

– High growth– Skill-intensive– Health as an important factor of growth

• a socially sensitive industry: health as a human right

• undergoing deep and unforeseeable transformations


• controversies about the welfare implications of patents have characterized this industry ever since its inception.

• But in the last thirty years or so, the establishment of strong tendency towards an extremely tight IP regime has made this debate even more heated.

• Pandemics make the problem even more “visible” and compelling.


Pushing the controversy to the extreme

• 1) Advent of biotech: – progresses in molecular biology and their increasing relevance

for industrial innovative activities have strained to the limit a patent system which was essentially conceived for technologies like mechanical engineering and chemistry.

– Stretching the notions of novelty and usefulness– The development of the biotechnology industry itself is strictly

dependent on a highly favourable IPR regime – the transformations of the latter have been significantly

influenced by the growth of the biopharmaceutical sector.


Pushing the controversy to the extreme (2)

• 2) The spread of policy doctrines aiming at facilitating the commercial exploitation of publicly funded (basic) research – the Bayh-Dole Act in the USA in 1981 and the subsequent attempts to import at least part of its principles in other countries - has also been crucial in such a strongly science-based industry as pharmaceuticals.


Pushing the controversy to the extreme (3)

• (3) TRIPS Agreements — of which the pharmaceuticals industry is one the main supporters — has ignited raging controversies which go beyond domestic boundaries and reach the global level.

• Now the debate regarding the desirability of property rights in drugs takes place not only within (rich) countries but also between developed and developing countries.


The revival of the debate

• most of the new contributions have an empirical nature. • the economic theory of patents was often deemed to be

inconclusive given that radically different results could be obtained by slight changes in even ancillary assumptions.

• But still, despite the progress empirical evidence remains flimsy: problems of measurement and sheer lack of adequate data– Data are extremely hard to get access to and when they do exist

they are often available at prices and terms which are unaccessible to anybody except few specialized research groups.

• Not only patents: regulations restricting access to clinical trials data for generic producers

• In search for alternatives: prizes?


The Broad Questions

• Can a tight IPR regime foster innovative capabilities and growth in developing countries?

• What are the costs of a tight IPR regime on drug prices and access to healthcare?

• What is the structure of an IPR system that could best promote innovation, access to new (and older) technologies and growth?

• Should we forsake the patent system?• What are the alternatives?


Main propositions

• There are, indeed, profound trade-offs between the incentives to innovate and ensuring public access to medicines for which no obvious and simple solutions exist.

• The effects of strengthening the patent regime depend (non linearly) on a wide variety of conditions in any given country: – institutions (price controls; health systems, in general; basic

research..); – Capabilities and opportunities for innovation; – size of markets; – modes of competition; the specific nature of patent laws

themselves and court interpretationsIPD, Manchester June 2009

Main propositions (2)

• The IPR system governing pharmaceuticals has become increasingly dysfunctional — even in countries like the U.S. The efficacy and desirability of extending strong IPR protection in the rest of the world raises very legitimate doubts.

• Excessively tight IPRs can have negative effects not only on prices, but also on the rates and directions of innovation

• Both economic theory and the evidence increasingly suggest that the strengthening of IPR regimes in developing countries is likely to impose upon them a series of negative consequences that most likely outweigh any potential benefits gained from the tighter regime.


Market structure• Pharmaceuticals has been traditionally dominated by a stable core

of large, globalised innovative firms (USA, UK, Switzerland, Germany, Japan), but also:– Small domestic firms involved in adaptation, manufacturing, marketing– Biotech firms– Generics producers

• Small entry and turbulence (until biotech)

• Low demand price elasticity, high income elasticity

• Strong information asymmetries

• The third payer problem


The dynamics of competition• Schumpeterian competition:

– High profits after introduction of new drug– Imitation and me-too-drugs before patent expiration– Entry of generics after patent expiration– Branded “generics”

• Low concentration (despite high R&D and marketing intensity, M&As):

– little cumulativeness in innovation (random screening) – independent sub-markets


The Golden Age• The system seems to have been working reasonably well for many years

– Innovative opportunities– Welfare systems– Moderate IPR regimes:

• The interpretation of novelty• The interpretation of usefulness• Scope and breadth

High rates of innovation

The scope and efficacy of patent protection has varied significantly across countries. Many countries allowed only process patents did not offer protection for pharmaceutical products:

Product patents: France in 1960; Germany 1968; Japan 1976; Switzerland 1977;, Italy and Sweden in 1978. In some cases, as in Japan and Italy (and possibly France) the absence of product patent protection induced firms to avoid product R&D and to concentrate instead on finding novel processes for making existing molecules. In other cases, primarily Germany and Switzerland, this negative effect didn’t happen


The transformation of the industry: Technology and Organization• Increasing role of fundamental science (“biotech”)• From random screening to rational drug design to molecular

biology• The biotech industry: networks and vertical specialization• Markets for technology • Venture capital• IPRs• A new, finance-led, model of innovation?

• Diffusion of knowledge and capabilities worldwide, but strong concentration in the USA

• But: soaring costs of discovery and development• declining research productivity


The Productivity Paradox• Between 1978 and 2003, research “productivity, has been

falling:– R&D expenditures increased tenfold while patenting output increased

only sevenfold (Nightingale and Martin 2004). – New Chemical Entities approved by the FDA in the U.S. between 1983

and 2003. Some increase was displayed until the mid 1990s, followed by a sharp decline in the years since. In 2002, U.S. R&D expenditures in pharmaceuticals were 30 times greater than in the early 1980s, while roughly the same number of drugs were approved annually.

• High rates of attrition, longer times in Phase I, the Phase II bottleneck

• Depletion of opportunities,more difficult pathologies• Increasing complexity, explosion of the research space• Increasing costs of regulation (?)• IPRs (?)


• Mee-too drugs?• Evergreening of patents and patentability for

second use• Are Big Pharma simply becoming manufacturing

and marketing organizations, using knowledge created elsewhere (universities, biotech,..)?


Biotech is no better

• Although around 1/3 of new drugs originates from basic research conducted at universities, hospitals and biotech companies, the performance of the biotech segment is disappointing (Pisano 2006):– Operating profits– New drugs– transaction costs and market failures


Further changes in the industry– Regulation, product approval: (evidence-based medicine, multi-

country trials…) before and after product approval;– But also significant rationalization and time/cost cutting,

especially for some categories of drugs (e.g. orphan drugs)– Markets: diffusion of generics– Appearance of new firms and countries as producers of

generics– Increasing marketing expenditures (prices of branded drugs

increase after patent expiry, market segmentation); Direct to Consumer Advertising

– Cost containment policies– Raising perceptions of health as a human right plus

humanitarian catastrophes (HIV/AIDS) – Substantial and controversial changes in the IPR regimes in the

North


• Is the Big Pharma, blockbuster model still viable?

• Is the current biotech/Big Pharma model efficient?

• A real issue: how to sustain R&D and innovation?


The debate on IPRs

• Neverending debate on the effects of patents in pharma well before Trips

• The Kefauver Commission (1962)

• “Excessive” prices and profits ?

• The fundamental trade off: monopoly power is needed to sustain the private funding and the incentive to innovation


Back to the basics• The early literature (Nordhaus 1969, etc..) predicts that stronger IPRs

increase the incentive to invest in R&D and hence the rate of innovation. • Increasing the number of potential inventors: individuals, small firms,

outside inventors lacking complementary assets• Raising propensity to invest in R&D• But the theoretical let alone the empirical implications are weak. In

particular, they rest on a vast range of ancillary but critical assumptions related e.g. to:

– curvature of the innovation function and/or probability distribution of innovating (the space of innovative opportunities)

– Definition of the population of potential and actual innovators (Baumol (1990) Murphy, Shleifer,and Vishny (1991)): incentives and competences

– elasticity of R&D expenditures to profits– cost structure of R&D– Specifics of R&D decision making process– Costs of imitation wrt costs of innovation– actual patterns of imitation (how much does imitation bite)?


Costs of IPRs

• monopoly power, higher prices, lower production, net changes in social welfare

• These effects are magnified by low price elasticity of demand and by the third payer problem

• Patents as a benefit taxes (Stiglitz, 2004):– only those who benefit from the innovation pay for– But it is a regressive tax


Additional costs

• Persistence of monopoly• Stronger IPRs can slow down the pace of

innovation: market structure and innovation• Cumulative innovation• Patent conflict can impede innovation• Distortions in the direction of research: much of

R&D activity directed at circumventing or strengthening monopoly, me-too products, etc..


Recent Changes in the IPR regimes

• Substantial and controversial changes in the IPR regimes: – Diamond vs. Chakrabarty– Bayh-Dole– The Federal Circuit – Patents scope – Stretching the notions of novelty and usefulness: genes, ….

• Most of these changes are based on the argument that IPRs favour commercialisation of inventions, not because they stimulate innovation


Further justifications for strong IPRs

• patents disclose information (vs. secrecy)– But information different from knowledge

• patents induce commercialization of innovation (e.g. biotech): markets for technology (Arora et al, 2004)– But implies that no further mechanisms of protection are

available in the development process– It might hinder further innovation if the invention is “basic”– The anticommons problems (Eisenberg)

• prospect theory– but ignores advantages of experimentation in conditions of

uncertainty


The empirical evidence and the new research

• These developments trigger further theoretical and empirical research

• effects of strengthening IPR regimes• Increasing skepticism • Less skepticism when patents are conceived not so

much as an incentive to innovation but a mechanism for creating market for technologies (Sokoloff and Lamoraux, Sokoloff and Kahn, Arora et al., ..)


What do we know?

• patents are important in bio-pharmaceuticals• But there are also other methods of protection

(marketing, organizational capabilities,…)• Scherer: co-movements of profitability and R&D

investment • But, how much does increasing patent protection

actually stimulate innovation?• Patents -> profits -> R&D -> innovation

• especially in a period of diminishing productivity of research


Empirical results

• Studies on effects of lower prices on R&D (in the USA)• Most of them suggest drastic reductions in R&D (e.g. Vernon)

• - estimations of elasticity of innovation (as measured by patents) to IPR regime:– Arora, Cohen and Walsh:

• patent premium ranging from .50 to .90, but 1.75 to 2.25 for pharma:• %change in R&D wrt to 10% change in patent premium: 6% but

7.5% to 8.9 pharma; • Equivalent subsidy rate: 17% (22% pharma)

– Linn and Acemoglu (2004): in pharmaceuticals a 1% increase in the size of the market for pharmaceutical products raises the number of new drugs by 4% to 6%, implying an elasticity of innovations to R&D ranging from .8 to . 85


• Should we increase the incentives to tap (depleting) opportunities?

• Or more should be done to raise research productivity?

• And to increase the capabilities to access and tap opportunities?


Costs of patents

• the average increase in price for pharmaceuticals due to patent protection is probably close to 400 percent, with the gap in many cases exceeding 1000 percent of the marginal cost (Baker and Chatani, 2002)

• Huge welfare losses: The size of the deadweight losses range between 0.1 and 0.5 percent of GDP, approximately equal to the amount that the industry currently claims that it is spending on pharmaceutical research in the United States.

• The deadweight loss may increase even more as costs of research increase (Baker, 2004)


Further costs

• 1) Higher profits, higher marketing expenditures, the efficiency of which is dubious, given information asymmetries and the third party payer

• 2) Distortions in the directions of research: – useful research: discovery of patentable products. – less productive lines of research, duplicative drugs

• 3) incentives are created through political interference to pursue less productive lines of research;

• 4) incentives are created to obstruct the free flow of research findings

• Controversial evidence on the role and effects of “me too drugs”


Patents as a in incentive to commercialize inventions

• Bayh – Dole

• Patents on basic, embryonic inventions and research tools

• Broad patents

• Exclusive licenses• Impediments to scientific research• Research tools and cumulative innovation• the anticommons issue


The evidence

• Mixed• Explosion of university patents and spin-offs: the

biotechnology industry• Numbers up, quality down• Advantages of division of innovative labour

(Arora et al); Gambardella et al. show that licensed compounds fare better than in-house developed molecules

• But research productivity is still falling (Pisano)


• Mixed evidence on impediments to knowledge circulation and trade-offs between publishing and patenting

• But at the very least a general case for the efficiency of such arrangements is vastly overstated


Analyses of tighter IPRs regimes

• We have seen the effects of patents in general; what about further strengthening?

• Recent evidence shows almost unanimously that strengthening IPRs regimes does not lead to higher rates of innovation:– studies of the broadening of Japanese patent scope (Sakakibara and

Branstetter [2001]), – the establishment of the Court of Appeals for the Federal Circuit in the

United States (Kortum and Lerner [1998], Hall and Ziedonis [2001]), – the strengthening of patent protection of pharmaceuticals in India

(Lanjouw [1998]) and Italy (Scherer and Weisburst [1995]).

• But under what conditions might stronger patent protection have a powerful effect on innovation?


Non linear, non monotonic relationships

– when patents are already strong, increasing patent protection further may actually depress the level of innovation (Gallini [1992], Cadot and Lippman [1995] and Horwitz and Lai)

– The effects depend critically on existing technological capabilities, innovative opportunities and the stage of development of a country (incentives and competences)

– These models similarly suggest that the relationship between patent length and innovation will display an “inverted U” shape.

– Confirmed by studies by Lerner (2000) and Qian (2007)– Introduction of patent protection does not increase levels of

innovative activity but may have stronger effects on changing the direction of innovative activity (Moser, 2005)


• The landscape


• • •

• •• • •

• • •

TA 1 TA 2 TA 3

Search

• Firms randomly screen the molecules, spending a given amount of money (a fixed share of their initial budget is used for the search activity,

• The firm draws from the environment n molecules and adds them to the array of (potential) projects.

Firm

12

3

NB = Imitative firm doesn’t draw and doesn’t pay the cost of draw 38

Some results. Benchmark

39

0 50 1000

0.2

0.4

0.6

0.8

1HtotP/HtotQ

time

HtotQ

HtotP

0 50 1000

0.2

0.4

0.6

0.8

1HTAP/HTAQ

time

HtotQ

HtotP

0 50 1000

200

400

600

800

1000Innovative/imitative products

time

imitative

innovative

0 50 1000

20

40

60

time

alive firms with products

alive with products

alive

0 50 1000

50

100

150

200Number of TA viewed

time0 50 100

0

10

20

30

40

50

60

time

number of firms

Imitative firms

innovative firms

0 50 1000

100

200

300

400

500

time

Avg TA size

Ta Size

Patiets reached

0 50 1000

1

2

3

time

Avg prices

Price Inno

Price Imi

Price patent

0 50 1000

2

4

6

8

time

Avg develop time

Inno

Imi

0 50 1000

100

200

300

400

500

time

Avg earnigs from signle products

Inno

Imi

patent

0 50 1000

200

400

600

800

1000number of products out

time

Patent duration,opportunities and innovation

1

10

20

30

40

50

1%

5%

25%

50%0

50

100

150

200

250

300

350

400

PDOpportunities

Patent duration, size of the market and innovation

110

2030

4050

low

std

high50

100

150

200

250

300

PDTA size

Tightness of product approval procedures, opportunities and

innovation

1%

5%

25%

50%

low

std

high0

10

20

30

40

50

60

70

OpportunitiesQuality check

Tightness of product approval procedures, market size and

innovation

high

std

low

low

std

high

15

20

25

30

35

40

45

50

55

Quality checkTA size

Developing countries

• Effects of IPRs on innovation in the South • Effects of IPRs in the South on innovation in

the North• Multinational Corporations: FDI and local R&D• Prices and access to drugs • Price discrimination and parallel trade• Price controls and health systems• Alternative proposals


Effects of IPRs on innovation in the South

• Background: – growth of India, Brazil, Thailand without IPRs– role of public research centres and organisations– entry in generics

• What happens after TRIPs?• In general, what are the opportunities for

entry and growth in pharmaceuticals for developing countries?

– Typically, entry in lower segments of the industries and/or specific niches:

» generics » orphan drugs


Conditions for and obstacles to transition

• Presumes sufficient scientific and technological capabilities (incentives and competences);

• Always requires accumulation of local scientific and technological capabilities: access to knowledge and active participation in research networks are crucial

• Presumes large domestic markets and/or ability to export• Current IPRs regime:

– may hinder development of domestic scientific capabilities (royalties on basic research tools);

– but there is evidence of the contrary too: weak property rights make licensing critical research tools difficult

– the anticommons problem– Restrictions to generics development: data exclusivity agreements– Patentability for second use– access to exports and limitations to exports through royalties, litigation,

etc..(S. Ramani)


Evidence (so far): India

• Segmentation of the local industry

• Some firms attempt at establishing themselves as (global) generics producers

• Attempts at making the transition to R&D-intensive companies, competing with Big Pharma: little success so far

• Differential attitudes towards IPRs among domestic firms according to their strategies

• Little evidence of effects on directions of research: local diseases and orphan drugsIPD, Manchester June 2009

Evidence (so far): Brazil

• Sharp increase in domestic patents

• But: mainly by non residents (the usual suspects)


Brazilian Vs Total pharma patents 1981-2005 Brazilian Patent Office

0

500

1000

1500

2000

2500

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Total pharma patents

pharma brazilian patents


Foreign Direct Investment

• Possible increasing investment by MNCs, depending on:

– local skill endowments,– Infrastructure, – demand characteristics

• Possible stronger effects as it concerns clinical trials and market development activities

• Stronger patents (and trade secrets and brand protection) could have the effect of lowering transaction costs and facilitating know-how transfers (Arora, 1996)

• But possible “crowding out” effects on local researchers

• Evidence?


Effects on prices and access to drugs in the South

• IPRs as a regressive tax• Increase in prices is function of:

– market structure before and after the new patent regime matters– Brand loyalty and marketing – demand elasticity (income levels..)– pricing regulations– competition policies (parallel imports, sole distributorship laws)

• Lack of data prevent firm conclusions• But most are pessimistic (Lanjouw (1998), Watal

(2000),Maskus (2001))• Evidence of higher prices and lower access to HIV/AIDS

drugs in Brasil (Coriat and Orsi, 2005)• Faster introduction of new drugs?


Effects on innovation in the North

– direct erosion of profits through imitation in local markets: how big is the market?

– Indirect erosion of profits through export– How much does actually imitation bite? Main effect

on other generics producers, rather than on innovation as such

– How much does the erosion of profits translate into less R&D?

– How much less R&D translates into less innovation?

• the topography of the innovation opportunity set• me-too-drugs and therapeutic value


Issues

• The Bolar exemption• Patentability for second use• Data exclusivity agreements• Compulsory licencing• Price discrimination• Parallel imports• Price regulations:

– cost-plus” formula encourage firms to set high transfer prices on imported ingredients

– reference prices: firms have an incentive to bargain for the highest possible prices in the low-price economies in order to gain a higher set of global reference prices.


Alternatives

• Price discrimination– but prices are often higher than in developing

nations than would be expected under a simple price discrimination equilibrium and, indeed, are at times higher than in the rich nations.

• Prizes

• Socialization of clinical trials


PART II.TRIPS and Acces to Care in DC’s

The post 2005 Issues

TRIPS as an Answer of the Big Pharmas to the new threats

Type of “economics answers” to the threats– M&A, between equals (and rivals) to re-establish « dominant

positions » on key sub-sgements : « bigger is better policy» (Pfister)

– Develop (or acquire through Mergers) generic divisions (Novartis),– Co-marketing and co-promotion agreements …

– … With generic producers to prevent the entry of rivals : “policy of market pre-emption”

But the key answer is : Strengthening and extending patent rights (through the enforcement of a tighter IPR regime)– Extending the Length of Patent duration (20 years)– Establishing new rights (data exclusivity,…)– Enforcing worldwide a « strong » patent protection

(TRIPS, FTAs)

The New Constraints Generated by the TRIPS

The signing of the TRIPS (1994) meant– The extension at the world Level of patent protection

provisions designed for the firms of the most developed countries (patenting of therapeutic molecules, 20 years length protection …)

This “upward harmonization” of IP protection– Negated the differences in national capabilities to provide

access to medicines, a provision that was at the basis of the former Treatise (WIPO, Paris Convention…)

Key consequence– The TRIPS have put an end to the right of developing

countries to produce and/or import generics drugs, at low costs to satisfy the needs of the poor

Pharmaceutical Patents Regime under the TRIPS

2005 implies an entry in a comptely new world

- End of the transitionnal period for DC’s to comply with the TRIPS constraints- Key event : the 2005 Amended Indian Patent Law

However : existence of some “flexibilities” in the TRIPS treaty

– Some Articles (Art 28 to 31) states the right to use « compulsory licenses », especially in case of « health emergency »

– Art 31f seems to prohibit the « imports » of generic drugs, even for the countries lacking of the technical capabilities required to produce the drugs localy

… but : the working of these clauses were never clarified in a satisfactory manner…

– 2001 and the “Doha Declaration” opens some room for DC’s and LDC’s but the Declaration has never been enforced as an international law (see Genova 2002)

Key features of the post 2005 period

• As regards IP issues, the Post 2005 period is marked by a strong contradiction between– WHO´s High Level Decision and Gleneagles’ statements

recommending “universal access by 2010”– … At a time when a series of changes make this goal

especially difficult to reach• End of the transitional period of the TRIPS agreement

(signed in 1994)• Spread of TRIPS + agreements …

• Hence … the question addressed in this part of the presentation : are the TRIPS flexibilities “flexible enough” to secure access to care in DCs ?

Issues to be discussed

• Looking to the past : the Pre-2005 period

• The post 2005 scene and the emergence of new IP issues

• Using TRIPS flexibilities : lessons from case studies

• Provisional conclusions

Looking to the Past : Procurement Policies in the Pre-2005 Period

• 1994-2005 : Transitional period allowing local production in developing countries

• Doha 2001, WTO August 2003 Decision…– India and Thailand as the “Pharmacies of the south”

• AAI policy of « preferential prices » for DC’s and LDC’s

• … In a context where very powerful financing mechanisms were installed – GFATM, Pepfar, World Bank PAM,

The combination of generic supply + AAI + branded ARVs at negotiated prices resulted in … massive decreases in ARV prices (1st line)

Pre-2005 : A Spectacular decreases of pricesThe case of first Line Regimen (1/2)

0

1

2

3

4

5

6

1999 2000 2001 2002 2003 2004

We

igh

ted

ind

ex

pric

e (

in c

urr

en

t U

SD

)

Benin (Branded) Benin (Generic)Burkina Faso (Branded) Burkina Faso (Generic)Cameroon (Branded) Cameroon (Generic)Congo-Brazzaville (Branded) Congo-Brazzaville (Generic)Gabon (Branded) Gabon (Generic)Mali (Branded) Mali (Generic)Senegal (Branded) Senegal (Generic)

Evolution of prices of ARV drugs in Africa

Benin(GSK)3.98 US$

Cameroon

(CIPLA)1.36 US$

Senegal(GSK - AAI)

3.13 US$

Lamivudine (3TC)

Source: ETAPSUDANRS / ORS-PACA / UMR-912

ARV procurement strategies in Sub-Saharan African countries

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1999 2000 2001 2002 2003 2004

In %

of

tota

l pu

rch

ase

d v

olu

me

s

Branded ARV negociated through the AAIBranded ARV directly negociated (Not through the AAI)Generic ARV

Source: ETAPSUDANRS / ORS-PACA / UMR-912

Today : (estimated) half of all patients on ARVs in developing countries depend on Indian generic ARVs

Innovative treatments : The case of the FDC “Triomune”

• A major innovation : the fisrt FDC • More generally : a large spectrum of generic ARV available before 2005, •Most of them being now pre-qualified by WHO• India and Thailand as « pharmacies of the South”

ADULT JUNIOR BABY

Cipla’s Fixed-Dose Combination

d4T/3TC/NVP

The post 2005 scene

Changes in the legal context … End of the transitional period (Amended Indian Patent Act) Spread of “TRIPS plus” Agreements

Changes in the scale of population under ART… Relevant increase in the number of patients under ART (3 millions in 2008)

Along with changes in the therapeutic recommendations (WHO) with inclusion of new much more costly ARVs, most often protected by patents (TDF, LPV/r…)

Rapid acceleration of people in need of 2nd and 3rd line treatments within the national therapeutic programs

• yearly, 10 % of each cohort has to pass to 2sd line regimen

New hindrances to the Sustainability of HIV/AIDS Programs in Southern Countries

Impacts of the new legal framework on access to HAART

(1/2) The case of 1st line regimen’s prices

Impacts of the new legal framework on access to HAART

(2/2) The budget surge for 2sd line treatment

Median price paid in 2007 by developing countries for the most commonly used second-line antiretroviral treatment (abacavir + didanosine + lopinavir/r), compared with first-line

regimen (lamivudine + statuvidine + nevirapine)

Median treatment cost paid by low-income and middle-income countries (Jan - July 2007)

$77

$1.291

$3.337

$0$500

$1.000$1.500

$2.000$2.500

$3.000$3.500

$4.000

1st line (low incomecountries)

2nd line (low incomecountries)

2nd line (middleincome countries)M

edia

n t

reat

men

t co

st p

er p

atie

nt

per

yea

r (U

SD

)

Source: WHO´s Global Price Reporting Mechanism (2007)

x43x43

x17x17

Using TRIPS flexibilities : lessons from case studies

Understanding TRIPS Flexibilities

• “Bolar Exception” for scientific use

• Parallel Imports

• Pre-Grant Oppositions

• Compulsory Licenses different alternatives provided by article 31 of the TRIPS agreement, including : Governmental Use, National Emergency, Public Interest …

Pre-grant opposition and Compulsory Licensewhat is it about ?

Pre-grant opposition “documents and information intended to assist the examination may be filed by (any) interested persons between publication of the application

and completion of the examination” Brazil’s legislation, article 30 of Law 9279/96

Issuing of Compulsory License“ limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner” (article 30).

The case studies in a nutschel (1/2)

• 3 key drugs : EFV, TDF, LPV/r

• 3 major countries– India : 1st world provider of generics– Brazil : largest HIV programme in the South– Thailand : major producer of generics with large

national programme of access to care

• 2 types of flexibilities– Pre-grant opposition (TNF)

– Compulsory licenses (EFV, LPV/r)

The case studies in a nutschel (2/2) Post-2005 uses of TRIPS Flexibilities

• Pre Grant opposition– Thai´s Pre-Grant

opposition to AZT+3TC patent application (2006)

– India’s Pre-Grant opposition to Tenofovir’s patent application (2006)

– Brazil’s Pre-Grant opposition to Tenofovir’s (2007)

• Compulsory License

– Thailand issues a CL on

Efavirenz (2006)

– Thailand issues a CL on Lopinavir/r (2007)

– Brazil’s Compulsory License of Efavirenz (2007)

Positive Outcomes• Pre-grant on TDF (India, 2006, Brazil 2007)

– Offers at lower prices from patent owners (the quality of the patent was known as poor)

– … Surprisingly : US PTO in a recent move has negated some of the claims first granted

– India (and Brazil) have refused to grant a patent to the drug

• Compulsory licences – EFV

• Many successive offers at lower prices by patent owners in different countries

• Since feb 2007, already (in generic form) available in Thailand

• Since March 2009, ditributed in Brazil– LPV/r still in process in Thailand

Positive Outcomes of the use of IP flexibilities : the case of EFV

Source: MSF (2007)

But serious limits too …. • Complex mechanisms… • Implemented always under high political pressure…

– The case of Brazil 2006 (LPV/r)– India 2006 and 2007– Thailand

• Subject to oppositions and litigations by patent owners

• Mechanisms not available for countries lacking of technological capabilities…

• Few uses, to date : – 3 countries, 3 drugs only ! …– (even if used successfully in some “minor” countries)

• Total impact on costs remains very modest

Questions arising from the case study on the use fo TRIPS flexibilities

• Should the future of 3 millions people under ART (to morrow much more !...) be dependant of battle fought on judicial grounds ?

• Need of innovative mechanisms guaranteeing the procurement of drugs, especially the new most innovative and efficient ones (2sd line, and switch to new 1st ones…)

• More then ever creativity is required to put in practice the Doha Statement“the TRIPS Agreement does not and should

not prevent Members from taking measures to protect public health”

General Conclusion

• Preserve open science• Excessive tightness of the IPR regime even in the North• A real issue for global R&D and –perhaps - and its

productivity• Opportunities in the light of the restructuring of the

pharma industry• There are methods for softening the problem• expanding local markets through the construction of

better health systems• Are size of the market and patent protection

substitutable? Incentives and volumes of R&D expenditure


IPRs, Public Health and the Pharmaceutical Industry Issues in the Post-2005 TRIPS agenda Benjamin...

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Transcript of IPRs, Public Health and the Pharmaceutical Industry Issues in the Post-2005 TRIPS agenda Benjamin...