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Basic for an R&D Treaty

By Audrey Edwards,2014-11-28 06:16
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Basic for an R&D Treaty

    From TRIPS to RIPS: A better Trade Framework

    to support Innovation in Medical Technologies

    Agence nationale de recherches sur le sida/Institute d' économie publique

    Workshop on Economic issues related to

    access to HIV/AIDS care in developing countries

    Université de la Méditerranée, Marseille, France

    May 27th, 2003.

     1 James Love

    Consumer Project on Technology

Introduction

    There is an almost unbounded interest in the development of new health care technologies that will prolong life or reduce suffering. The pace and direction of innovation will depend in part on the resources mobilized for research and development (R&D). National governments have a variety of policy instruments to lift and shape R&D expenditures. Public sector grants and contracts, tax incentives, government imposed research mandates, philanthropic efforts, and an expanding universe of intellectual property protection schemes are all important in raising levels of R&D investments. Each instrument has its own advantages and shortcomings. Most countries undertake a mixed strategy of public and private funding.

    In recent years the framework for funding such R&D has become the subject of a multilateral, regional and bilateral trade negotiations. The most important discussions have concerned intellectual property rights, the systems of private rights in data and inventions that protect investment and create incentives to develop new commercially important products. The World Trade Organization (WTO) Agreement on the Trade Related Aspects of Intellectual Property Rights (TRIPS) is the best known such agreement, but increasingly important are other multilateral agreements administered by

     1 Director, Consumer Project on Technology. This paper is based up collaboration with Tim Hubbard of the Welcome Trust/Sanger Institute, and has benefited from comments and suggestions by many public health experts, scientists, trade professionals, economists, pharmaceutical industry stakeholders, and others in several seminars. Notable was a September 2002, meeting organized by Aventis in Ottrott-le-Haut, France on "Pharma Scenarios for Sustainable Healthcare," where Tim Hubbard and James Love presented Radical IP Scenarios #1 and #2. The proposals were also discussed at the 2002 Trans Atlantic Consumer Dialogue meeting on intellectual property and health care, an October Buko/HAI meeting at Bad Boll Germany, the December 2002 MSF seminar on drugs for neglected diseases in Rio, a March 2003 conference in Stellenbosch, South Africa on Africa and the Human Genome, a March 2003 workshop on benefit sharing at University of Pennsylvania, an April workshop on TRIPS and public health in Sri Lanka, an April meeting on TRIPS and Public Goods at Duke University, and the April 29, 2003 CPTech, MSF, Oxfam, HAI workshop on a global framework for supporting health research and development (R&D) in areas of market and public policy failure, and at several other workshops and meetings. Many have offered thoughtful criticisms and suggestions, and none should be blamed for shortcomings of this paper.

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    the World Intellectual Property Organization (WIPO), and hundreds of bilateral and regional agreements on intellectual property norms and enforcement mechanisms, particularly those between the United States or Europe and smaller economies.

    It is well known that patents and other forms of intellectual property protection have only limited efficacy in stimulating innovation in the health care field. Basic research, development of high-risk projects, and research on vaccines or neglected diseases are some well-known examples of areas where private market incentives are insufficient to secure adequate investment. There is also considerable evidence that systems of intellectual property protection are fraught with high costs in terms of administration and dispute resolution, and a number of well-known inefficiencies, such as anticompetitive barriers to follow-on innovators. Recently there is considerable interest in new collaborative open source development models, which in some cases work best with little or no intellectual property protection.

    Intellectual property regimes that rely upon exclusive rights often lead to unacceptable barriers to access to treatments. This is problem in both rich and poor countries. For example, while developing countries struggle to pay for the least expensive HAART regimes to treat AIDS, there are also increasingly severe problems managing limited budgets for AIDS treatments in the United States and other wealthy countries, particularly with the introduction of products such as T-20, which are so expensive they threaten to exhaust limited public funding for indigent AIDS patients. Canada, France, Sweden and the UK are among the countries that see high fees for breast cancer screening patents as a barrier to deployment of these new technologies. The impact of high prices in the United States is a growing crisis for access among the uninsured, and in the United States, Europe and other OECD countries there are substantial controversies over which treatments will be reimbursed under public or private insurance schemes -- a rationing of the most expensive new medicines.

    Historically, governments have recognized these and other limitations, and complement the intellectual property approach with a variety of direct and indirect public subsidies to raise investment levels in health care R&D. The United States, for example, will spend more than $27 billion this year at the National Institutes of Health (NIH), and more through a variety of other agency efforts, and also subsidize R&D though income tax credits. Every OECD country and many developing countries have some public sector grant, tax or other subsidy programs to support health care R&D. In some areas, the US government simply mandates that private firms undertake R&D as a condition of doing business. Other national governments have their own mixed models of supporting R&D. For example, in the UK domestic prices of pharmaceutical drugs depend in part upon firm R&D expenditures, Canada linked NAFTA changes in its patent laws to a negotiated increases in levels of R&D that industry was obligated to undertake, and at the regional level, Brazil has imposed R&D mandates on private sector firms.

    Despite the widely recognized importance of non-intellectual property factors in determining the levels of R&D and the rate of innovation in new treatments for disease, there has been little discussion of the trade related aspects of such programs. There are

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    notable exceptions, such as the G-8 discussions regarding funding R&D on drugs for neglected diseases, or the Blair/Clinton statement on the benefits of unencumbered access to human genome sequence. The G-8 discussions involved a handful of wealthy countries that were motivated to raise global levels of R&D on specific diseases, such as malaria or tuberculosis, that primarily afflict the poor, and for which the patent system does not provide sufficient incentives relative to the importance of these diseases from a public health perspective. The Blair/Clinton statement on the Human Genome Project (HGP) sought to address a different global IPR failure. The United States NIH, the UK Welcome Trust, and funding agencies in Japan, France and Germany agreed that donor and public sector funds would be used to sequence the human genome, and to place the results immediately in the public domain, without any IP claims. The no-IPR approach to the HGP was influenced by the growing interest in “open source” development models for software and medicines, that emphasized the benefits of increased access to information, and it also enjoyed substantial support within the pharmaceutical sector, due to concerns that broad gene patents would saddle researchers and firms with high royalties and deter development of new products. The Blair/Clinton statement strongly supported the principle of making raw research data freely available in order to maximize its use, as a way of obtaining the greatest medical benefits for humankind.

There are additionally a number of proposals for global agreements that would increase 2 or address other areas where there funding for vaccines, broaden the scientific commons,

    is a both a need and an opportunity for global cooperation on the development of public goods. However, none of these initiatives have the same level of multilateral, regional or bilateral attention that is now given to agreements on intellectual property rules.

    We propose a new emphasis be placed on the development of formal global frameworks that consider jointly both the IP and the non-IP instruments for funding health care R&D. One fundamental rationale for any global framework is to address the free rider problem. There are global benefits to R&D, but local costs. The efforts to create more uniform IP regimes are efforts to share more broadly the costs of funding R&D, but there is clearly a need to expand the trade framework to address a broader range of funding instruments.

    Even for a privatized research model, the IP regime by itself only addresses one aspect of financing R&D. In particular, the regulation of drug prices and the availability of social insurance to pay for medicines are two very important factors in determining the level of incentives for new drug development. Indeed, in recent years, the United States trade policy has placed increased emphasis the issue of drug pricing or the structure of social insurance reimbursement schemes, even though the US does not regulate drug prices or provide social insurance for drug purchases in its domestic market. The United States successfully demanded that Korea impose a seven country reference pricing system for minimum prices on innovative drugs, and the US trade officials have pressed Australia,

     2 John Barton, Science and Technology Diplomacy Initiative and the ICTSD-UNCTAD Project on IPRs and Sustainable Development , Policy Dialogue on a Proposal for an International Science and Technology Treaty, Room XXV, Palais des Nations, Geneva Friday, 11 April 2003.

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    3 to raise Canada, France, Germany, New Zealand, Thailand and many other countries

    prices and extend reimbursement for new medicines. The US efforts to raise prices are bitterly resented by governments and patients, as higher prices inevitably reduce access to new treatments, and they do not recognize other ways that countries might support R&D, such as funding research that enters the public domain, or any number of public private partnerships to advance particular public health goals.

A Trade Framework that focuses on R&D

    It is possible to craft a trade framework that recognizes the entire range of instruments that might be used to support health care R&D, and such a framework can be shaped to address public health goals. Iintellectual property agreements are often the product of lobbying by commercial interests. Pfizer, IBM and other intellectual property owner interests are widely credited with the design of the TRIPS agreement. But if one sought to design a trade framework that sought first and foremost to promote innovation and the advances of public health goals, it would be different. Intellectual property rights would be a means to an end, but not the only means. The protection of property rights would not be an end in itself, but one of several instruments to finance investments in

    innovation.

Treaties or Trade Negotiations that address R&D

    There are many treaties and trade discussions that have addressed R&D directly. For example:

     The Treaty of Europe includes provisions for public sector funding of R&D.

    There are measures to ensure that the least developed countries in Europe

    receive a relatively greater share of R&D investments in order to promote a

    more equal level of development. This is the type of operational mechanism

    to give effect to technology transfer and capacity building that was promised

    but never delivered in the TRIPS agreement.

     The Landmine Treaty requires support for R&D into humanitarian de-mining

    technologies.

     The Koyto Climate Treaty calls for R&D into energy efficient technologies.

     The G-8 has held discussions over the need to increase public sector support

    for funding R&D for vaccines and drugs for neglected diseases.

     3 Often motivated by industry submissions to USTR. For example: PhRMA “Special 301” Submission:

    Priority Watch List Countries. The Croatian sick fund disregards the considerable R&D costs associated with innovative medicines. Many innovative products that are still protected by patents in the U.S. or the EU are reimbursed in Croatia at levels that are not significantly different than the prices of local and Slovenian copies, therefore disregarding the high R&D costs of pharmaceutical innovation.”

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     The Human Genome Project (HGP) involved coordination between the United

    States and several governments, including for example the highly publicized

    Clinton/Blair announcement that the donor and government funded

    sequencing efforts would put data into the public domain in order to provide

    the research community with a global public good.

    How might one frame a treaty or trade agreement to support R&D for health care research? If this framework would ever replace TRIPS, it would have to address the free rider problem. Everyone wants to enjoy the benefits of health care R&D, but no one wants to pay. The trade agreement would have to address this issue. But there are also many other topics to explore. Features of a treaty or trade agreement might include:

     Transparency of investment flows,

     Identification of areas of the greatest public health R&D needs,

     Mechanisms to ensure that there is access to new inventions,

     Technology transfer and capacity building in lesser developed countries,

     Greater efficiency in terms of the costs of acquiring R&D, and

     Avoidance of anti-competitive or unfair trade practices.

Proposal for a Trade Framework

    The following is a proposal for a trade framework to support innovation in health care. It is designed to be an alternative to the WTO TRIPS accord, but it would easily work independent of or together with the TRIPS. It is designed to support the entire health care sector, but it could also be implemented in a much narrower way, for example to address only medicines for HIV or neglected diseases, databases and other public goods, or for a broader category of essential medicines.

The key features of this proposal are as follows:

    1. Every country would have to take measures to ensure greater transparency of

    R&D investment flows and financing.

    2. Every country would be expected to meet or exceed norms regarding

    aggregate funding of R&D. The funding could be supported through a variety

    of means, including purchase of commercial products from innovators, direct

    public funding, research mandates, or other mechanisms.

    3. The measured contributions of support for investment would reflect social

    valuations that would differ from market transactions. A set of multipliers

    would increase the weights given to investments that were open, addressed

    public health priorities, or which transferred technology or built research

    capacity in developing countries.

    4. The member countries would have flexibility to manage their own R&D

    investments. They could adopt strategies that were highly centralized or

    highly decentralized. They could cooperate with other countries in managing

    R&D funding or projects, or they could act entirely independent. They could

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    outsource R&D performance in foreign countries, or do everything

    domestically.

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