Informative Debate On IP And Drug Price Model, Flexibilities

By William New
An informative event this week pitted key proponents of opposite views on how to best protect the intellectual property rights of pharmaceutical companies while also addressing the needs of poor patients around the world unable to afford necessary treatments.

The 20 February panel entitled, “Debating Pharmaceutical IPRs,” jointly sponsored by the UN Conference on Trade and Development and the Stockholm Network, a London-based free-market think tank. The meeting was held alongside the weeklong World Intellectual Property Organization (WIPO) Provisional Committee on Proposals Related to a WIPO Development Agenda.

James Love, director of the non-governmental Knowledge Ecology International, took a stance in favour of changes to the existing patent system. He called it “the ultimate hypocrisy,” that industry is using developed-nation taxpayer funds to file patents in developing countries, whose governments are then criticised in the financial press for taking actions to ensure their publics have affordable access to needed drugs, while at the same time the United States steadily files compulsory licenses for non-essential consumer products like software and television components.

Eric Noehrenberg, director, international trade and market policy at the Geneva-based International Federation of Pharmaceutical Manufacturers Associations, said the “hypocrisy” is that some are “wrapping this debate in a public health mantle,” but that it is really more about commercial policy designed to create business for local producers in developing countries.

A representative of Swiss pharmaceutical company Novartis, which is facing criticism for challenging India’s patent law, said the company is trying to get medicine to developing countries and is providing it below cost, but that other issues seem to be blocking its distribution.

Love said that delivery problems are the “hard part” of the problem and that removing problems related to intellectual property rights is the “easy part.” But, “there’s no problem when it comes to the poor that’s not important enough to address,” he said.

Price vs. Prize

Love said the reason there are almost no patented drugs on the World Health Organization essential drugs list is because they are so expensive they do not get put on the list. “The WHO list is the best evidence that the model has priced essential drugs out of existence,” he said, adding that his group, formerly known as the Consumer Project on Technology, has called for a list of essential drugs “as available.”

He said with a model of funding medicines to the poor through recently enlarged foundations, American taxpayers are effectively “the biggest purchasers of AIDS drugs” in the world. Love touted a proposal to redesign the drug innovation system using prizes instead of high prices for industry to recover its research and development costs.

Noehrenberg countered the assumption that generic drugs are always cheaper. He cited an example of second-line antiretrovirals, using Health Action International data, and said the generic versions are more expensive.

Noehrenberg also sought to counter the perception that pharmaceutical companies are not doing as much as they can to help patients in poor countries. For instance, he said, Swiss drug manufacturer Novartis, which is under criticism for challenging India’s new patent law, has an “extensive and generous” programme of giving away medicines in that country. In India, only 50 out of 1,000 pay for their drugs, and they are on government health plans, he said.

Noehrenberg also said often the multinational company drops its price on a drug before the generics producers do, and raised quality concerns about generics. He argued that efforts to “undermine” the system of drug development in the name of public health are really aimed at changing industrial policy. His primary message appeared to be that instead of coming up with an unproven new system, effort should be placed on improving the existing system.

Love countered that if generics are charging a high price too, that is another sign of the need for change in the existing system which is based on high prices to recover research costs. He predicted that “the buzzword of the future” would be prizes for research, possibly publicly funded, rather than the price-based model.

Noehrenberg said an industry concern about the prize fund is that it rewards the first idea into the market, but that in industry the follow-up products often offer better benefits for consumers. He said the socioeconomic value of a new idea is “very difficult to determine,” and is why companies conduct trials on new drugs, which is the most expensive part of the process. Finally, he questioned whether the financing for a prize fund would be reliable into the future, as governments often change priorities.

Love answered that different models of the prize fund proposal are under discussion, and suggested that if a second product improved on the first, it would get rewards too. But even if the successor product garnered all the market share, the first product would still get to share in the revenue if they show the second product was based on the first.

But Meir Perez Pugatch, of the University of Haifa (Israel) School of Public Health and head of the Stockholm Network IP and Competition Programme, said the medical field does not work in such a linear way with one drug overtaking another.

Pugatch also argued that evidence shows definitively that patent protection promotes innovation. He emphasised the importance of public-private partnerships, noting for example that small biotechnology companies need seed money but when seeking it are first asked whether they own any patents. “Patent protection is more important today than ever,” he said. The Stockholm Network receives financial support from the pharmaceutical industry, he noted afterward.

Graham Dutfield, a senior research fellow at Queen Mary, University of London, said “patents don’t necessarily lead to cures.” In recent years, he said, an increasing amount of research has been targeted at what has been termed “the worried well,” meaning lifestyle treatments for non-critical afflictions.

Dutfield also said there is increasing research into “me-too” drugs which “only require a small inventive step” to receive a patent but may not offer a significant improvement over the original product. He cited India, which he said is doing more research into areas of interest to companies rather than of poor Indians.

The Policy View on Trade, IP and Health

Noehrenberg called for policymakers and others to “see how we can move ahead rather than rehash old debates,” suggesting for instance, that the World Trade Organization committee on intellectual property rights issues look at how IP rights can be used to promote innovation.

He also defended the industry’s work to help develop drugs affecting poor people, citing HIV/AIDS, and said the patent system helps innovation because it makes an otherwise secret process publicly available so that others may use it for further innovation rather than simply copy it.

Noehrenberg cited a new report from India referred to as the Mashelkar report (named for a controversial Indian scientist who headed it) that purported to lend support to the importance of the patent system for developing countries. That report was withdrawn last week by the author for technical errors and plagiarism. Dutfield said the researcher who identified the plagiarism was one of his students.

Referring to bilateral trade negotiations and provisions in them that exceed the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Dutfield said that the United States and European Union are asking poor nations to adopt terms that are “TRIPS-plus and USA-plus,” and “TRIPS-plus and Europe-plus,” respectively. Meanwhile, these countries retain exceptions in their own laws. In the United Kingdom, he said, “We’re trying to export all the rights without the exceptions.”

Dutfield also said developing countries are being forced to “compress 100 years of very slow patent law in a very short time.” He said Novartis, for instance, got its start in Switzerland by moving across the border to Basel because the country did not have a patent law (it was later forced to adopt one by Germany, he said). He argued that a “certain amount of copying must be allowed” for developing countries to create their own systems of innovation. He said he opposes global patent harmonisation as “anti-development.”

On the use of compulsory licenses, which are permitted under international trade rules and allow competitors access to patented technology, Love said the United States has issued at least five compulsory licenses since last June, including to companies like Microsoft, Toyota and DirectTV for technologies such as digital rights management to protect software, automobile transmissions and set-top television boxes. Yet only developing countries are criticised for using these licenses for health reasons, he said.

But Pugatch said compulsory licenses should not become the rule instead of the exception. “If compulsory license becomes modus operandi, then there is no point in having the patent system at all,” he said. Use of such licenses should be limited to disease outbreaks and other emergencies, he said, echoing an argument made by industry.

But countries like Thailand argue they are following WTO rules which allow government use of compulsory license for any non-commercial purpose, whether an emergency or not. Noehrenberg called that into question by asserting that the beneficiary companies of such licenses may be government-owned local manufacturers. Pugatch criticised Thailand, which recently announced it would issue compulsory licenses for several more drugs, for offering only one-half of one percent of revenues to the patent-holding company in one case. Love agreed this was “indefensible” as too low, but had been explained as an offer for negotiation.

Pugatch said TRIPS-plus bilateral agreements would continue until issues beyond the use of flexibilities are included in multilateral talks, such as at the WTO. Issues he said need to be addressed include: TRIPS Article 39.3 on data exclusivity, and reopening TRIPS Article 27.3 (on the patentability of plants and animals) to take into account biotechnology.

Love said his group opposes exclusivity as unethical since it would require repeating experiments on human beings. He suggested substituting exclusive rights with cost-sharing.

Noehrenberg said the question of what is government, non-commercial use bears some clarification, but emphasised that industry is not calling for a renegotiation of TRIPS.

William New may be reached at wnew@ip-watch.ch.