Innovation And Access: Fission Or Fusion? Interview With Dr. Kristina M. Lybecker, Associate Professor Of Economics At Colorado College

In the light of the UN High-Level Panel on Access to Medicines, this series of sponsored articles challenges experts to give their views on the policies that best support the development of solutions to societies’ greatest challenges and how enabling policy environments, including IP systems, influence the development and flow of new technologies and services in different sectors, fields of technology, and jurisdictions. The views expressed in the articles are those of the authors. Below is an interview with Dr. Kristina M. Lybecker, Associate Professor of Economics at Colorado College in Colorado Springs (US).

What is the UN High-Level Panel on Access to Medicines and what do you think of its objectives?

Late last year, United Nations Secretary-General Ban Ki-moon convened a High-Level Panel on Access to Medicines. As described, the overall proposed scope of the High-Level Panel will be “to review and assess proposals and recommend solutions for remedying the policy incoherence between the justifiable rights of inventors, international human rights law, trade rules and public health in the context of health technologies.”  The objective of the High-Level Panel is laudable, in that the High-Level Panel seeks to improve the health and well-being of all, as envisaged by Sustainable Development Goal 3 (“Ensure healthy lives and promote well-being for all at all ages”). While this effort clearly addresses a critical public health problem, success depends on getting things right, and the High-Level Panel falls short in several ways, most importantly in the conceptualization of the task at hand.  That is, the description of the issue as a “policy incoherence” and “misalignment” is deeply troubling and suggests that the Panel has mischaracterized the problem. In particular, the assumption that patients in developing nations do not have the drugs they need because of patents and other forms of intellectual property rights oversimplifies the issue and fails to capture the nuance of the problem.

the assumption that patients in developing nations do not have the drugs they need because of patents and other forms of intellectual property rights oversimplifies the issue and fails to capture the nuance of the problem.

Can the UN High-Level Panel on Access to Medicines substantially contribute to improving health and well-being in developing countries?

I am optimistic that they can, but this will require the Panel to change their focus – to hone in on the true barriers to access and realistic solutions that both preserve the incentives to innovate as well as facilitate increased access.  Improving the health of developing country populations is much more complicated, and difficult, than merely reconfiguring the patent system. Specifically, if the Panel sincerely intends to search for a genuine solution, they must consider the full spectrum of access barriers: corruption, poverty, inadequate transportation infrastructure, unreliable supply chains, deficient distribution systems, a shortage of trained healthcare providers and facilities, negligible public healthcare spending, as well as taxes and tariffs on medicines.  Remedying the lack of access to medicines is a complicated challenge and will require more than the superficial endeavor the Panel is engaged in.   Describing intellectual property protection as counter to public health goals, the “policy incoherence”, is counterproductive and divisive, only serving to further entrench the falsehoods that prevent genuine progress and cooperation.

if the Panel sincerely intends to search for a genuine solution, they must consider the full spectrum of access barriers: corruption, poverty, inadequate transportation infrastructure, unreliable supply chains, deficient distribution systems, a shortage of trained healthcare providers and facilities, negligible public healthcare spending, as well as taxes and tariffs on medicines.

Why is the biopharmaceutical industry so reliant on patents?

Patents protect innovation, but success stems from innovation that society values.

Patents protect innovation, but success stems from innovation that society values.

While it is very expensive, risky and time-consuming to develop a new therapy or cure, it is relatively straightforward and inexpensive to then produce these medicines.  That is, the biopharmaceutical industry is characterized by high fixed costs of research and development and low costs of production.   In order to incentivize the tremendous investment in research and development that brings us cutting-edge treatments, innovators must be assured of a return on their investment, which is what the patent system provides.  Innovators embrace the risky process of drug development because they know that if they succeed, they will be rewarded with a period of exclusivity.

Many empirical economic studies confirm that patents provide the incentives that promote innovation and the impact is particularly pronounced in some sectors.   We know that incentives are important and matter to innovation.  Consider the following, small selection.  In a study of 60 countries, examined between 1960-1990, Park and Ginarte (1997) find that the strength of intellectual property rights was positively associated with research and development (R&D) investments.[1]   In addition, Hall (2007) and Hall and Marhoff (2012) confirm the value of patents as important incentives for R&D in several sectors, including pharmaceuticals, biotechnology and medical instruments.  Finally, Duguet and Lelarge (2012) conclude that “overall, patents do increase the private incentives to innovate, but through a specific, unbalanced, channel. Indeed, at the firm level, the direct incentive effect of patents is restricted to the firms’ R&D effort, which affects significantly their product innovations.”  The importance of patents to incentivizing innovation stems, in part, from their reliance on market forces, arguably moreso than any other incentive mechanism.

Why is it important to find the right balance between pharmaceutical patent protection and access to essential medicines? 

Creating a future in which health for all is a reality necessitates a present in which innovation is encouraged and intellectual property is protected.  That is, access to essential medicines only matters when there are treatments and cures to access.  Ensuring that medical progress continues, that groundbreaking therapies and cures are discovered, and that life is enhanced and extended with new medicines, requires innovation and investment.   If we are to continue to reduce the burden of disease and enjoy longer life expectancies, innovation must be incentivized. However, resilient health systems also need to be in place to diagnose and deliver treatments. The benefits of costly pharmaceutical innovation should be available to everyone, but the innovator should reap some reward as well.  Patent protection does this.  It is essential to the future of medicine and to access for everyone.

The benefits of costly pharmaceutical innovation should be available to everyone, but the innovator should reap some reward as well.  Patent protection does this. 

What are the main barriers to access to medicines and vaccines? 

For the most vulnerable across the globe, better health is inextricably linked to two things: poverty and incentivizing the development of treatments for diseases of the poor.  Intellectual property protection addresses the second, and has done so with great success.[2]   Fundamentally, the majority of the health gains of the past 50 years in developing countries are due to pharmaceutical innovation in medicines and vaccines, innovations that were incentivized by intellectual property rights.

What is being done to stimulate pharmaceutical research and development, especially on neglected diseases?

Facilitating innovation, especially on neglected diseases, may be accomplished by efforts on either the demand side (creating a market through an advance purchase commitment) or on the supply side (stimulating research initiatives with a prize for drug development).  Specifically, ‘push’ mechanisms provide funding along the way, while ‘pull’ mechanisms reward innovators with prizes upon completion.  Economists, legal scholars, public health advocates and others have developed a significant literature on complementary (and substitute) incentive mechanisms for drug development.   Reflecting on the past, we must acknowledge that biopharmaceutical innovation is best spurred by the market rather than under government direction or mandate. There is also considerable R&D collaboration within ten imminent breakthroughs in TB (3 projects), malaria (5 projects), dengue (1 project), and intestinal worms (1 project), which are nearing the end of what is on average a 10 to 15 years of R&D. Given this, successful solutions in the biopharmaceutical realm must engender market incentives to spur innovation.   A number of mechanisms complement the existing patent system. Notably, the 1983 U.S. Orphan Drug Act (and similar 2001 European legislation) has been very successful in this capacity.  The Orphan Drug Act simultaneously stimulated the development of numerous drugs for neglected diseases, through both push (R&D tax credits) and pull (market exclusivity) mechanisms.

existing drugs which treat the diseases that disproportionately impact developing countries were almost exclusively developed by international biopharmaceutical firms

Finally, it is important to remember that the existing drugs which treat the diseases that disproportionately impact developing countries were almost exclusively developed by international biopharmaceutical firms.  These firms are also significant donors in the battles against ‘diseases of poverty’ and are engaged in over 300 partnerships[3] ranging from research and development to improving health system infrastructure in developing countries to technology transfer and product donations, including through the London Declaration on Neglected Tropical Diseases, where 14 billion treatments have been committed for needy populations at no cost for 10 years. The Hudson Institute notes the “U.S. based Partnership for Quality Medical Donations (PQMD) recorded the ‘value of donated products at $4.3 billion in 2005’ for the developing world.  This sum alone is greater than the combined annual health budgets of the WHO, UNICEF and the World Bank.”  In order to ensure that the treatments and cures currently under development reach those who need them, we must ensure that the incentives are in place to make this happen.  Patents and other forms of intellectual property rights protection do precisely this.

Prof. Kristina Lybecker

Dr. Kristina Lybecker is an Associate Professor of Economics at Colorado College in Colorado Springs. Dr. Lybecker’s research analyzes the challenges surrounding intellectual property rights protection in innovative industries: incentivizing pharmaceutical research and development especially on neglected diseases, addressing the difficulties of strengthening intellectual property rights protection in developing countries, battling the problems related to pharmaceutical counterfeiting and the unique nature of protection for biotech therapies. Kristina has testified in more than a dozen states on the economics of pharmaceutical counterfeiting. She has also worked with US Food and Drug Administration, Reconnaissance International, PhRMA, the National Peace Foundation, the OECD, the Fraser Institute, the Macdonald Laurier Institute, and the World Bank, on issues of innovation, international trade, and corruption.

The International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) is the sponsor of this series. IFPMA advocates for solutions that take a holistic view of access to medicines, underpinned by strong innovation frameworks that provide incentives for investments in R&D and sustainable access to new health technology solutions for the long term benefits of patients.

References:

Duguet, Emmanuel & Claire Lelarge. “Does Patenting Increase the Private Incentives to Innovate? A Microeconomic Analysis,” Annals of Economics and Statistics, No. 107/108, July/December 2012, pp.1-38.  (quote at p.21)  Available at:  https://www.gate.cnrs.fr/IMG/pdf/Duguet2013.pdf

Hall, Bronwyn H. “Patents and Patent Policy,” Oxford Review of Economic Policy, vol.23, no.4, 2007, pp.568-587.

Hall, Bronwyn H., and Dietmar Harhoff. 2012. Recent Research on the Economics of Patents. Annual Review of Economics 4: 541–565.

Norris, Jeremiah.  “An Analysis of the World Health Organization Secretariat’s Draft Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property,” Center for Science in Public Policy, Hudson Institute, Washington, DC, 27 September 2007.

[available at:  http://www.who.int/phi/public_hearings/second/contributions_section1/Section1_Jeremiah%20Norris_Hudson%20Institute_Full_Contribution.pdf  ]

Park, W.G., and J. C. Ginarte. “Intellectual Property Rights and Economic Growth,” Contemporary Economic Policy, XV, 1997, pp.51-61.

[1] Please note that this result holds for countries with above median incomes, but not for the less-developed countries.

[2] It is worth noting that creative applications of IP rights have resulted in the development of medicines for previously-ignored conditions.  “In 2013, the Food and Drug Administration (FDA) approved 27 new drugs for marketing.  Eight of these drugs are for orphan diseases, including six rare cancers.  In fact, more than half of the 139 drugs approved by the FDA since 2009 are for orphan diseases and cancers.”  (Kocher, Robert, and Bryan Roberts.  “The Calculus of Cures,” The New England Journal of Medicine, online edition, 26 February 2014.  Available at:  http://www.nejm.org/doi/full/10.1056/NEJMp1400868)

[3]World Health Partnerships Directory http://partnerships.ifpma.org/pages/