New Intellectual Property Regimes and New Business Models for Funding R&D James Love Consumer Project on Technology 20 March 2003 The Human Genome and Africa Stellenbosch, South Africa

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.

How do we fund R&D? Public and Donor Funds Research Mandates Direct Indirect Research Mandates Intellectual Property Rights Patents other exclusive marketing rights

Intellectual property

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.

Who obtains patent protection? PCT Patent Filings, 2002   Number % of Total Cumm % USA 44,609 39.1% Germany 15,269 13.4% 52.5% Japan 13,531 11.9% 64.4% UK 6,274 5.5% 69.9% France 4,877 4.3% 74.1% Netherlands 4,019 3.5% 77.7% Sweden 2,988 2.6% 80.3% Korea 2,552 2.2% 82.5% Switzerland/Liechtenstein 2,469 84.7% Canada 2,210 1.9% 86.6% All Developing countries 5,359 4.7%  

Rate of investment in R&D 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 R&D investments? Van ontwikkelen tot slikken, Pharma Selecta congres, January 16, 2003

The pharmaceutical market was estimated at $406 billion in 2002 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

Strong IPR regimes are controversial because they lead to disparities in access

Tim Hubbard’s demand curve problem Cost + Marketing + R&D Cost + Profit Free People treated

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

Generic competition and social activism has driven down the price of AIDS drugs in Africa

Nevirapine+3TC+d4T HAART Regime annual cost

February 2003 demonstrations in Korea over pricing of Glivec, a Norvartis drug to treat leukemia

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.

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.

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?

Are Access and R&D competing policy objectives?

WTO/TRIPS is limited and problematic framework for addressing global R&D 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 R&D projects. Exclusive rights on R&D may not be the most efficient mechanism to finance R&D. 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

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

Do we need a new global framework for funding R&D?

Models for R&D treaties The Treaty of Europe: R&D 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

Decentralized decision making on R&D Treaty requires minimum national contribution to R&D, and transparency of investment flows Countries free to fund R&D 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 country’s system is without prejudice to claiming IP in other countries regimes, subject to non-discrimination

Possible approach Divide countries into group by income For each group, minimum support for R&D 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

Initial health care R&D target for developed economies .1 percent of GDP? .15 percent of GDP? Could be adjusted higher to increase rate of innovation

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

WHO Harare Proposal for funding R&D 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 R&D fund Patent owners are shareholders in R&D fund Fund invested in African country Patent owners benefit from global returns on commercial discoveries

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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