Monash University Intellectual Property Rights and Access to Essential Medicines Thomas Pogge Professor of Political Science, Columbia University Centre for Applied Philosophy and Public Ethics, Australian National University Centre for the Study of Mind in Nature, University of Oslo

1 Our Shared Commitment “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control” [Article 25(1)]. Universal Declaration of Human Rights

2 Human Cost of Poverty Today Among 6630 million human beings (2006), about 800 million are undernourished (UNDP 2007, p. 90), 2000 million lack access to essential drugs ( _ summary.htm), 1085 million lack access to safe drinking water (UNDP 2007, p. 254), 1000 million lack adequate shelter (UNDP 1998, p. 49), 2000 million have no electricity (UNDP 2007, p. 305), 2600 million lack adequate sanitation (UNDP 2007, p. 254), 774 million adults are illiterate ( 211 million children (aged 5 to 17) do wage work outside their household — often under slavery-like and hazardous conditions: as soldiers, prostitutes or domestic servants, or in agriculture, construction, textile or carpet production (ILO: The End of Child Labour, Within Reach, 2006, pp. 9, 11, 17-18).

3 One Third of all Human Deaths — some 18 million per year or 50,000 daily — are due to poverty-related causes, cheaply preventable through food, safe drinking water, rehydration packs, vaccines or other medicines. In thousands per year: diarrhea (1798), malnutrition (485), perinatal (2462) and maternal conditions (510), childhood diseases (1124 — mainly measles), tuberculosis (1566), meningitis (173), hepatitis (157), malaria (1272), tropical diseases (129), respiratory infections (3963 — mainly pneumonia), HIV/AIDS (2777), sexually transmitted diseases (180) (World Health Organization: World Health Report 2004, 120-5).

4 Millions of Deaths

5 Shares of Global Income 2005; poorest households versus richest countries Calculated in terms of market exchange rates so as to reflect the avoidability of poverty. Per capita: P ie chart r ich/poor ratio over 200:1. (Decile inequality ratio 320:1, Milanovic 2005, pp )

6 Global Income Inequality At current exchange rates, the poorest half of world population, some 3,400 million people, have less than 2% of world income ― as against 6% received by the most affluent one percent of US households consisting of 3 million people.

7 Shares of Global Wealth 2000; poorest versus richest households Calculated in terms of market exchange rates so as to reflect the avoidability of poverty. Decile Ineq. 2837:1. Quintile Ineq. 85:1. Year 2000, $125 trillion total. (James B Davies et al.: WIDER 2006)

8 Global Wealth Inequality At current exchange rates, the poorest half of the world’s population, some 3,400 million people, have about 1 percent of global wealth ― as against 3 percent owned by the world’s 946 billionaires.

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10 Intranational Increases in Income Inequality In the US, , the income share of the bottom half declined from 26.4% to 12.8% ― while that of the top one percent rose from 9% to 21.2%. In China, , the income share of the bottom half declined from 27% to 18% ― while that of the top tenth rose from 25% to 35%.

11 How do such huge intranational and (especially) global inequalities accumulate?

12 Global Institutional Order Governments of the More Powerful (G-7) Countries National Institutional Schemes of the Various Developing Countries Citizens of the More Powerful (G-7) Countries Poor and Vulnerable Citizens in the Developing Countries 4 privileges Protectionism Pharmaceuticals

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Rules Governing Medical Research Under the TRIPs agreement – part of the WTO Treaty – inventors of new medicines must be granted 20-year monopoly patents in all WTO member states.

Seven Problems 1. High Prices Impeding Access by the Poor 2. Neglected Diseases (90/10 Problem)

Distribution of Pharma Research Diseases accounting for 90% of the global disease burden receive only 10% of all medical research worldwide. Pneumonia, diarrhea, tuberculosis and malaria, which account for over 20% of the global disease burden, receive less than 1% of all public and private funds devoted to health research. Of the 1556 new drugs approved between 1975 and 2004, only 18 were for tropical diseases and 3 for TB.

17 Are Patents Just? A natural right of the inventor? –Libertarian worries –Fair opportunity worries (tainted inequality) The Argument from Rational Consent –Not plausible from PV of present global poor The Argument from General Utility –Interests of present global poor outweigh –There may be a superior alternative …

Seven Problems 1. High Prices Impeding Access by the Poor 2. Neglected Diseases (90/10 Problem) 3. Bias toward Symptom Relief 4. Waste: Litigation, Deadweight Losses 5. Counterfeiting 6. Diff Cost/Price  Excessive Marketing 7. Last-Mile Problem, perverse incentives

19 “The root of the evil lies not in how corporations do business, but in how we regulate and incentivize them. If we structure markets so corporations can earn billions by getting people to smoke, then corporations will work hard to get people to smoke. If we structure markets so corporations can earn billions by getting people to stop smoking, then corporations will work hard to get people to stop smoking. It is our responsibility to restructure the patent regime so that pharmaceutical innovators lose the financial stake in the proliferation of their target diseases and gain a financial stake in the destruction and eradication of these diseases. If we can reverse present incentives, the immense powers of free enterprise will be marshaled against the great diseases that bring so much misery and premature death to poor people everywhere.”

Solutions 1. Differential Pricing a. Status Quo before TRIPS b. Voluntary Tiered Pricing c. Compulsory Licenses 2. Public Good Strategies a. Push Programs b. Pull Programs (Prizes, APCs, AMCs) (i) FULL PULL (Health Impact Fund)

21 Health Impact Fund Comprehensive Advance Market Commitment promising to reward any new medicine (upon registration) on the basis of its global health impact Innovator must give up either claims to market exclusivity, allowing generics to be produced and sold immediately, or all revenues from sale of the new medicine Voluntary for the innovator

Problems Solved? 1. High Prices Impeding Access by the Poor 2. Neglected Diseases (90/10 Problem) 3. Bias toward Symptom Relief 4. Waste: Litigation, Deadweight Losses 5. Counterfeiting 6. Diff Cost/Price  Excessive Marketing 7. Last-Mile Problem, wholesome incentives

23 Measurement & Reward Fixed term of payments, ca. 10 years Fixed annual HIF pools Metric: variant of QALY The $/QALY “exchange rate” / Funding Data: clinical, sales, clusters Interfering factors: baseline projections Phase-in Allocation Rules Corruption and Gaming

24 Funding by Willing Governments I 15-year commitment by willing governmnts d : total reward dollars for the year q : total number of QALYs that same year r : rate at which QALYs are rewarded in $s Low-yield ― Ceiling on the reward rate r High-yield ― Government-Company Risk Sharing: d ~ q e and r ~ q -e, with 0 < e < 1, preserving the constraint d = rq

25 Funding by Willing Governments II “yield”QALYs achieved in millions (q) Reward Rate per QALY in $ (r) Reward Expense in $b (d) low-yield1$10001 low-yield3$10003 border low-high4$10004 high6.25$8005 high10.24$ high16$5008 high25$40010 high64$25016 high100$20020

26 Allocation Rules “Because pharmaceutical companies negotiate under a virtual veil of ignorance with respect to as yet uninvented medicines, their collective interests will shape their negotiating strategy. They will want to design the allocation rules so as to maximize their collective harvest of rewards. In particular, they will want these rules to be clear and transparent so as to reduce uncertainty. They will want the incentives to be shaped so as to foster efficient collaboration and synergies among themselves. They will want to set up a cheap and reliable arbitration mechanism so as to avoid costly disputes.”

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Rules Governing Medical Research 2 One obvious alternative is a regime under which inventor firms can choose to be rewarded in proportion to the impact of their invention on the global disease burden. This solution would end the morally untenable situation of the drug companies, which must now, to recover their costs, price life-saving medications out of the reach of vast numbers of poor patients. The solution would align the interests of inventor firms and the generic drug producers. The former would want their inventions to be widely copied, mass-produced, and sold as cheaply as possible, because this would magnify the health impact of their inventions. If new drugs were sold at the competitive price, near the marginal cost of production, many poor patients would gain access to drugs they now cannot afford. And affluent patients would gain as well, by paying substantially less for drugs and medical insurance. This solution would also greatly expand research into diseases that now attract very little research: dengue fever, hepatitis, meningitis, leprosy, trypanosomiasis (sleeping sickness and Chagas disease), river blindness, leishmaniasis, Buruli ulcer, lymphatic filariasis, schistosomiasis (bilharzia), malaria, tuberculosis, and many more. In time, this one rule change alone would easily halve the number of annual poverty deaths.