Donors, prize funds and patent pools. KEI & UNU- MERIT Maastricht Workshop on Medical Innovation Prizes January 28th-29th 2008 Michelle Childs, Head of European Affairs Knowledge Ecology International

Background: donor driven market Example: UNITAID, Global Fund and PEPFAR: focus on HIV/AIDS, TB and Malaria Existence of donor market contingent on low prices Prices at marginal costs maximize number of patients who receive treatment Market threatened by rising costs e.g ‘second line’ treatments for HIV /AIDS Donor’s dilemma : How to reconcile innovation and access: cheap second line treatments plus incentives for R&D for new AIDS drugs

Patent Barriers to access and availability New WHO guidelines for a first line and second line regimen fixed dose combinations raise price and availability issues. Recommended combinations are patented in many countries. Monopoly prices act as barrier to access. Patents restrict innovation and adaptation for diseases specific and country specific settings e.g differing viral strains, heat stabilized products. The complexity of identifying,tracking and obtaining licenses for patented technologies together with fear of potential claims for infringement, act as barriers to generic competition. Uncertainty over size of market/export potential also inhibits generic scale up and prevents economies of scale.

Donors: UNITAID UNITAID is an international drug purchase facility, established to provide long-term, sustainable and predictable funding to increase access and reduce prices of quality drugs and diagnostics for the treatment of HIV/AIDS, malaria and tuberculosis in developing countries. These funds come largely from a sustainable and innovative source: an airline ticket levy. The UNITAID budget will exceed $320m in 2007 and could be as high as $500m in ( source UNITAID) Countries: France, Brazil, Chile, Norway and the United Kingdom founding donors. As of May 2007, nearly 30 additional countries have joined or committed to join UNITAID, more than half from Africa.

Donors: Global Fund The Global Fund was created to finance a dramatic turn- around in the fight against AIDS, tuberculosis and malaria. These diseases kill over 6 million people each year, and the numbers are growing. Since 2001, the Global Fund has attracted US$ 4.7 billion in financing through In its first two rounds of grant- making, it has committed US $ 1.5 billion in funding to support 154 programs in 93 countries worldwide. ( source: Global Fund)

Donors: PEPFAR The President's Emergency Plan for AIDS Relief (PEPFAR). At the inception of PEPFAR, the U.S. developed a five- year strategy that devoted $15 billion to programs in the following way: $10 billion for the 15 focus countries; $4 billion for other PEPFAR countries and for additional activities including HIV/AIDS research; $1 billion over five years for the Global Fund to Fight AIDS, Tuberculosis, and Malaria. (source: PEPFAR)

Background: UNITAID Patent Pool On June 2006, Médecins Sans Frontières (MSF) and Essential Inventions/KEI presented a proposal to UNITAID for the creation of a UNITAID Medicines Patent Pool for patented medical technologies relevant for the treatment of HIV-AIDS. Incentives for patent owners to voluntarily license to pool: Licensing terms: including reasonable and transparent remuneration rules, measures to ensure products are of good quality, and access to other patents in the pool, including patents acquired through grant back clauses.

UNITAID Medicines Patent Pool Patent OwnersGeneric manufacturers Pool collects (tiered) royalties from the generic manufacturers, and distributes to the patent owners

Potential benefits of a Pool Offers practical way to overcome patent barriers, which encourages competition and leads to lower prices ‘One stop’ licensing so reduced licensing transaction costs. Elimination of blocking patents Management of multiple owners and staking of royalties Potential to facilitate downstream innovation and development Potential to facilitate technology transfer and sustainable scale up of capacity an access to the developing world.

Background: UNITAID Patent Pool

Proposal: Create a prize fund to reward patent owners who license their patents to a patent pool Donors commit to set aside a fixed proportion of their budget for drug purchases to fund the prize E.g 10% of budget - similar % to private market (2005 total private investments in R&D approx 8.5%). Reward to patent owners in proportion to positive impact of inventions on health care incomes. First to license incentive: first to license receives full 10% even if patents only used for 1% of products.

Proposal: benefits/ issues Patent owners rewarded for licensing If refuse run risk of loss of market/ compulsory license c/f cl royalty rates.5% Licensing allows availability of products at marginal cost. Donors reconcile innovation and access Issues Which budget? Global Fund? UNITAID? Size of fund

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