1. 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

2. 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.

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

4. Intellectual property

5. 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.

6. 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%

7. Rate of investment in R&D for new products: pharmaceutical industry
percent
percent
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

8. The pharmaceutical market was estimated at $406 billion in 2002
The pharmaceutical market was estimated at $406 billion in 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

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

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

11. 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

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

13. Nevirapine+3TC+d4T HAART Regime annual cost

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

15. 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.

16. 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.

17. 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?

18. Are Access and R&D competing policy objectives?

19. 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

20. 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

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

22. 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

23. 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

24. 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

26. 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

27. 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

28. 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

29. 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

30. For more information james.love@cptech.org http://www.cptech.org
Consumer Project on Technology
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