[Ip-health] James Love in the Financial Times: A better way of stockpiling emergency medicines

[Thiru Balasubramaniam]

http://news.ft.com/cms/s/253d4b12-474f-11da-b8e5-00000e2511c8.html


 A better way of stockpiling emergency medicines
 By James Love
 Published: October 27 2005 20:15 | Last updated: October 27 2005 20:15

 In 2001, the US was paralysed by the fear that it would face an attack of
 a particular strain of anthrax that would be resistant to penicillin and
 other common antibiotics, but possibly treatable by ciprofloxacin, a more
 specialised antibiotic.

 The recommended stockpiles for ciprofloxacin did not exist and the patent
 owner could not meet the demand for nearly two years. Despite the fear of
 an imminent attack, the US public health authorities decided to wait
 rather than buy readily available generics from outside the US.


 Today, most of the world faces severe shortages of oseltamivir phosphate,
 marketed as Tamiflu by Roche, which is one of the drugs that might be
 useful in the event of an avian flu pandemic. The patent owner cannot meet
 the demand for stockpiled medicine for several years and, again, is
 seeking to maintain control over the patent, with possibly some limited
 licensing to a handful of generic firms.


 In both the anthrax case and the current avian flu case, the US departed
 from its orthodox rhetoric and used the threat of a compulsory licence to
 obtain better pricing and, in the current dispute, to push for licensing
 to generic firms. It is time to reconsider the entire global approach to
 managing emergency stockpiles and to reconcile better the need for both
 research and development incentives and the protection of public health.


 The World Health Organisation plans to acquire 3m doses of oseltamivir,
 which could treat 300,000 people at best. Globally, the stockpiles should
 be much higher =96 at least 12bn doses, and ideally far more to cover more
 of the population and to allow for prevention rather than just =ADtreatmen=
t.
 According to the WHO, =93most developing countries will have no access to
 vaccines and antiviral drugs throughout the duration of a pandemic=94.


 In both cases, the need for the stockpiles were known earlier, but the
 medicines were not ordered on a timely basis. In the meantime, access is
 unequal, as people with means and influence can acquire private stockpiles
 of the medicines and those without face the risk of terrible suffering and
 death should the emergency actually unfold.


 These scenarios are repeated for other known risks to public health. Why?
 When purchased from patent owners, stockpiles are expensive. =ADGovernment=
s
 have limited resources and the probability of the emergencies is initially
 thought to be small. On a risk-adjusted basis, the benefits do not justify
 the cost of the stockpiles relative to other competing claims on the
 government purse.


 But there is a better way of thinking about the management of emergency
 medical stockpiles =96 one that would change the incentives to protect us
 from anthrax, avian flu, severe acute respiratory syndrome and other
 =ADemerging public health threats, at least for medicines that already hav=
e
 =ADcommercial markets for other uses.


 The proposal is to permit governments to acquire medicines freely for
 stockpiles from generic suppliers, on the condition that if the medicines
 were used to treat people, the patent owner would receive royalties. This
 makes it much cheaper to acquire the stockpiles, but also increases the
 value of the =ADpatented invention, as long as there is some probability
 that the emergency use will occur.


 The price of medicines is related to their expected benefit. But this
 assumes a nearly 100 per cent probability that someone will actually use
 them. In the case of stockpiles, on the other hand, there is often a
 fairly low probability of use. Indeed, the lower the risk of the
 emergency, the lower the expected benefit of the stockpile. As long as the
 prices for the medicines are above marginal costs and the =ADpatent owner
 insists on a price related to the price of the drug when used, stockpiles
 will be small. But if governments could freely obtain stockpiles at
 marginal costs, with only a liability to remunerate the patent owner
 in the event of use, the incentives to match costs and benefits will be
 far more efficient.


 The amount of royalties to pay in such a system should be generous for
 higher income countries and much smaller for countries with poor
 populations. As noted, this works best when the medicine has a parallel
 commercial market for non-emergency uses. For those drugs that would only
 have a market in the case of an emergency, such as an anthrax or small pox
 vaccine, the liability rule could also be used, but in combination with
 other incentives, such as the medical innovation prize fund approach now
 being considered in the US, which provides for large cash rewards for
 developers of new drugs.


 Hurricane Katrina reminded us that governments do not always plan for
 emergencies and that the poor are often the last to be helped. We urgently
 need to change the system for emergency medical stockpiles to promote
 better health security, economic efficiency and fairness.


 The writer is the director of the =ADConsumer Project on Technology and
 co-chairman of the Transatlantic =ADConsumer Dialogue Working Group on
 Intellectual Property