[Ip-health] IP-Watch: Informative Debate On IP And Drug Price Model, Flexibilities

[Thiru Balasubramaniam]

http://www.ip-watch.org/weblog/index.php?p=3D553&res=3D1024_ff&print=3D0

26/2/2007

Informative Debate On IP And Drug Price Model, Flexibilities

By William New

An informative event this week pitted key proponents of opposite views
on how to best protect the intellectual property rights of
pharmaceutical companies while also addressing the needs of poor
patients around the world unable to afford necessary treatments.

The 20 February panel entitled, =93Debating Pharmaceutical IPRs,=94 jointly
sponsored by the UN Conference on Trade and Development and the
Stockholm Network, a London-based free-market think tank. The meeting
was held alongside the weeklong World Intellectual Property
Organization (WIPO) Provisional Committee on Proposals Related to a
WIPO Development Agenda.

James Love, director of the nongovernmental Knowledge Ecology
International, took a stance in favour of changes to the existing
patent system. He called it =93the ultimate hypocrisy,=94 that industry is
using developed-nation taxpayer funds to file patents in developing
countries, whose governments are then criticised in the financial press
for taking actions to ensure their publics have affordable access to
needed drugs, while at the same time the United States steadily files
compulsory licenses for non-essential consumer products like software
and television components.

Eric Noehrenberg, director, international trade and market policy at
the Geneva-based International Federation of Pharmaceutical
Manufacturers Associations, said the =93hypocrisy=94 is that some are
=93wrapping this debate in a public health mantle,=94 but that it is really
more about commercial policy designed to create business for local
producers in developing countries.

A representative of Swiss pharmaceutical company Novartis, which is
facing criticism for challenging India=92s patent law, said the company
is trying to get medicine to developing countries and is providing it
below cost, but that other issues seem to be blocking its distribution.

Love said that delivery problems are the =93hard part=94 of the problem and
that removing problems related to intellectual property rights is the
=93easy part.=94 But, =93there=92s no problem when it comes to the poor tha=
t=92s
not important enough to address,=94 he said.

Price vs. Prize

Love said the reason there are almost no patented drugs on the World
Health Organization essential drugs list is because they are so
expensive they do not get put on the list. =93The WHO list is the best
evidence that the model has priced essential drugs out of existence,=94
he said, adding that his group, formerly known as the Consumer Project
on Technology, has called for a list of essential drugs =93as available.=94

He said with a model of funding medicines to the poor through recently
enlarged foundations, American taxpayers are effectively =93the biggest
purchasers of AIDS drugs=94 in the world. Love touted a proposal to
redesign the drug innovation system using prizes instead of high prices
for industry to recover its research and development costs.

Noehrenberg countered the assumption that generic drugs are always
cheaper. He cited an example of second-line antiretrovirals, using
Health Action International data, and said the generic versions are
more expensive.

Noehrenberg also sought to counter the perception that pharmaceutical
companies are not doing as much as they can to help patients in poor
countries. For instance, he said, Swiss drug manufacturer Novartis,
which is under criticism for challenging India=92s new patent law, has an
=93extensive and generous=94 programme of giving away medicines in that
country. In India, only 50 out of 1,000 pay for their drugs, and they
are on government health plans, he said.

Noehrenberg also said often the multinational company drops its price
on a drug before the generics producers do, and raised quality concerns
about generics. He argued that efforts to =93undermine=94 the system of
drug development in the name of public health are really aimed at
changing industrial policy. His primary message appeared to be that
instead of coming up with an unproven new system, effort should be
placed on improving the existing system.

Love countered that if generics are charging a high price too, that is
another sign of the need for change in the existing system which is
based on high prices to recover research costs. He predicted that =93the
buzzword of the future=94 would be prizes for research, possibly publicly
funded, rather than the price-based model.

Noehrenberg said an industry concern about the prize fund is that it
rewards the first idea into the market, but that in industry the
follow-up products often offer better benefits for consumers. He said
the socioeconomic value of a new idea is =93very difficult to determine,=94
and is why companies conduct trials on new drugs, which is the most
expensive part of the process. Finally, he questioned whether the
financing for a prize fund would be reliable into the future, as
governments often change priorities.

Love answered that different models of the prize fund proposal are
under discussion, and suggested that if a second product improved on
the first, it would get rewards too. But even if the successor product
garnered all the market share, the first product would still get to
share in the revenue if they show the second product was based on the
first.

But Meir Perez Pugatch, of the University of Haifa (Israel) School of
Public Health and head of the Stockholm Network IP and Competition
Programme, said the medical field does not work in such a linear way
with one drug overtaking another.

Pugatch also argued that evidence shows definitively that patent
protection promotes innovation. He emphasised the importance of
public-private partnerships, noting for example that small
biotechnology companies need seed money but when seeking it are first
asked whether they own any patents. =93Patent protection is more
important today than ever,=94 he said. The Stockholm Network receives
financial support from the pharmaceutical industry, he noted afterward.

Graham Dutfield, a senior research fellow at Queen Mary, University of
London, said =93patents don=92t necessarily lead to cures.=94 In recent
years, he said, an increasing amount of research has been targeted at
what has been termed =93the worried well,=94 meaning lifestyle treatments
for non-critical afflictions.

Dutfield also said there is increasing research into =93me-too=94 drugs
which =93only require a small inventive step=94 to receive a patent but may
not offer a significant improvement over the original product. He cited
India, which he said is doing more research into areas of interest to
companies rather than of poor Indians.

The Policy View on Trade, IP and Health

Noehrenberg called for policymakers and others to =93see how we can move
ahead rather than rehash old debates,=94 suggesting for instance, that
the World Trade Organization committee on intellectual property rights
issues look at how IP rights can be used to promote innovation.

He also defended the industry=92s work to help develop drugs affecting
poor people, citing HIV/AIDS, and said the patent system helps
innovation because it makes an otherwise secret process publicly
available so that others may use it for further innovation rather than
simply copy it.

Noehrenberg cited a new report from India referred to as the Mashelkar
report (named for a controversial Indian scientist who headed it) that
purported to lend support to the importance of the patent system for
developing countries. That report was withdrawn last week by the author
for technical errors and plagiarism. Dutfield said the researcher who
identified the plagiarism was one of his students.

Referring to bilateral trade negotiations and provisions in them that
exceed the WTO Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS), Dutfield said that the United States and
European Union are asking poor nations to adopt terms that are
=93TRIPS-plus and USA-plus,=94 and =93TRIPS-plus and Europe-plus,=94
respectively. Meanwhile, these countries retain exceptions in their own
laws. In the United Kingdom, he said, =93We=92re trying to export all the
rights without the exceptions.=94

Dutfield also said developing countries are being forced to =93compress
100 years of very slow patent law in a very short time.=94 He said
Novartis, for instance, got its start in Switzerland by moving across
the border to Basel because the country did not have a patent law (it
was later forced to adopt one by Germany, he said). He argued that a
=93certain amount of copying must be allowed=94 for developing countries to
create their own systems of innovation. He said he opposes global
patent harmonisation as =93anti-development.=94

On the use of compulsory licenses, which are permitted under
international trade rules and allow competitors access to patented
technology, Love said the United States has issued at least five
compulsory licenses since last June, he said, including to companies
like Microsoft, Toyota and DirectTV for technologies such as digital
rights management to protect software, automobile transmissions and
set-top television boxes. Yet only developing countries are criticised
for using these licenses for health reasons, he said.

But Pugatch said compulsory licenses should not become the rule instead
of the exception. =93If compulsory license becomes modus operandi, then
there is no point in having the patent system at all,=94 he said. Use of
such licenses should be limited to disease outbreaks and other
emergencies, he said, echoing an argument made by industry.

But countries like Thailand argue they are following WTO rules which
allow government use of compulsory license for any non-commercial
purpose, whether an emergency or not. Noehrenberg called that into
question by asserting that the beneficiary companies of such licenses
may be government-owned local manufacturers. Pugatch criticised
Thailand, which recently announced it would issue compulsory licenses
for several more drugs, for offering only one-half of one percent of
revenues to the patent-holding company in one case. Love agreed this
was =93indefensible=94 as too low, but had been explained as an offer for
negotiation.

Pugatch said TRIPS-plus bilateral agreements would continue until
issues beyond the use of flexibilities are included in multilateral
talks, such as at the WTO. Issues he said need to be addressed include:
TRIPS Article 39.3 on data exclusivity, and reopening TRIPS Article
27.3 (on the patentability of plants and animals) to take into account
biotechnology.

Love said his group opposes exclusivity as unethical since it would
require repeating experiments on human beings. He suggested
substituting exclusive rights with cost-sharing.

Noehrenberg said the question of what is government, non-commercial use
bears some clarification, but emphasised that industry is not calling
for a renegotiation of TRIPS.

---------------------------------
Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org