[Ip-health] The Health Impact Fund and open licensing vs. price controls

Tue Apr 29 04:28:18 2008

If I can share my two cents on this issue, not knowing all the
background, I certainly would agree with
Jamie that open source mechanisms would be preferable to price controls.
There are very few drugs that
are expensive to produce. It seems highly unlikely, that if we really
had open source production, it would not
be possible to find some firm somewhere in the world that could produce
any drug needed. That certainly
seems a simpler route than having to negotiate case by case price
controls, which would of course have to be
adjusted at regular intervals.

(For my two cents, as Jamie, Thomas and Aidan know, I favor push
mechanisms with direct public funding
to place patents and clinical test results in the public domain. So I am
not in either of their camps as to the
design of the best system.)

James Love wrote:
> On Mon, 2008-04-28 at 00:20 -0600, Aidan Hollis wrote:
>
>> There are many proposals envisioning a prize mechanism for stimulating
>> pharmaceutical innovation, including the two Sanders Bills. The HIF is
>> another such proposal, and we are currently working on specifying its
>> operations in some detail. We hope to be in a position to present a work=
able
>> version within a few months.
>>
>
> I agree with this statement.  What is confusing to people who don't read
> everything is not what , which is always clear, but rather some of the
> statements Thomas has made elsewhere, deriding prizes (in submission to
> the IGWG, in his recent book, and in lectures).  In our earlier exchange
> off this list, said he meant to disparage a certain type of prize, one
> that is an ad hoc with excessive specification of a qualifying outcome.
> But the message received by people who are less deep into the details is
> often less nuanced, a point I want to make here.
>
> The HIF can call itself a prize, an AMC, or a banana.  However, in terms
> of having a debate over the role of prizes, it will be helpful if the
> proposals for prizes are fairly acknowledged and described, and not
> dismissed by proxy as ad hoc rewards with excessive specificity,
> particularly when the HIF is borrowing so heavily in terms of its own
> reward mechanism on the medical innovation prize fund approach.
>
> Making things even more confusing for a general audience is the fact
> that the HIF calls itself an AMC, which is precisely the type of ad hoc
> reward mechanism for which such a criticism seems intended.   In terms
> of actual proposals on the table, it is as if the HIF decided to define
> prizes as AMCs and AMCs as prizes.   There is probably an explanation
> for why this was a good idea, but for a lot of people, it creates
> confusion.
>
>
>> However,
>> instead of requiring open licensing of the relevant IP and know-how, the=
 HIF=E2=80=99s
>> design requires that the owner oisf the relevant IP must sell the drug a=
t an
>> administratively fixed low price, no higher than the HIF=E2=80=99s estim=
ate of the
>> cost of manufacturing. This would not be a negotiated price.
>>
>> Why are we proposing price controls, rather than open licensing? If
>> competition is not effective in reducing the price to near cost, innovat=
ors
>> would benefit from high prices and still receive reward payments from th=
e
>> HIF. Competition may fail to be effective for a variety of reasons.
>>
>
> Ok, fine. You don't trust competition, and you prefer price controls.
> Our view is that the capacity to administer price controls is weak in
> the WHO and weak in developing countries.  I agree that for some
> products, competition is a challenge, even with open licensing of
> patents and know-how. Empirically, however, competition has been a
> powerful force for driving down the prizes of many other products, such
> as, for example, pretty much the entire India pharmaceutical market.
>
> Price controls might be a useful tool for cases where competition isn't
> effective.  But why get rid of open licensing?  You can have competition
> and price controls.  One does observe price negotiations and tiered
> pricing for off-patent vaccines or drugs, and government price
> regulations of generic products (a major feature of the India generics
> market).  Once you end the legal monopoly, you have more freedom and
> options in how to procure products.  This can't be a bad thing. If
> competition solves the problem, the HIF can avoid being a price
> regulator.  Open licensing should be put back into the HIF, even if you
> retain the ability to regulate prices.
>
>
>
>> Jamie has suggested that following the implementation of TRIPS, there ma=
y be
>> fewer and fewer independent sources of active pharmaceutical ingredients
>> (APIs). We agree that this is a concern. This concern reinforces our vie=
w
>> that generic competition will not always reduce prices to near cost.
>>
>
> A shift to new incentive mechanisms that employ open licensing will make
> the API markets more competitive.  A shift to incentive mechanisms that
> retain supply monopolies controlled by innovators, will make the API
> market less competitive.  I don't see the decision as to which approach
> to use to be neutral.
>
>
>> We have received no funding from drug companies nor are we soliciting an=
y.
>> Our only four research sponsors -- the Australian Research Council, the
>> Social Science and Humanities Research Council of Canada, the BUPA
>> Foundation, and the European Commission -- have never made the slightest
>> attempt to influence in any way the direction of our work.
>>
>
> It is good they have not sought to influence your work, which means it
> can go in any direction you like.
>
> Some parts of the European Commission (DG-Trade), have put a lot of
> pressure on Thailand and other countries to negotiate prices, and not
> use the compulsory licensing option.  It is certainly the case that in
> the current debate over the AMC, European governments have made it clear
> that open licenses were off the table, as a concession to the industry.
> (why is this so important to industry?)  And, the industry is not shy
> letting researchers and NGOs what they want, and what they don't want.
>
> In the late 1990s, Gates was pushing for APCs and monopoly supply
> agreements, and he supported price negotiations with big pharma, over
> compulsory licensing.  I was talking last week to someone from Bostwana,
> who said that the government would still not buy generics, largely to
> please Gates, even though if they did buy generics, they could treat
> more people with HIV.
>
> Do groups working on drug pricing think it is helpful to abandon open
> licensing, in favor of a price control approach?  Jamie
>
> --
> _____________________________
> James Love, Knowledge Ecology International (KEI)
> http://www.keionline.org, mailto:james.love@keionline.org
> voice +1.202.332.2670, fax +1.202.332.2673, US mobile +1.202.361.3040, Ge=
neva mobile +41.76.413.6584
>
> When everyone thinks the same, no one thinks.  Bill Walton remix of Walte=
r Lippmann
>
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