[Ip-health] Compulsory Licensing

[James Love]

On Thu, 2008-12-04 at 10:48 -0700, Aidan Hollis wrote:
2. We regret if you feel that your intellectual contributions have not
been
> adequately acknowledged by us at any point in the past. A large number
of
> people have made valuable contributions to this area, and we are
building on
> the excellent work of many, including you.
>

Dear Aidan,

This is the second time you have commented on my feelings.  I don't
think you know what I feel.  I was making a point about the evolution of
the thinking about the valuation of the rewards, and drawing attention
to what is or is not different about the HIF.

I would like you to read this comment that Professor Pogge made to the
WHO IGWG in 2007

<---------start quote--
http://www.who.int/phi/public_hearings/second/contributions_section1/en/

In contrast to prizes and other =E2=80=98push=E2=80=99 schemes that rely on=
 government
planners and experts to determine the direction of R&D, Track2 is a
=E2=80=98pull=E2=80=99 market solution that leaves it up to potential innov=
ators (better
informed and better motivated than planners) to decide how they can make
the most effective contribution. There is no need to specify a specific
reward, nor specific conditions a new medicine must meet. Whatever works
is rewarded according to how well it works in reducing the global burden
of disease. It further encourages companies to consider the cost of
distribution of a given health product, going one step further than
advance-market commitments by encouraging improved collaboration between
key agents in the health sector instead of placing the burden of
coordination on any sole entity.
---end quote--------->

Professor Pogge's comment implies that proposals for prizes would
require "government planners and experts to determine the direction of
R&D." I think this is a fair comment on the APC approaches, or any
narrowly defined prize fund. It does not describe the approach that we
had advocated.  Pogge was saying his "Tract 2" approach was novel in
this area, but in fact, it was quite derivative, and wholly misleading
about the nature of the earlier proposals, including yours, on this
point.

Next, Professor Pogge said:

<---------start quote--
Track2 offers a clear solution to the twin challenges of incentivizing
R&D and improving drug distribution networks. Prize systems, as
currently construed, focus only on the front end of bringing drugs to
market. We realize that governments, particularly those saddled with
large debt repayments, cannot be the sole investors in health
infrastructure if widespread access is desired. Our system encourages
all third-party procurement and distribution networks, public and
private, to work with pharmaceutical companies to reduce the disease
burden. This could have the desirable effect of prioritizing effective,
longer-term interventions, such as improvements in basic sanitation,
access to preventative care and locally implemented health solutions.
---end quote--------->

Pogge simply asserts a straw man which does not exist.   The prize fund
proposals that were before the IGWG would reward actual health impacts,
not simply development of new products.  But to do this, it is not
necessary to grant monopolies in the supply chain.  The fact that the
reward is related to improvements in outcomes is by itself sufficient to
motivate developers to develop things that have practical benefits in
actual use.

With regard to the assignment of credit for ideas, I would ask you to
identify what is new about the HIF.

I do think that Tim Hubbard and I solved an important design issue in
2002, with a solution not dissimilar to the proposals that Will Masters
has independently made in the area of innovation inducement prizes for
agriculture.  I appreciate you saying we have done excellent work.  What
you don't say is what that excellent work was.

In practice, the HIF's most attractive features are those that are not
original to the HIF.  Since you are holding the HIF out as better than
other proposals, it would be appropriate to acknowledge what was
borrowed and what is new.  Particularly when your co-author has so
inaccurately described our proposals in the IGWG process.

3. We understand that you are in favor of an alternative system of
rewards,
> rather than a complementary system, so that *all* medical innovations
would
> be rewarded with prizes rather than patent exclusivity. While this is
an
> admirable goal, we are proposing something more modest, which could be
> expanded if it works well.

   We are in favour of a change in the business model for drug
development, including the end to legal monopolies in the supply chain.
How you get there is a matter of strategy and tactics.

   We have not shied away from compulsory licensing of patents, and on
more than one occasion, including the case of Canada (a high income
country), neither have you, for example, in this excellent article:
Aidan Hollis, "The Link Between Publicly Funded Health Care and
Compulsory Licensing," Canadian Medical Association Journal, 167:
765-767, 2002.

   We have also endorsed a number of voluntary prize funds in our IGWG
comments, and we clearly support all five of the Barbados/Bolivia prize
fund proposals, of which 4 rely upon voluntary mechanisms.  By the way,
how is it that these country proposals, made in the context of the WHO
negotiations you are trying to influence, are never even acknowledged by
Professor Pogge or you?  I would think they would merit some mention.
They have, after all, generated a lot more support among public NOGs
than has the HIF.


We look forward to your constructive engagement with us in this project.
>
> Aidan Hollis
>
> Associate Professor
> Department of Economics, University of Calgary
> 2500 University Dr NW Calgary AB T2N 1N4 Canada
>
> tel: +1 403 220 5861  fax: +1 403 220 5861
> email: ahollis@ucalgary.ca
> web: http://econ.ucalgary.ca/profiles/aidan-michael-hollis
>
> Incentives for Global Health
> http://www.healthimpactfund.org
>
> ----- Original Message -----
> From: <james.love@keionline.org>
> To: "Aidan Hollis" <ahollis@ucalgary.ca>
> Cc: <ip-health@lists.essential.org>; <thomas.pogge@yale.edu>
> Sent: Thursday, December 04, 2008 7:39 AM
> Subject: Re: [Ip-health] Compulsory Licensing
>
>
> > Dear Aidan and Thomas.
> >
> > There are several things I could mention about this revised position
on
> > compulsory licenses, but I will begin with these.
> >
> > 1.  There is no evidence that strong patent protection has
stimulated R&D
> > for Type II and III diseases.  I think you could acknowledge the
comments
> > by the CIPIH and others on this point.  And if the whole point of
strong
> > patent protection is to allow high prices, you really don't want
this type
> > of outcome for Type II and III diseases.
> >
> > 2.  With respect to the middle income countries, I have the strong
feeling
> > that both you and Professor Pogge are ignoring points that I (and
others)
> > have made in on- and off-line exchanges for about a year.  The
markets in
> > middle income countries are quite important to attract generic
entry, and
> > also to obtain decent economies of scale.  Africa would never had
> > attracted an offer of $350/250 per year in 2001 for NVP+3TC+d4T if
Brazil
> > had not already been buying generic APIs for several years for all
three
> > components, and stimulated entry and competition.  India was a large
> > enough market to induce entry for all sorts of other generic
products. If
> > you remove Brazil, China, India, South Africa, Thailand, Chile and
other
> > middle income countries from the generic market, you lose the
feasibility
> > of doing compulsory licensing in the poorer countries.
> >
> > Not everyone understands the economics of generic drug markets in
> > developing countries.  But when you and Professor Pogge launch a
high
> > profile roll-out of a self billed "major" public health initiative,
you
> > should not have missed these points, in my opinion.  Particularly
when the
> > evidence has been presented to both you and Professor Pogge on
several
> > occasions.
> >
> > The prize fund approach that Tim Hubbard and I proposed in 2002 was
to
> > separate the reward for products from the price.  We called for the
> > elimination of the legal monopoly on products, to be replaced by a
system
> > of cash rewards, based upon the incremental impact on health
outcomes.
> > The 2002 Aventis scenarios, among other things, identified the
weakness in
> > longitude type prize mechanisms, that relied, as did the early APC
> > proposals, and a technical specification and a prize budget for a
specific
> > outcome.  We proposed a system where all qualifying products would
win
> > something, and rewards would be connected to the value of the
products, as
> > determined, in a zero sum competition, by relative merits - relative
> > impact on health outcomes.   The first Sanders bill was developed in
2004
> > (introduced in 2005), to provide a concrete illustration of how the
> > approach could be implemented in the largest pharmaceutical market -
the
> > US. We thought was necessary also to counter some early (2004)
criticism
> > against the proposal by Professors Grabowski and DiMasi, that we
thought
> > described incorrectly the approach we favoured.
> >
> > Following the Aventis Scenarios and the Sanders bills and the
Barbados
> > Bolivia proposals, everything in the academic literature has been
trending
> > toward the 2002 valuation designs.  Your 2005 papers were essential
> > voluntary applications of the design.
> >
> > Pogge's early proposals consistently avoided any mention of anyone
else's
> > work on this topic, and his valuation design was fundamentally
flawed.  He
> > proposed a fixed QALY reward system, and a treaty that would have
provided
> > an unlimited liability to pay for QALYS supplied.  It not only
vastly
> > underestimated the noise in QALY measurement, and scared budget
officials,
> > but it imposed a "cost" of very use of a drug, much like a
reimbursement
> > liability under the current system.  Thankfully that ill advised
idea has
> > been rejected.
> >
> > (The comparison of the various design issues is set out in the Big
Idea
> > paper).
> >
> > To implement prize funds for Type II and III diseases across many
> > developing countries, you are pretty much stuck with a voluntary
approach
> > in the sort run, with the rewards largely funded by Northern Donors.
But
> > even here, a really important medical innovation should be subject
to
> > compulsory licensing pressures if the voluntary license is not
> > forthcoming.
> >
> > To have a larger transformation change in access, including Type I
> > diseases, countries have to introduced non-voluntary licenses on
patents,
> > in connection with an alternative (not complementary) reward system.
> >
> >
> >> This is a multi-part message in MIME format.
> >> --
> >> [ Picked text/plain from multipart/alternative ]
> >> James Love, commenting on the HIF book, asked in a recent email to
this
> >> list
> >> "I would like to know from Aidan Hollis or Thomas Pogge if they
think the
> >> HIF book was in error in not providing the more compelling case for
the
> >> use
> >> of compulsory licenses, in light of the issue of the relative
> >> quantitative
> >> impact on innovation and access?"
> >>
> >> We are happy to oblige in this matter. Compulsory licenses clearly
can
> >> have
> >> a place in enabling access to patented drugs which are priced
outside of
> >> the
> >> reach of consumers in a country. Particularly for the poorest
countries,
> >> compulsory licenses make sense. Jamie refers to the case of
> >> Africa, which as he notes represents a very small share of global
> >> pharmaceutical expenditures and perhaps even less of patented
> >> pharmaceuticals. It is clear that for drugs for global diseases,
> >> compulsory
> >> licenses in African countries are unlikely to have any significant
impact
> >> on incentives
> >> for pharmaceutical innovation; in the case of drugs for diseases
which
> >> primarily affect the very poor, compulsory licenses could however
have
> >> non-trivial impacts on the incentives for innovation.
> >>
> >> The situation with respect to "emerging" markets is less clear.
India,
> >> China
> >> and Brazil represent significant and growing markets in their own
right.
> >> I
> >> believe that compulsory licensing in those countries might have
negative
> >> consequences for global incentives for innovation, even for global
> >> disease
> >> therapies. That does not, in my view, mean that compulsory
licensing
> >> would
> >> necessarily be unjustified, (and in fact Sean Flynn, Mike Palmedo,
and I
> >> have a paper forthcoming in JLME which develops a new economic
rationale
> >> for
> >> compulsory licensing) but there may be effects on innovation which
have
> >> to
> >> be considered.
> >>
> >> In any case, of course, compulsory licensing is at the
> >> discretion of the government of each country, including of
high-income
> >> countries. The price controls almost universally exercised by
developed
> >> countries are second cousin to compulsory licensing: both have the
effect
> >> of
> >> reducing price, so the governments of developed countries should
not
> >> pretend
> >> to be shocked by compulsory licensing in countries like Thailand
and
> >> Brazil.
> >>
> >> If Jamie is concerned that the HIF book may be used to beat
developing
> >> countries over the head to stop them from exercising their
legitimate
> >> rights
> >> of compulsory licensing, that wasn't our intention, and he should
feel
> >> welcome to use this letter as a clarifying statement.
> >>
> >> Our intention was merely to point out that there can be a trade-off
> >> between
> >> access and innovation if the tools used to enable access simply
cause a
> >> reduction in price (though the trade-off in many circumstances will
of
> >> course favor access over innovation).  The advantage of the HIF in
this
> >> respect is that it can be used to maintain the incentive for
innovation
> >> while also enabling the widest access.
> >>
> >> As I mentioned in a previous email to this list, we have learned a
lot
> >> from a number of recent meetings on the HIF, and from
correspondence
> >> including ip-health. We welcome further comments, whether by email,
> >> telephone, or this list-serve, and we will in due course try to
respond
> >> adequately to comments on the proposed design of the Health Impact
Fund.
> >> We believe that there is room for improvement, and take the
comments we
> >> have received very seriously.
> >>
> >> Aidan Hollis
> >>
> >> Associate Professor
> >> Department of Economics, University of Calgary
> >> 2500 University Dr NW Calgary AB T2N 1N4 Canada
> >>
> >> tel: +1 403 220 5861  fax: +1 403 220 5861
> >> email: ahollis@ucalgary.ca
> >> web: http://econ.ucalgary.ca/profiles/aidan-michael-hollis
> >>
> >> Incentives for Global Health
> >> http://www.healthimpactfund.org
> >>
> >> ----- Original Message -----
> >> From: "James Love" <james.love@keionline.org>
> >> To: <ip-health@lists.essential.org>
> >> Cc: "Thomas Pogge" <thomas.pogge@yale.edu>; "Aidan Hollis"
> >> <ahollis@ucalgary.ca>
> >> Sent: Thursday, November 27, 2008 9:00 AM
> >> Subject: Trade-off between access and incentives
> >>
> >>
> >>> http://www.keionline.org/blogs/2008/11/27/trade-off-innov-access/
> >>> Knowledge Ecology Notes
> >>> Trade-off between access and incentives, November 27, 2008
> >>>
> >>> This is a comment on the references to compulsory licensing in the
> >>> Hollis/Pogge HIF book that are quoted below.
> >>>
> >>> <<-------------------start quote
> >>>
> >>>
http://www.keionline.org/blogs/2008/11/18/excerpts-from-hif-compulsory-lice=
nsing/
> >>> Aidan Hollis and Thomas Pogge, The Health Impact Fund, Making New
> >>> Medicines Accessible for All, A Report of Incentives for Global
Health,
> >>> 2008.
> >>>
> >>>    Strengthened intellectual property protections in the less
developed
> >>> countries burden the poor immediately by pricing vital medicines
out of
> >>> their reach. Yet, such protections may benefit only future poor
people,
> >>> starting in 2025, when patents on medicines that owe their
existence to
> >>> such protections expire. Appealing to this time difference, one
might
> >>> then propose to resolve the dilemma in favor of Pre-TRIPS on the
ground
> >>> that it is morally impermissible to cause severe harms, including
death,
> >>> to poor people now for the sake of protecting millions of poor
people
> >>> from similarly severe harms later on. Many endorse such a
principled
> >>> stance. Yet, one can not be satisfied with such an outcome in view
of
> >>> all the harm that stimulating new drug development could avert
from so
> >>> many future lives.
> >>>
> >>>    . . . compulsory licenses weaken the innovation incentives that
were
> >>> supposed to result from the extension of strong intellectual
property
> >>> rights into the less developed countries. Pharmaceutical companies
will
> >>> understandably discount any such incentive if they are uncertain
whether
> >>> and to what extent they will actually be allowed to reap the
financial
> >>> reward from inventing a new medicine. . .
> >>>
> >>>    Third, while systems of compulsory licensing may provide an
> >>> expedient solution to short-term health problems, they discourage
> >>> investment in R&D for diseases whose remedies may become targets
for
> >>> compulsory licenses. The welcome relief from the problem of high
prices
> >>> compulsory licenses bring thus aggravates the neglect of diseases
> >>> concentrated among the poor. Pharmaceutical companies spend less
on the
> >>> quest for vital medicines - especially ones needed mainly by the
poor -
> >>> when the uncertainties of development, testing, and regulatory
approval
> >>> are compounded by the additional unpredictability of whether and
to what
> >>> extent successful innovators will be allowed to recoup their
investments
> >>> through undisturbed use of their monopoly pricing powers.
Compulsory
> >>> licensing may thereby even exacerbate the health crisis facing
> >>> developing countries over the medium and long terms (Pogge 2008b,
240).*
> >>> -------------end quote---------------->>
> >>>
> >>> I was struck by the HIF discussion on this topic, because Thomas
Pogge
> >>> has a background in ethics, and Aidan Hollis was involved in a
> >>> competition case in South Africa in 2003, where these tensions
were
> >>> explored.
> >>>
> >>> Missing from the Hollis/Pogge discussion was a realistic
assessment of
> >>> the quantitative impact of the access and incentive trade-offs.
> >>>
> >>> During the first major compulsory licensing meeting in Geneva in
March
> >>> 1999, Dr. Richard Laing put up a slide that showed that the entire
> >>> continent of Africa represented about 1 percent of the global
market for
> >>> pharmaceuticals. He said, patent protection Africa was irrelevant
to the
> >>> pharmaceutical company decisions about whether or not to develop a
new
> >>> drug. This was certainly true in 1999. It is certainly true for a
number
> >>> of market segments where consumption of high priced patented
medicines
> >>> are basically zero. When the Thailand government sought a
compulsory
> >>> license for patents on Plavix, for use in the public sector health
> >>> programs, there was zero consumption of this product in that
market.
> >>> When fluconazole as too expensive for HIV patients in Thailand and
South
> >>> Africa, there was almost no access to this drug. In these and in
> >>> countless other cases, the harm from the lack of access is huge,
and the
> >>> incentive effects are incredibly small. These empirical realities
are
> >>> quite important in evaluating the trade-offs.
> >>>
> >>> In a 2003 patent dispute, a number of economists and human rights
> >>> scholars looked at this issue, including the economist William
Jack of
> >>> Georgetown University, and Aidan Hollis. Hollis noted that when
"patent
> >>> protection has very weak effects on stimulating innovation but
large
> >>> effects in terms of harming poor consumers . . .
government-granted
> >>> compulsory licenses can be used to mitigate the negative effects
of
> >>> government-granted patents." This point is missing from the HIF
book,
> >>> which now could easily be quoted by patent owners to oppose
compulsory
> >>> licensing requests.
> >>>
> >>> In 2006, the WHO Commission on Intellectual Property, Innovation
and
> >>> Public Health issued a report that also addressed the relative
> >>> quantitative significance of the effects of patents on innovation
and
> >>> access developing countries:
> >>>
> >>> <<---------start quote---
> >>>
> >>>    Intellectual property rights have an important role to play in
> >>> stimulating innovation in health-care products in countries where
> >>> financial and technological capacities exist, and in relation to
> >>> products for which profitable markets exist. In developing
countries,
> >>> the fact that a patent can be obtained may contribute nothing or
little
> >>> to innovation if the market is too small or scientific and
technological
> >>> capability inadequate. In the absence of effective differential
and
> >>> discounted prices, patents may contribute to increasing the price
of
> >>> medicines needed by poor people in those countries. Although the
balance
> >>> of costs and benefits of patents will vary between countries,
according
> >>> to their level of development and scientific and technological
> >>> infrastructure, the flexibility built into the TRIPS agreement
allows
> >>> countries to find a balance more appropriate to the circumstances
of
> >>> each country (page 22). . .
> >>>
> >>>    There is no evidence that the implementation of the TRIPS
agreement
> >>> in developing countries will significantly boost R&D in
pharmaceuticals
> >>> on Type II, and particularly Type III diseases. Insufficient
market
> >>> incentives are the decisive factor. (page 85)
> >>>
> >>>    There is very little real evidence, one way or the other, on
how the
> >>> availability or possible use of compulsory licences will affect
> >>> willingness or reticence to invest in R&D. (page 120)
> >>> -----------end quote---->>
> >>>
> >>>
> >>> The WHO CIPIH even saw a positive role for compulsory licenses in
> >>> promoting research:
> >>>
> >>>
> >>> <<-- 2.10 Countries should provide in their legislation powers to
use
> >>> compulsory licensing, in accordance with the TRIPS agreement,
where this
> >>> power might be useful as one of the means available to promote,
inter
> >>> alia, research that is directly relevant to the specific health
problems
> >>> of developing countries. (page 55)-------->>
> >>>
> >>> I would like to know from Aidan Hollis or Thomas Pogge if they
think the
> >>> HIF book was in error in not providing the more compelling case
for the
> >>> use of compulsory licenses, in light of the issue of the relative
> >>> quantitative impact on innovation and access?
> >>>
> >>> This is particularly interesting since quotes from their book on
the
> >>> topic of compulsory licensing may later be used by patent owners
to
> >>> oppose compulsory licenses in developing countries.
> >>>
> >>> ----
> >>> *It is interesting to compare the issues raised in the HIF Book in
> >>> opposition to compulsory licenses to the views set out by Harvey
Bale of
> >>> the IFPMA in 1999;
> >>> http://lists.essential.org/pharm-policy/msg00060.html.
> >>>
> >>>
> >>>
> >>> --
> >>> James Love, Director, Knowledge Ecology International
> >>> http://www.keionline.org | mailto:james.love at keionline.org
> >>> Wk: +1.202.332.2671 | US Mobile +1.202.361.3040 | Geneva Mobile
> >>> +41.76.413.6584
> >> --
> >>
> >> _______________________________________________
> >> Ip-health mailing list
> >> Ip-health@lists.essential.org
> >> http://lists.essential.org/mailman/listinfo/ip-health
> >>
> >
> >
> >
>
>
> --
James Love, Director, Knowledge Ecology International
http://www.keionline.org | mailto:james.love at keionline.org
Wk: +1.202.332.2671 | US Mobile +1.202.361.3040 | Geneva Mobile
+41.76.413.6584