[Ip-health] Re: impact of the HIF on generic industry in developing
countries
Jeffrey A. Williams
jwkckid1@ix.netcom.com
Mon Nov 24 05:43:02 2008
Michael and all,
Perhaps than, generic drug companies in the US should find
a way to bet in line at the Treasuries window? At least they
have a half legitimate reason to do so.
michael.davis@law.csuohio.edu wrote:
> One of the many problems associated with this project is that it seems to
> rely at least to a certain extent on data supplied by the drug companies.
> Unless I am wrong about that, this makes the project as unreliable as the
> Tufts pricing studies. I am not sure why a drug company would behave any
> differently than the other firms that have demonstrated how far their
> numbers can be trusted since Enron, World.com, Bear Sterns, and GM, AIG,
> and the other almost countless firms that have put us in the present
> economic straits.
>
> Or did I misunderstand how the data is going to be acquired?
>
> > This is a multi-part message in MIME format.
> > --
> > [ Picked text/plain from multipart/alternative ]
> > Jamie,
> > I appreciate your concern for how the HIF will affect the pharmaceutical
> > industry. Please let me reply.
> >
> > I had some difficulty in interpreting your comments, as it appears that
> > you don't fully understand the HIF mechanism. The HIF mechanism would
> > require that the registrant sell the product at a price "no higher than
> > the long-run marginal cost of production and distribution, as determined
> > by the HIF, wherever the product is legal and needed." Thus, the following
> > paragraph, taken from your email, makes no sense in the context of the
> > HIF.
> >
> >> If Merck or GSK was being rewarded
> >> through the HIF, they could lower prices enough to make it politically
> >> difficult to credibly ask for a CL. Imagine a developing country trying
> >> to issue a CL when US and European taxpayers were running a fund to make
> >> the price officially "reasonable," according to the HIF price regulation
> >> formulas. The country that issued the CL would almost certainly be under
> >> attack for its ungrateful and unwise action. And, this is important, how
> >> many countries have to issue such a CL to make the generic market
> >> feasible in the first place?
> >
> > You wish us to imagine a developing country trying to issue a compulsory
> > license for a drug which is being supplied to it at or below production
> > cost. Why would it bother?
> >
> > And what do you mean, Merck or GSK could "lower prices enough"? As you
> > will find in the Health Impact Fund book, and as I have described in
> > several emails to you, the HIF would *require* the registrant to sell the
> > product at or below a price determined by the HIF. It is a gross
> > misrepresentation of the HIF to suggest that the standard for the price
> > would be "officially reasonable".
> >
> > You proceed to comment:
> >
> >> The cases where the HIF would be most attractive
> >> would include the cases where developing countries (and donors) would
> >> normally expect open licensing, through either voluntary (UNTIAID) or
> >> mandatory (compulsory) licenses, or where a country would challenge the
> >> validity of patents through litigation.
> >
> > While I encourage all drug firms to engage in philanthropy, I am not aware
> > that developing countries or donors "normally" expect open licensing
> > either of the voluntary or mandatory sort. It appears that in your idea of
> > the future, drug companies will "normally" expect to license out their
> > patents whenever it would be good for patients. Perhaps this may come to
> > pass. As it happens, the HIF also allows for patentees to voluntarily
> > license generic producers, and to continue to benefit from payments based
> > on health impact from all sales of the patented product (including by
> > licensees, providing that the price limits of the HIF are maintained).
> > Thus, if patentees of HIF-registered drugs wish to arrange voluntary
> > licenses, this "normal" outcome can be supported by the HIF -- but our
> > proposal for the HIF does not *require* companies to offer such licenses
> > unless they fail to supply at the specified terms. Thus, generic producers
> > do not seem to be in any way disadvantaged by the HIF.
> >
> > Happily, for drugs registered with the HIF, the registrant would be
> > equally rewarded for health impact from the registered drug, no matter
> > where in the world it occurred. In your vision of the future, the patentee
> > can expect, I think, little gain from selling drugs in the poorest
> > countries, and naturally this will reduce the incentives to engage in
> > research or development of drugs which primarily address the diseases and
> > conditions of poor people, or of development of versions suitable for
> > resource-constrained settings. Under the HIF, successful treatments for
> > diseases and conditions of the poor can be appropriately rewarded.
> >
> > As for your assertion that "It is not true that the HIF endorses licensing
> > patents to the UNITAID patent pool," I can only assume that you believe
> > the HIF to exist. It does not, yet, and so cannot endorse anything. In
> > case you don't find the comments about UNITAID in the book sufficiently
> > positive, let me state the following, as I have already indicated in our
> > previous correspondence:
> >
> > I personally endorse the UNITAID patent pool. Thomas has assured me that
> > he personally endorses the UNITAID patent pool.
> >
> > The HIF proposal does not require open licensing of patents, for the
> > reasons I have already explained in previous emails. However, the HIF is a
> > different mechanism from the UNITAID patent pool, so I see no conflict in
> > saying that while licensing of patents may be a necessary part of a patent
> > pool, it is not a necessary part of the HIF. As I mentioned, however, HIF
> > registrants could still, if they wanted, offer open licenses of their
> > patents into any number of patent pools.
> >
> > I hope that these comments are helpful to you in better understanding the
> > HIF.
> >
> > Yours,
> >
> > 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: "Aidan Hollis" <ahollis@ucalgary.ca>
> > Cc: "Ip-health" <ip-health@lists.essential.org>; "Thomas Pogge"
> > <thomas.pogge@yale.edu>
> > Sent: Thursday, November 20, 2008 6:58 AM
> > Subject: Re: [Ip-health] Re: impact of the HIF on generic industry
> > indeveloping countries
> >
> >
> >>
> >> http://www.keionline.org/blogs/2008/11/20/impact-of-hif-on-generics/
> >>
> >> Dear Aidan,
> >>
> >> I would like to review the reasons why the HIF will undermine the
> >> generic industry in developing countries.
> >>
> >> One core issue concerns economies of scale and scope. I would not be
> >> surprised if Thomas Pogge was not particularly savvy about the empirical
> >> realities of economies of scale and scope, but I would expect that you
> >> would. Generic firms will not enter a market that is too small, or if
> >> the costs of entry are too high. The HIF would shrink potential generic
> >> markets, reducing economies of scale.
> >>
> >> By reducing the number of generic products, HIF would also reduce
> >> the potential economies of scope, since there would be less know-how or
> >> facilities used in similar products. This would raise entry costs.
> >>
> >> The HIF would give drug developers the option to unconstrained
> >> monopoly pricing, or accepting the HIF subsidies, in return for price
> >> regulation of products. The cases where the HIF would be most attractive
> >> would include the cases where developing countries (and donors) would
> >> normally expect open licensing, through either voluntary (UNTIAID) or
> >> mandatory (compulsory) licenses, or where a country would challenge the
> >> validity of patents through litigation.
> >>
> >> The HIF would move the market away from generic supply to the
> >> monopoly supply in these cases. If Merck or GSK was being rewarded
> >> through the HIF, they could lower prices enough to make it politically
> >> difficult to credibly ask for a CL. Imagine a developing country trying
> >> to issue a CL when US and European taxpayers were running a fund to make
> >> the price officially "reasonable," according to the HIF price regulation
> >> formulas. The country that issued the CL would almost certainly be under
> >> attack for its ungrateful and unwise action. And, this is important, how
> >> many countries have to issue such a CL to make the generic market
> >> feasible in the first place? For some data on this point, you might want
> >> to look at this document:
> >>
> >> http://www.keionline.org/misc-docs/1/cost_benefit_UNITAID_patent_pool.pdf
> >>
> >> Secondly, companies have ready told the UNITAID patent pool that
> >> they cannot get important licenses in middle income country markets,
> >> unless they link the licenses to some type of prize fund reward
> >> incentive. If you embrace the HIF approach where the rewards are not
> >> linked to the open license, you don't get middle income countries
> >> included in the UNITAID pool. Without middle income countries in the
> >> pool, you get much much less generic entry (again, see the UNITAID cost
> >> benefit analysis).
> >>
> >> You also state in your report that the HIF will make it less
> >> economically feasible for generic companies to challenge patent
> >> validity.
> >>
> >> "First, the incentives to challenge patents will be relatively
> >> weak, since generic companies will find themselves competing not against
> >> a firm with high prices, but against a firm with low prices. If the
> >> registrant sold the product at a price below the generic average cost of
> >> manufacture, generic firms would find entering such a market
> >> unprofitable until the end of the payment period . . . "
> >>
> >> http://www.keionline.org/blogs/2008/11/18/hif-on-intellectual-property/
> >>
> >> It is not true that the HIF endorses licensing patents to the
> >> UNITAID patent pool. The complete reference in your report is as
> >> follows:
> >>
> >> ----------
> >> PATENT POOLS
> >> A new mechanism to assist with lowering drug prices in specific
> >> countries is the patent pool approach recently espoused by Unitaid. What
> >> makes this approach particularly interesting is that it could also
> >> result in a reduction in transactions costs which could benefit
> >> patentees too. A patent pool is a portfolio of patents related to a
> >> particular technology and held by companies, universities, and
> >> government institutions. The patents would be made available under a
> >> non-exclusive license to manufacturers and distributors, and the pool
> >> operated through the auspices of a licensing agency. The licensing of
> >> patents to the pool is to be done on a voluntary basis with royalties
> >> paid, and there could be geographic limits on the license. The appeal of
> >> this approach is particularly for formulations which may require patents
> >> from multiple firms, since the pool would substantially reduce the
> >> transactions costs of dealing with separate patentees. Unitaid has
> >> initially suggested a focus on patents relating to pediatric
> >> anti-retrovirals and new combination products.
> >> ----------------
> >>
> >> This almost makes it sound as if the UNITAID patent pool would be
> >> limited to upstream research and product development, rather than as a
> >> downstream access pool, the least aggressive implementation of the pool.
> >>
> >> Contrast your assertion of support for the UNITAID patent pool with
> >> the assult on voluntary licensing contained in page 22 of your report.
> >> Here are just a couple of points you make in the HIF report:
> >>
> >> -------------
> >> http://www.keionline.org/blogs/2008/11/18/hif-voluntary-licensing-not-required/
> >> 1. There are a number of reasons for preferring a system in which
> >> the registrant must forgo only pricing freedom, rather than giving up
> >> the exclusivity rights created by the patent.
> >> 2. First, the licensing approach would require registrants to
> >> forgo some intellectual property protection, which is not necessary as
> >> long as the registrant is willing to sell the product at the
> >> administered price.
> >> 3. In some cases, the intellectual property arrangements may be
> >> complex, and licensing may therefore be difficult. In other cases, the
> >> intellectual property may have many applications, and the patentee might
> >> prefer not to grant an open license for its use.
> >> ---------------
> >>
> >> These arguments hardly are an endorsement for licensing to the
> >> UNITAID patent pool. Consider also these comments by Thomas Pogge from
> >> the i+a list.
> >>
> >> -------------
> >> http://www.keionline.org/blogs/2008/11/19/why-hif-rejected-open-licensing/
> >>
> >> In exploring reform ideas, Jamie, it seems to me reasonable to
> >> take prospects of implementation into account. The pharmaceutical
> >> industry has a lot of political influence. Other things equal,
> >> therefore, a reform proposal is improved when it is modified so that the
> >> pharmaceutical industry has less reason to oppose it.
> >>
> >> In previous work, Aidan and I have both explored the possibility
> >> of requiring immediate open licensing as a condition of receiving health
> >> impact rewards. In long discussions we have come to the conclusion that
> >> allowing innovators to retain IP is actually the better way of
> >> specifying the Health Impact Fund. One reason is that the proposal is
> >> then less unacceptable to pharmaceutical companies and therefore more
> >> likely to be adopted. A second reason is that such companies would then
> >> be less reluctant to register a new medicine for HIF rewards (which, in
> >> our scheme, would result in the HIF paying for all registered medicines'
> >> health impact at a lower rate). A third reason is that open licensing
> >> would typically be redundant: given the prospect of health impact
> >> rewards, the registered innovator would typically have incentives to
> >> sell the product below the price generic competition would result in.
> >> (The way we have it now, the registered innovator is required to sell
> >> below the price generic competition would result in: namely at the
> >> lowest feasible cost of manufacture and distribution. The innovator's
> >> profits come entirely out of health impact rewards as diminished by the
> >> antecedent R&D outlays. Most innovators would in fact contract out
> >> manufacture of their medicines to generic producers who can manufacture
> >> at lower cost.) A fourth reason is that counterfeiting (drugs that don't
> >> contain the listed ingredients) of new drugs is easier to control when
> >> the genuine item comes in only one variant.
> >> -------
> >>
> >> For you to assert, on the NGO monitored ip-health list that
> >>
> >>
> >> ------ We expect the HIF to have approximately zero impact on the
> >> generic drug industry. -----------
> >>
> >> seems less than candid.
> >>
> >> A more realistic assessment of the impact of the HIF approach is
> >> that it would marginalize the generics industry in developing countries,
> >> make it harder to credibly threaten a compulsory license, raise the
> >> costs of generic suppliers (fewer economies of scale or scope), and make
> >> the political environment for CL or UNITAID type VL quite difficult.
> >>
> >> To add insult to injury, the HIF's negative impact on the economic
> >> viability and efficiency of the generics supplier would influence in a
> >> negative way the HIF price control formulas.
> >>
> >> Finally, it is only a minor virtue that the HIF would ask for an
> >> open license after ten years. For many products, the effective patent
> >> and product life is not much longer than this anyway, particularly given
> >> late product registrations in developing countries.
> >>
> >>
> >> On Wed, 2008-11-19 at 20:23 -0700, Aidan Hollis wrote:
> >>> Dear Jamie,
> >>> Thanks for your question. We expect the HIF to have approximately zero
> >>> impact on the generic drug industry. It would reduce barriers to
> >>> competition
> >>> at the end of the reward period of ten years, by requiring open
> >>> licensing
> >>> of
> >>> all outstanding patents required for the manufacture and sale of the
> >>> registered product at that time. This would of course reduce litigation
> >>> costs in those markets where litigation occurs, which would benefit
> >>> generic
> >>> manufacturers. The HIF could result in decreased sales of some generic
> >>> medicines if there were cheaper and better HIF-registered drugs
> >>> available
> >>> at
> >>> low prices, which could harm generic manufacturers. (Of course, in the
> >>> latter case, consumers would benefit.) Generic firms might also benefit
> >>> from
> >>> increased opportunities for contract manufacturing of HIF-registered
> >>> drugs.
> >>>
> >>> It bears repeating that the HIF is intended to be complementary to
> >>> other
> >>> mechanisms for increasing innovation and increasing access. To the
> >>> extent
> >>> that, in the book, we recognize the shortcomings of other mechanisms,
> >>> that
> >>> is not intended as a claim that those mechanisms are worthless, but
> >>> that,
> >>> like all mechanisms including the HIF, they are incomplete and
> >>> imperfect.
> >>> Our hope is that the HIF can be a complement which meaningfully
> >>> improves
> >>> outcomes by increasing the set of mechanisms. The idea, which you have
> >>> been
> >>> promoting, that the HIF proposal is an attack on compulsory licensing
> >>> or
> >>> the
> >>> Unitaid patent pool, is quite erroneous. The Unitaid patent pool could
> >>> be a
> >>> very useful mechanism for increasing access to important medicines, and
> >>> we
> >>> have only positive discussion of it in the HIF book (see page 100).
> >>> Similarly, compulsory licensing has a role, as you will find I have
> >>> expressed in my own published research specifically on that topic.
> >>> Thomas
> >>> has also publicly expressed support for the right of states to use
> >>> compulsory licensing ( eg
> >>> http://www.cptech.org/ip/health/c/thailand/riceschwabthailand21dec06.pdf).
> >>>
> >>> Finally, for readers who are learning about the HIF through this
> >>> exchange,
> >>> you main gain a fuller understanding of the HIF proposal by visiting
> >>> www.healthimpactfund.org. The e-library there features a short summary
> >>> as
> >>> well as a book-length exploration. And the events pages provide
> >>> information
> >>> about forthcoming workshops and discussions with members of the HIF
> >>> team.
> >>>
> >>> With kind regards,
> >>> 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
> >>>
> >>> 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" <ip-health@lists.essential.org>
> >>> Cc: "Thomas Pogge" <thomas.pogge@yale.edu>; "Aidan Hollis"
> >>> <ahollis@ucalgary.ca>
> >>> Sent: Wednesday, November 19, 2008 2:15 PM
> >>> Subject: impact of the HIF on generic industry in developing countries
> >>>
> >>>
> >>> > Dear Thomas and Aidan,
> >>> >
> >>> > Have you or will you predict that impact of the HIF on the generic
> >>> > industry in developing countries, in the event that the HIF is
> >>> > implemented as you suggest?
> >>> >
> >>> > Jamie
> >>> >
> >>> > --
> >>> > 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
> >>
> >>
> >>
> > --
> >
> > _______________________________________________
> > Ip-health mailing list
> > Ip-health@lists.essential.org
> > http://lists.essential.org/mailman/listinfo/ip-health
> >
>
> --
> Mickey Davis
> _________________________________
> Prof. Michael H. Davis
> Professor of Law
> Cleveland State Univ. College of Law
> 1801 Euclid Ave.
> Cleveland, OH 44115-2214
> (mailing address: 2121 Euclid Ave. LB 234)
> 216-687-2228
> _____________________________________________________________
> Patent Attorney Admitted to Practice Before the US Patent and Trademark
> Office Reg.No. 45,863
>
> Peace, Love, and Vegetable Rights!
> Eat Meat and Save the Plants!
>
> _______________________________________________
> Ip-health mailing list
> Ip-health@lists.essential.org
> http://lists.essential.org/mailman/listinfo/ip-health
Regards,
Spokesman for INEGroup LLA. - (Over 284k members/stakeholders strong!)
"Obedience of the law is the greatest freedom" -
Abraham Lincoln
"YES WE CAN!" Barack ( Berry ) Obama
"Credit should go with the performance of duty and not with what is
very often the accident of glory" - Theodore Roosevelt
"If the probability be called P; the injury, L; and the burden, B;
liability depends upon whether B is less than L multiplied by
P: i.e., whether B is less than PL."
United States v. Carroll Towing (159 F.2d 169 [2d Cir. 1947]
===============================================================
Updated 1/26/04
CSO/DIR. Internet Network Eng. SR. Eng. Network data security IDNS.
div. of Information Network Eng. INEG. INC.
ABA member in good standing member ID 01257402 E-Mail
jwkckid1@ix.netcom.com
My Phone: 214-244-4827