[Ip-health] Trade-off between access and incentives

[James Love]

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 =E2=80=94 especially ones needed mainly by the po=
or =E2=80=94
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.

=E2=80=94=E2=80=94=E2=80=94=E2=80=94
*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