Patent rights stimulate R&D, but fall short in helping poor countries obtain lifesaving drugs

Intellectual property protection is needed to encourage risk taking and
innovation in large research-based pharmaceutical companies and biotechnology
firms. However, in a report published this month, world health leaders
emphasize that intellectual property protection may not be enough to address
the larger problem of how to get cheap drugs to poor countries. 

The report explores themes discussed by 40 representatives from private
industry, governments, research funders, multilateral and bilateral
organizations, non-governmental organizations, and universities who gathered
recently in Cambridge, UK to address these issues.

“This forum and the resulting report is really an attempt to bridge the gap
between drug makers, who defend their right to patent protection, and
activists, who argue that patents unfairly drive up prices of pharmaceutical
products,” said Carol Medlin, PhD, project director at the UCSF Institute for
Global Health. “Forum participants were trying to shoot down the middle - to
figure out how to provide drugs cheaply without creating a disincentive for
firms to invest in the development of new products.”

The forum agenda was sparked by fallout from the 1995 TRIPS (Trade-Related
Aspects of Intellectual Property Rights) Agreement, which required World Trade
Organization (WTO) member countries to recognize and protect intellectual
property from other countries. Patent protection under TRIPS extends for a
minimum of 20 years.  Prior to the agreement, WTO-affiliated countries were
able to produce cheap copies of drugs and other pharmaceutical products because
they were under no obligation to meet the same standard of intellectual
property rights protection offered elsewhere (largely in the U.S., Europe and
Japan), explained Medlin, co-author of the report titled Global Health Forum II
- Intellectual Property Rights and Global Health: Challenges for Access and R&D, published by the UCSF Institute for Global Health, The Wellcome Trust (London), and the Commission on Macroeconomics and Health.

One proposed model, called differential pricing, may provide a solution to that
tension, explained Richard Feachem, PhD, director of the UCSF Institute for
Global Health, which co-sponsored the recent forum. Under differential pricing
arrangements, consumers in rich countries bear the costs of R & D by paying
higher prices for pharmaceutical products than consumers in developing
countries (who pay only the manufacturing costs, minus overhead). According to
the researchers, certain guarantees must be set in place for differential
pricing to be implemented effectively. These include:

- Preventing a backwash of cheap products from the developing to developed
countries;

- Preventing the use of cheap prices offered to poor counties as reference
prices for government purchases of drugs in rich-country markets;

-  Identifying the true marginal costs of production in the absence of generic
production and in the absence of full knowledge of the industry’s R & D
costs;

- Maintaining sustainable financing.

The researchers explained that although differential pricing provides an
approach to improving access without compromising R & D goals, it does not
directly address the problem of providing incentives for research and
development of drugs to treat diseases common in developing countries.

“In fact, differential pricing can be applied only with drugs that can be
marketed to rich and poor countries, so the cost of R &D can be borne by
consumers in rich counties,” said Feachem. He explained that drugs for malaria
and tuberculosis are good candidates for differential pricing because potential
markets exist in both poor and wealthy countries. On the other hand, drugs to
treat tropical diseases, for example, which occur only in developing countries,
are not good candidates for differential pricing strategies. Pharmaceutical
firms have little incentive to develop drugs because they cannot recoup the
costs of their investment, he explained.

Forum participants did not agree on how differential pricing should be set up
or implemented. Some experts recommend that the World Health Organization (WHO)
or the World Bank play a central coordinating role. Others recommend
case-by-case negotiations, whereby countries and pharmaceutical companies make
individual agreements.

“However it occurs, the implementation of differential pricing needs to get
resolved because we have to find a way to provide needed drugs to people in
poor countries at prices they can afford,” said Feachem. “As rich countries
benefit from rapidly advancing technologies in health, poor countries of the
world are falling behind.”

Health disparities between populations of rich and poor countries are wide,
according to the report. Average life expectancy at birth in the poorest
countries is half that of the richest. In many countries, the mortality rate of
children under five is over 20 percent, whereas in rich countries it is 0.6
percent. The problem is worsening. The AIDS epidemic has taken a toll in
sub-Saharan Africa, reducing average life expectancy by over 10 years in some
countries. Multi-drug resistance is increasing in many parts of the developing
world - threatening to undermine the effectiveness of current drugs used to
treat tuberculosis and malaria.

Funding for the forum and report was provided by the Bill and Melinda Gates
Foundation, the Rockefeller Foundation, and the World Health Organization.
Forum organizers included the UCSF Institute for Global Health, The Wellcome
Trust (London), and the Commission on Macroeconomics and Health. To view the
complete report visit: http://www.igh.org/programs/GlobalForumII.pdf