Benefits of a treaty on R&D

Session on alternative frameworks to finance R&D

James Love

The Drugs for Neglected Diseases (DND) Working GroupRio de Janerio, Brazil

3 December 2002

How do we fund R&D?

● Public and Donor Funds– Direct– Indirect

● Research Mandates● Intellectual Property Rights

– Patents – other exclusive marketing rights

TRIPS is limited and problematic framework for addressing global R&D

● TRIPS does not address the problem of free riding for the creation of global public goods, such as research that enters the public domain.

● Small return for non-profit and educational institutions

● There are insufficient private incentives to invest in many important R&D projects.

● Exclusive rights on R&D may not be the most efficient mechanism to finance R&D.

– Patent can be barriers to conducting research

– Private benefits are not equal to social benefits

– Excessive investment in drugs with incremental benefits, insufficient investments in many areas.

● Strong IPR protection can and does lead to access problems

– HIV, Glivec/Leukaemia, Singulair/Asthma

Tim Hubbard’s demand curve problemCost

People treated

Free

Cost + Profit

+ Marketing

+ R&D

Global thinking on new models for IPR

Global brainstorming on intellectual property

• Open Source/GPL models for software development

• Peer to peer technologies and social organization models

• UK Commission on Intellectual Property Rights

• TACD IP agenda

• Royal Society brainstorming on IPR

• OECD IPR studies

• US National Academies of Science

• US Federal Trade Commission / Department of Justice hearings on competition and intellectual property.

• MSF Working groups on IPR/DND

• IETF working group on IPR• UNDP Human Development Report

2001• Blur/Banff discussions on music• Rockefeller Bellagio meetings /

collective management of intellectual property rights

• World Business Council for Sustainable Development Project on Intellectual Property Rights

• Aventis Radical IPR scenarios• Ransom / Matching Funds model• WIPO access to genetic resources /

traditional knowledge and folklore• WHO/Harare proposal

What are the benefits of initiating discussions on an R&D treaty?

● Shift in responsibility from Trade and Industry ministers to health and finance ministers.

● Multilateral framework (compare to G8 or World Bank)● Overcome sense of powerlessness on R&D issues.● Creates a mechanism to offset reduced incentives from weaker

IPR regimes.● Stimulate critical thinking

● Motivates proactive thinking for policymaking on health care R&D.● Provides explicit framework for technology transfer● Transparency● Research priorities

Models for R&D treaties● The Treaty of Europe: R&D as a development tool● Landmine treaty: Humanitarian de-mining technologies● Koyto Climate Treaty: Energy efficient technologies● G8: Negotiations over funding vaccines and drugs for

neglected diseases● John Barton: Vaccines, public domain, technology

transfer ● Discussions on access to scientific journals● Human Genome Project: Clinton/Blair Agreement

Possible approaches

Aventis Radical IP Scenarios

Decentralized decision making on R&D

● Treaty requires minimum national contribution to R&D, and transparency of investment flows

● Countries free to fund R&D in a variety of ways.● Range of options allowed

● Strong IPR, high prices● Research mandates● Weak IPR regimes (non-exclusive rights liability models)● Public Funding● No IPR open source development regimes, marginal cost pricing

● Each country’s system is without prejudice to claiming IP in other countries regimes, subject to non-discrimination

Aventis Radical IPR Scenario #1

● No intellectual property rights● Every product is marketed as a generic drug.

– $178 billion in US market falls to $45 billion or less, freeing up $134 billion in resources

● A portion of the $134 billon in savings is transferred to R&D funds, replacing and expanding the $27 billion in private sector investments

Use Intermediators to invest in projects

● Version 1.0. – Create several competing intermediators, that spend

money, but don’t do R&D directly– evaluate performance, and – New allocations based upon performance

● Version 2.0– Intermediators compete to raise funds from employers

or persons managing funds on behalf of groups of patients

Benefits of Aventis Radical Scenario # 1

● Fewer resources spent on lawyers● Reduces incentives for expensive and harmful marketing

practices● Marginal cost pricing or products● No need to address parallel trade or create complex

tiered pricing schemes● Consistent with decentralized decision making and

economic incentives● Enables open source development models● Probably far cheaper way to fund R&D

Challenges with this scenario

● Need to prevent countries from eliminating budgets for innovation

● Need to create management structures that are decentralized and which avoid wasteful spending and have accountability, while taking risks.

Less radical, incremental approaches

● Address research gaps – DND

– Vaccines

– Funding of public goods

● Research mandates● Agreement on transparency of investment flows● Transfer of technology

– Good practices for licensing government funded inventions

– Affirmative allocations of funds in developing countries

Strategy to get to a treaty

● Think radical scenarios for long run. – Big ideas sometimes easier to attract attention.

● But start with incremental approaches, and build confidence in mechanisms

● Learn to walk before trying to run the marathon

Parallel trade and pricing issues

– Parallel trade● TRIPS rules on exhaustion of patent rights need to be

changed to allow selective exhaustion based upon country income or level of development

– Pricing as an R&D issue● Reference pricing

– World Health Organization or other non-WTO body for treaty or resolution on restrictions on the use of reference pricing.

● US/Korea agreement on pricing– Korea must use average of G7 Prices

WTO type issues for R&D treaty

– Subsidies– National Treatment– Performance Requirements– Market Access– Investment

Strategies to move the debate forward

– Get R&D Treaty on agenda of NGO and Academic meetings on IPR, access to medicine or drugs for neglected diseases.

– Organize meetings that exclusively deal with the structure of an R&D treaty.

– Find an official fora of have discussions about an R&D Treaty

How fast could things move?

● Minimalist resolution at World Health Assembly Executive Board meeting on January 26, 2003, to be approved by full WHA in May.

For more information

Consumer Project on Technology

http://www.cptech.org

Subscribe to ip-health