TEXTS
Looking beyond IP: Access and Innovation in Medical Technologies
By James Love
There is an almost unbounded interest in the development of new health
care technologies that will prolong life or reduce suffering. The pace
and direction of innovation will depend in part on the resources
mobilized for research and development (R&D). National governments
have a variety of policy instruments to lift and shape R&D
expenditures. Public sector grants and contracts, tax incentives,
government imposed research mandates, philanthropic efforts, and an
expanding universe of intellectual property protection schemes are all
important in raising levels of R&D investments. Each instrument has
its own advantages and shortcomings. Most countries undertake a mixed
strategy of public and private funding.
In recent years the framework for funding such R&D has become the
subject of a multilateral, regional and bilateral trade negotiations.
The most important discussions have concerned intellectual property
rights, the systems of private rights in data and inventions that
protect investment and create incentives to develop new commercially
important products. The World Trade Organization (WTO) Agreement on the
Trade Related Aspects of Intellectual Property Rights (TRIPS) is the
best known such agreement, but increasingly important are other
multilateral agreements administered by the World Intellectual Property
Organization (WIPO), and hundreds of bilateral and regional agreements
on intellectual property norms and enforcement mechanisms, particularly
those between the United States or Europe and smaller economies.
It
is well known that patents and other forms of intellectual property
protection have only limited efficacy in stimulating innovation in the
health care field. Basic research, development of high-risk projects,
and research on vaccines or neglected diseases are some well-known
examples of areas where private market incentives are insufficient to
secure adequate investment. There is also considerable evidence that
systems of intellectual property protection are fraught with high costs
in terms of administration and dispute resolution, and a number of
well-known inefficiencies, such as anticompetitive barriers to
follow-on innovators. Recently there is considerable interest in new
collaborative open source development models, which in some cases work
best with little or no intellectual property protection.
Intellectual
property regimes that rely upon exclusive rights often lead to
unacceptable barriers to access to treatments. This is a problem in
both rich and poor countries. For example, while developing countries
struggle to pay for the least expensive HAART regimes to treat AIDS,
there are also increasingly severe problems managing limited budgets
for AIDS treatments in the United States and other wealthy countries,
particularly with the introduction of products such as T-20, which are
so expensive they threaten to exhaust limited public funding for
indigent AIDS patients. Canada, France, Sweden and the UK are among the
countries that see high fees for breast cancer screening patents as a
barrier to deployment of these new technologies. The impact of high
prices in the United States is a growing crisis for access among the
uninsured, and in the United States, Europe and other OECD countries
there are substantial controversies over which treatments will be
reimbursed under public or private insurance schemes -- a rationing of
the most expensive new medicines.
Historically, governments
have recognized these and other limitations, and complement the
intellectual property approach with a variety of direct and indirect
public subsidies to raise investment levels in health care R&D. The
United States, for example, will spend more than $27 billion this year
at the National Institutes of Health (NIH), and more through a variety
of other agency efforts, and also subsidize R&D though income tax
credits. Every OECD country and many developing countries have some
public sector grant, tax or other subsidy programs to support health
care R&D. In some areas, the US government simply mandates that
private firms undertake R&D as a condition of doing business. Other
national governments have their own mixed models of supporting R&D.
For example, in the UK domestic prices of pharmaceutical drugs depend
in part upon firm R&D expenditures, Canada linked NAFTA changes in
its patent laws to a negotiated increases in levels of R&D that
industry was obligated to undertake, and at the regional level, Brazil
has imposed R&D mandates on private sector firms.
Despite
the widely recognized importance of non-intellectual property factors
in determining the levels of R&D and the rate of innovation in new
treatments for disease, there has been little discussion of the trade
related aspects of such programs. There are notable exceptions, such as
the G-8 discussions regarding funding R&D on drugs for neglected
diseases, or the Blair/Clinton statement on the benefits of
unencumbered access to human genome sequence. The G-8 discussions
involved a handful of wealthy countries that were motivated to raise
global levels of R&D on specific diseases, such as malaria or
tuberculosis, that primarily afflict the poor, and for which the patent
system does not provide sufficient incentives relative to the
importance of these diseases from a public health perspective. The
Blair/Clinton statement on the Human Genome Project (HGP) sought to
address a different global IPR failure. The United States NIH, the UK
Welcome Trust, and funding agencies in Japan, France and Germany agreed
that donor and public sector funds would be used to sequence the human
genome, and to place the results immediately in the public domain,
without any IP claims. The no-IPR approach to the HGP was influenced by
the growing interest in “open source” development models for software
and medicines, that emphasized the benefits of increased access to
information, and it also enjoyed substantial support within the
pharmaceutical sector, due to concerns that broad gene patents would
saddle researchers and firms with high royalties and deter development
of new products. The Blair/Clinton statement strongly supported the
principle of making raw research data freely available in order to
maximize its use, as a way of obtaining the greatest medical benefits
for humankind.
There are additionally a number of proposals for
global agreements that would increase funding for vaccines, broaden the
scientific commons, or address other areas where there is a both a need
and an opportunity for global cooperation on the development of public
goods. However, none of these initiatives have the same level of
multilateral, regional or bilateral attention that is now given to
agreements on intellectual property rules.
We propose a new
emphasis be placed on the development of formal global frameworks that
consider jointly both the IP and the non-IP instruments for funding
health care R&D. One fundamental rationale for any global framework
is to address the free rider problem. There are global benefits to
R&D, but local costs. The efforts to create more uniform IP regimes
are efforts to share more broadly the costs of funding R&D, but
there is clearly a need to expand the trade framework to address a
broader range of funding instruments.
Even for a privatized
research model, the IP regime by itself only addresses one aspect of
financing R&D. In particular, the regulation of drug prices and the
availability of social insurance to pay for medicines are two very
important factors in determining the level of incentives for new drug
development. Indeed, in recent years, the United States trade policy
has placed increased emphasis the issue of drug pricing or the
structure of social insurance reimbursement schemes, even though the US
does not regulate drug prices or provide social insurance for drug
purchases in its domestic market. The United States successfully
demanded that Korea impose a seven country reference pricing system for
minimum prices on innovative drugs, and the US trade officials have
pressed Australia, Canada, France, Germany, New Zealand, Thailand and
many other countries to raise prices and extend reimbursement for new
medicines. The US efforts to raise prices are bitterly resented by
governments and patients, as higher prices inevitably reduce access to
new treatments, and they do not recognize other ways that countries
might support R&D, such as funding research that enters the public
domain, or any number of public private partnerships to advance
particular public health goals.
This article is an excerpt
from “From TRIPS to RIPS: A better Trade Framework to support
Innovation in Medical Technologies” first presented at the "Workshop on
Economic Issues Related to Access to HIV/AIDS Care in Developing
Countries" at Université de la Méditerraneée, Marseille, France, 27 May
2003.
James Love is director of the Consumer Project on
Technology (CPTech) of the Center for Study of Responsive Law. CPTech
is active in areas such as intellectual property, telecommunications,
privacy and electronic commerce, and conducts projects relating to
antitrust enforcement and policy.
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