Benefits of a treaty on R&D Session on alternative frameworks to finance R&D James Love The Drugs for Neglected Diseases (DND) Working Group Rio 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 problem Cost 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.

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