IPRs, Public Health and the Pharmaceutical Industry Issues in the Post-2005 TRIPS agenda

1
IPRs, Public Health and the Pharmaceutical
Industry Issues in the Post-2005 TRIPS agenda

• Benjamin Coriat and Luigi Orsenigo
• Universitè Paris XIII, Villetaneuse
• University of Brescia and KITeS, Bocconi
  University, Milan Italy

2
Bio-pharmaceuticals

• this sector brings the trade-offs and issues
  involved in patent theory to their extreme
  consequences
• an industry where patents are actually very
  important mechanisms of private appropriability
• a science-based, innovation-intensive industry
• A strategic industry
• High growth
• Skill-intensive
• Health as an important factor of growth
• a socially sensitive industry health as a human
  right
• undergoing deep and unforeseeable transformations

3

• controversies about the welfare implications of
  patents have characterized this industry ever
  since its inception.
• But in the last thirty years or so, the
  establishment of strong tendency towards an
  extremely tight IP regime has made this debate
  even more heated.
• Pandemics make the problem even more visible
  and compelling.

4
Pushing the controversy to the extreme

• 1) Advent of biotech
• progresses in molecular biology and their
  increasing relevance for industrial innovative
  activities have strained to the limit a patent
  system which was essentially conceived for
  technologies like mechanical engineering and
  chemistry.
• Stretching the notions of novelty and usefulness
• The development of the biotechnology industry
  itself is strictly dependent on a highly
  favourable IPR regime
• the transformations of the latter have been
  significantly influenced by the growth of the
  biopharmaceutical sector.

5
Pushing the controversy to the extreme (2)

• 2) The spread of policy doctrines aiming at
  facilitating the commercial exploitation of
  publicly funded (basic) research the Bayh-Dole
  Act in the USA in 1981 and the subsequent
  attempts to import at least part of its
  principles in other countries - has also been
  crucial in such a strongly science-based industry
  as pharmaceuticals.

6
Pushing the controversy to the extreme (3)

• (3) TRIPS Agreements of which the
  pharmaceuticals industry is one the main
  supporters has ignited raging controversies
  which go beyond domestic boundaries and reach the
  global level.
• Now the debate regarding the desirability of
  property rights in drugs takes place not only
  within (rich) countries but also between
  developed and developing countries.

7
The revival of the debate

• most of the new contributions have an empirical
  nature.
• the economic theory of patents was often deemed
  to be inconclusive given that radically different
  results could be obtained by slight changes in
  even ancillary assumptions.
• But still, despite the progress empirical
  evidence remains flimsy problems of measurement
  and sheer lack of adequate data
• Data are extremely hard to get access to and when
  they do exist they are often available at prices
  and terms which are unaccessible to anybody
  except few specialized research groups.
• Not only patents regulations restricting access
  to clinical trials data for generic producers
• In search for alternatives prizes?

8
The Broad Questions

• Can a tight IPR regime foster innovative
  capabilities and growth in developing countries?
• What are the costs of a tight IPR regime on drug
  prices and access to healthcare?
• What is the structure of an IPR system that could
  best promote innovation, access to new (and
  older) technologies and growth?
• Should we forsake the patent system?
• What are the alternatives?

9
Main propositions

• There are, indeed, profound trade-offs between
  the incentives to innovate and ensuring public
  access to medicines for which no obvious and
  simple solutions exist.
• The effects of strengthening the patent regime
  depend (non linearly) on a wide variety of
  conditions in any given country
• institutions (price controls health systems, in
  general basic research..)
• Capabilities and opportunities for innovation
• size of markets
• modes of competition the specific nature of
  patent laws themselves and court interpretations

10
Main propositions (2)

• The IPR system governing pharmaceuticals has
  become increasingly dysfunctional even in
  countries like the U.S. The efficacy and
  desirability of extending strong IPR protection
  in the rest of the world raises very legitimate
  doubts.
• Excessively tight IPRs can have negative effects
  not only on prices, but also on the rates and
  directions of innovation
• Both economic theory and the evidence
  increasingly suggest that the strengthening of
  IPR regimes in developing countries is likely to
  impose upon them a series of negative
  consequences that most likely outweigh any
  potential benefits gained from the tighter
  regime.

11
Market structure

• Pharmaceuticals has been traditionally dominated
  by a stable core of large, globalised innovative
  firms (USA, UK, Switzerland, Germany, Japan), but
  also
• Small domestic firms involved in adaptation,
  manufacturing, marketing
• Biotech firms
• Generics producers
• Small entry and turbulence (until biotech)
• Low demand price elasticity, high income
  elasticity
• Strong information asymmetries
• The third payer problem

12
The dynamics of competition

• Schumpeterian competition
• High profits after introduction of new drug
• Imitation and me-too-drugs before patent
  expiration
• Entry of generics after patent expiration
• Branded generics
• Low concentration (despite high RD and marketing
  intensity, MAs)
• little cumulativeness in innovation (random
  screening)
• independent sub-markets

13
The Golden Age

• The system seems to have been working reasonably
  well for many years
• Innovative opportunities
• Welfare systems
• Moderate IPR regimes
• The interpretation of novelty
• The interpretation of usefulness
• Scope and breadth
• High rates of innovation
• The scope and efficacy of patent protection has
  varied significantly across countries. Many
  countries allowed only process patents did not
  offer protection for pharmaceutical products
• Product patents France in 1960 Germany 1968
  Japan 1976 Switzerland 1977, Italy and Sweden
  in 1978. In some cases, as in Japan and Italy
  (and possibly France) the absence of product
  patent protection induced  firms to avoid product
  RD and to concentrate instead on finding novel
  processes for making existing molecules. In other
  cases, primarily Germany and Switzerland, this
  negative effect didnt happen

14
The transformation of the industry Technology
and Organization

• Increasing role of fundamental science
  (biotech)
• From random screening to rational drug design to
  molecular biology
• The biotech industry networks and vertical
  specialization
• Markets for technology
• Venture capital
• IPRs
• A new, finance-led, model of innovation?
• Diffusion of knowledge and capabilities
  worldwide, but strong concentration in the USA
• But soaring costs of discovery and development
• declining research productivity

15
The Productivity Paradox

• Between 1978 and 2003, research productivity,
  has been falling
• RD expenditures increased tenfold while
  patenting output increased only sevenfold
  (Nightingale and Martin 2004).
• New Chemical Entities approved by the FDA in the
  U.S. between 1983 and 2003. Some increase was
  displayed until the mid 1990s, followed by a
  sharp decline in the years since. In 2002, U.S.
  RD expenditures in pharmaceuticals were 30 times
  greater than in the early 1980s, while roughly
  the same number of drugs were approved annually.
• High rates of attrition, longer times in Phase I,
  the Phase II bottleneck
• Depletion of opportunities,more difficult
  pathologies
• Increasing complexity, explosion of the research
  space
• Increasing costs of regulation (?)
• IPRs (?)

16

• Mee-too drugs?
• Evergreening of patents and patentability for
  second use
• Are Big Pharma simply becoming manufacturing and
  marketing organizations, using knowledge created
  elsewhere (universities, biotech,..)?

17
Biotech is no better

• Although around 1/3 of new drugs originates from
  basic research conducted at universities,
  hospitals and biotech companies, the performance
  of the biotech segment is disappointing (Pisano
  2006)
• Operating profits
• New drugs
• transaction costs and market failures

18
Further changes in the industry

• Regulation, product approval (evidence-based
  medicine, multi-country trials) before and after
  product approval
• But also significant rationalization and
  time/cost cutting, especially for some categories
  of drugs (e.g. orphan drugs)
• Markets diffusion of generics
• Appearance of new firms and countries as
  producers of generics
• Increasing marketing expenditures (prices of
  branded drugs increase after patent expiry,
  market segmentation) Direct to Consumer
  Advertising
• Cost containment policies
• Raising perceptions of health as a human right
  plus humanitarian catastrophes (HIV/AIDS)
• Substantial and controversial changes in the IPR
  regimes in the North

19

• Is the Big Pharma, blockbuster model still
  viable?
• Is the current biotech/Big Pharma model
  efficient?
• A real issue how to sustain RD and innovation?

20
The debate on IPRs

• Neverending debate on the effects of patents in
  pharma well before Trips
• The Kefauver Commission (1962)
• Excessive prices and profits ?
• The fundamental trade off monopoly power is
  needed to sustain the private funding and the
  incentive to innovation

21
Back to the basics

• The early literature (Nordhaus 1969, etc..)
  predicts that stronger IPRs increase the
  incentive to invest in RD and hence the rate of
  innovation.
• Increasing the number of potential inventors
  individuals, small firms, outside inventors
  lacking complementary assets
• Raising propensity to invest in RD
• But the theoretical let alone the empirical
  implications are weak. In particular, they rest
  on a vast range of ancillary but critical
  assumptions related e.g. to
• curvature of the innovation function and/or
  probability distribution of innovating (the space
  of innovative opportunities)
• Definition of the population of potential and
  actual innovators (Baumol (1990) Murphy,
  Shleifer,and Vishny (1991)) incentives and
  competences
• elasticity of RD expenditures to profits
• cost structure of RD
• Specifics of RD decision making process
• Costs of imitation wrt costs of innovation
• actual patterns of imitation (how much does
  imitation bite)?

22
Costs of IPRs

• monopoly power, higher prices, lower production,
  net changes in social welfare
• These effects are magnified by low price
  elasticity of demand and by the third payer
  problem
• Patents as a benefit taxes (Stiglitz, 2004)
• only those who benefit from the innovation pay
  for
• But it is a regressive tax

23
Additional costs

• Persistence of monopoly
• Stronger IPRs can slow down the pace of
  innovation market structure and innovation
• Cumulative innovation
• Patent conflict can impede innovation
• Distortions in the direction of research much of
  RD activity directed at circumventing or
  strengthening monopoly, me-too products, etc..

24
Recent Changes in the IPR regimes

• Substantial and controversial changes in the IPR
  regimes
• Diamond vs. Chakrabarty
• Bayh-Dole
• The Federal Circuit
• Patents scope
• Stretching the notions of novelty and usefulness
  genes, .
• Most of these changes are based on the argument
  that IPRs favour commercialisation of inventions,
  not because they stimulate innovation

25
Further justifications for strong IPRs

• patents disclose information (vs. secrecy)
• But information different from knowledge
• patents induce commercialization of innovation
  (e.g. biotech) markets for technology (Arora et
  al, 2004)
• But implies that no further mechanisms of
  protection are available in the development
  process
• It might hinder further innovation if the
  invention is basic
• The anticommons problems (Eisenberg)
• prospect theory
• but ignores advantages of experimentation in
  conditions of uncertainty

26
The empirical evidence and the new research

• These developments trigger further theoretical
  and empirical research
• effects of strengthening IPR regimes
• Increasing skepticism
• Less skepticism when patents are conceived not so
  much as an incentive to innovation but a
  mechanism for creating market for technologies
  (Sokoloff and Lamoraux, Sokoloff and Kahn, Arora
  et al., ..)

27
What do we know?

• patents are important in bio-pharmaceuticals
• But there are also other methods of protection
  (marketing, organizational capabilities,)
• Scherer co-movements of profitability and RD
  investment
• But, how much does increasing patent protection
  actually stimulate innovation?
• Patents -gt profits -gt RD -gt innovation
• especially in a period of diminishing
  productivity of research

28
Empirical results

• Studies on effects of lower prices on RD (in the
  USA)
• Most of them suggest drastic reductions in RD
  (e.g. Vernon)
• - estimations of elasticity of innovation (as
  measured by patents) to IPR regime
• Arora, Cohen and Walsh
• patent premium ranging from .50 to .90, but 1.75
  to 2.25 for pharma
• change in RD wrt to 10 change in patent
  premium 6 but 7.5 to 8.9 pharma
• Equivalent subsidy rate 17 (22 pharma)
• Linn and Acemoglu (2004) in pharmaceuticals a
  1 increase in the size of the market for
  pharmaceutical products raises the number of new
  drugs by 4 to 6, implying an elasticity of
  innovations to RD ranging from .8 to . 85

29

• Should we increase the incentives to tap
  (depleting) opportunities?
• Or more should be done to raise research
  productivity?
• And to increase the capabilities to access and
  tap opportunities?
•  

30
Costs of patents

• the average increase in price for pharmaceuticals
  due to patent protection is probably close to 400
  percent, with the gap in many cases exceeding
  1000 percent of the marginal cost (Baker and
  Chatani, 2002)
• Huge welfare losses The size of the deadweight
  losses range between 0.1 and 0.5 percent of GDP,
  approximately equal to the amount that the
  industry currently claims that it is spending on
  pharmaceutical research in the United States.
• The deadweight loss may increase even more as
  costs of research increase (Baker, 2004)

31
Further costs

• 1) Higher profits, higher marketing expenditures,
  the efficiency of which is dubious, given
  information asymmetries and the third party payer
• 2) Distortions in the directions of research
• useful research discovery of patentable
  products.
• less productive lines of research, duplicative
  drugs
• 3) incentives are created through political
  interference to pursue less productive lines of
  research
• 4) incentives are created to obstruct the free
  flow of research findings
• Controversial evidence on the role and effects of
  me too drugs

32
Patents as a in incentive to commercialize
inventions

• Bayh Dole
• Patents on basic, embryonic inventions and
  research tools
• Broad patents
• Exclusive licenses
• Impediments to scientific research
• Research tools and cumulative innovation
• the anticommons issue

33
The evidence

• Mixed
• Explosion of university patents and spin-offs
  the biotechnology industry
• Numbers up, quality down
• Advantages of division of innovative labour
  (Arora et al) Gambardella et al. show that
  licensed compounds fare better than in-house
  developed molecules
• But research productivity is still falling
  (Pisano)

34

• Mixed evidence on impediments to knowledge
  circulation and trade-offs between publishing and
  patenting
• But at the very least a general case for the
  efficiency of such arrangements is vastly
  overstated

35
Analyses of tighter IPRs regimes

• We have seen the effects of patents in general
  what about further strengthening?
• Recent evidence shows almost unanimously that
  strengthening IPRs regimes does not lead to
  higher rates of innovation
• studies of the broadening of Japanese patent
  scope (Sakakibara and Branstetter 2001),
• the establishment of the Court of Appeals for the
  Federal Circuit in the United States (Kortum and
  Lerner 1998, Hall and Ziedonis 2001),
• the strengthening of patent protection of
  pharmaceuticals in India (Lanjouw 1998) and
  Italy (Scherer and Weisburst 1995).
• But under what conditions might stronger patent
  protection have a powerful effect on innovation?

36
Non linear, non monotonic relationships

• when patents are already strong, increasing
  patent protection further may actually depress
  the level of innovation (Gallini 1992, Cadot
  and Lippman 1995 and Horwitz and Lai)
• The effects depend critically on existing
  technological capabilities, innovative
  opportunities and the stage of development of a
  country (incentives and competences)
• These models similarly suggest that the
  relationship between patent length and innovation
  will display an inverted U shape.
• Confirmed by studies by Lerner (2000) and Qian
  (2007)
• Introduction of patent protection does not
  increase levels of innovative activity but may
  have stronger effects on changing the direction
  of innovative activity (Moser, 2005)

37

• The landscape

38
Search

• Firms randomly screen the molecules, spending a
  given amount of money (a fixed share of their
  initial budget is used for the search activity,
• The firm draws from the environment n molecules
  and adds them to the array of (potential)
  projects.

Firm
3
1
2
38
NB Imitative firm doesnt draw and doesnt pay
the cost of draw
39
Some results. Benchmark
39
40
Patent duration,opportunities and innovation
41
Patent duration, size of the market and innovation
42
Tightness of product approval procedures,
opportunities and innovation
43
Tightness of product approval procedures, market
size and innovation
44
Developing countries

• Effects of IPRs on innovation in the South
• Effects of IPRs in the South on innovation in the
  North
• Multinational Corporations FDI and local RD
• Prices and access to drugs
• Price discrimination and parallel trade
• Price controls and health systems
• Alternative proposals

45
Effects of IPRs on innovation in the South

• Background
• growth of India, Brazil, Thailand without IPRs
• role of public research centres and organisations
• entry in generics
• What happens after TRIPs?
• In general, what are the opportunities for entry
  and growth in pharmaceuticals for developing
  countries?
• Typically, entry in lower segments of the
  industries and/or specific niches
• generics
• orphan drugs

46
Conditions for and obstacles to transition

• Presumes sufficient scientific and technological
  capabilities (incentives and competences)
• Always requires accumulation of local scientific
  and technological capabilities access to
  knowledge and active participation in research
  networks are crucial
• Presumes large domestic markets and/or ability to
  export
• Current IPRs regime
• may hinder development of domestic scientific
  capabilities (royalties on basic research tools)
  
• but there is evidence of the contrary too weak
  property rights make licensing critical research
  tools difficult
• the anticommons problem
• Restrictions to generics development data
  exclusivity agreements
• Patentability for second use
• access to exports and limitations to exports
  through royalties, litigation, etc..(S. Ramani)

47
Evidence (so far) India

• Segmentation of the local industry
• Some firms attempt at establishing themselves as
  (global) generics producers
• Attempts at making the transition to
  RD-intensive companies, competing with Big
  Pharma little success so far
• Differential attitudes towards IPRs among
  domestic firms according to their strategies
• Little evidence of effects on directions of
  research local diseases and orphan drugs

48
Evidence (so far) Brazil

• Sharp increase in domestic patents
• But mainly by non residents (the usual suspects)

49

50
Foreign Direct Investment

• Possible increasing investment by MNCs, depending
  on
• local skill endowments,
• Infrastructure,
• demand characteristics
• Possible stronger effects as it concerns clinical
  trials and market development activities
• Stronger patents (and trade secrets and brand
  protection) could have the effect of lowering
  transaction costs and facilitating know-how
  transfers (Arora, 1996)
• But possible crowding out effects on local
  researchers
• Evidence?

51
Effects on prices and access to drugs in the South

• IPRs as a regressive tax
• Increase in prices is function of
• market structure before and after the new patent
  regime matters
• Brand loyalty and marketing
• demand elasticity (income levels..)
• pricing regulations
• competition policies (parallel imports, sole
  distributorship laws)
• Lack of data prevent firm conclusions
• But most are pessimistic (Lanjouw (1998), Watal
• (2000),Maskus (2001))
• Evidence of higher prices and lower access to
  HIV/AIDS drugs in Brasil (Coriat and Orsi, 2005)
• Faster introduction of new drugs?

52
Effects on innovation in the North

• direct erosion of profits through imitation in
  local markets how big is the market?
• Indirect erosion of profits through export
• How much does actually imitation bite? Main
  effect on other generics producers, rather than
  on innovation as such
• How much does the erosion of profits translate
  into less RD?
• How much less RD translates into less
  innovation?
• the topography of the innovation opportunity set
• me-too-drugs and therapeutic value

53
Issues

• The Bolar exemption
• Patentability for second use
• Data exclusivity agreements
• Compulsory licencing
• Price discrimination
• Parallel imports
• Price regulations
• cost-plus formula encourage firms to set high
  transfer prices on imported ingredients
• reference prices firms have an incentive to
  bargain for the highest possible prices in the
  low-price economies in order to gain a higher set
  of global reference prices.

54
Alternatives

• Price discrimination
• but prices are often higher than in developing
  nations than would be expected under a simple
  price discrimination equilibrium and, indeed, are
  at times higher than in the rich nations.
• Prizes
• Socialization of clinical trials

55
PART II. TRIPS and Acces to Care in DCs The post
2005 Issues
56
TRIPS as an Answer of the Big Pharmas to the new
threats

• Type of economics answers to the threats
• MA, between equals (and rivals) to re-establish
  dominant positions on key sub-sgements
  bigger is better policy (Pfister)
• Develop (or acquire through Mergers) generic
  divisions (Novartis),
• Co-marketing and co-promotion agreements
• With generic producers to prevent the entry of
  rivals policy of market pre-emption
• But the key answer is Strengthening and
  extending patent rights (through the enforcement
  of a tighter IPR regime)
• Extending the Length of Patent duration (20
  years)
• Establishing new rights (data exclusivity,)
• Enforcing worldwide a strong patent
  protection (TRIPS, FTAs)

57
The New Constraints Generated by the TRIPS

• The signing of the TRIPS (1994) meant
• The extension at the world Level of patent
  protection provisions designed for the firms of
  the most developed countries (patenting of
  therapeutic molecules, 20 years length protection
  )
• This upward harmonization of IP protection
• Negated the differences in national capabilities
  to provide access to medicines, a provision that
  was at the basis of the former Treatise (WIPO,
  Paris Convention)
• Key consequence
• The TRIPS have put an end to the right of
  developing countries to produce and/or import
  generics drugs, at low costs to satisfy the needs
  of the poor

58
Pharmaceutical Patents Regime under the TRIPS

• 2005 implies an entry in a comptely new world
• - End of the transitionnal period for DCs to
  comply with the TRIPS constraints
• - Key event the 2005 Amended Indian Patent Law
• However existence of some flexibilities in
  the TRIPS treaty
• Some Articles (Art 28 to 31) states the right to
  use  compulsory licenses , especially in case
  of  health emergency 
• Art 31f seems to prohibit the  imports  of
  generic drugs, even for the countries lacking of
  the technical capabilities required to produce
  the drugs localy
• but the working of these clauses were never
  clarified in a satisfactory manner
• 2001 and the Doha Declaration opens some room
  for DCs and LDCs but the Declaration has never
  been enforced as an international law (see Genova
  2002)

59
Key features of the post 2005 period

• As regards IP issues, the Post 2005 period is
  marked by a strong contradiction between
• WHOs High Level Decision and Gleneagles
  statements recommending universal access by
  2010
• At a time when a series of changes make this
  goal especially difficult to reach
• End of the transitional period of the TRIPS
  agreement (signed in 1994)
• Spread of TRIPS agreements
• Hence the question addressed in this part of
  the presentation are the TRIPS flexibilities
  flexible enough to secure access to care in DCs
  ?

60
Issues to be discussed

• Looking to the past the Pre-2005 period
• The post 2005 scene and the emergence of new IP
  issues
• Using TRIPS flexibilities lessons from case
  studies
• Provisional conclusions

61
Looking to the Past Procurement Policies in the
Pre-2005 Period

• 1994-2005 Transitional period allowing local
  production in developing countries
• Doha 2001, WTO August 2003 Decision
• India and Thailand as the Pharmacies of the
  south
• AAI policy of  preferential prices  for DCs
  and LDCs
• In a context where very powerful financing
  mechanisms were installed
• GFATM, Pepfar, World Bank PAM,
• The combination of generic supply AAI branded
  ARVs at negotiated prices resulted in massive
  decreases in ARV prices (1st line)

62
Pre-2005 A Spectacular decreases of pricesThe
case of first Line Regimen (1/2)
63
Evolution of prices of ARV drugs in Africa
Lamivudine (3TC)
Benin (GSK) 3.98 US
Senegal (GSK - AAI) 3.13 US
Cameroon (CIPLA) 1.36 US
Source ETAPSUD ANRS / ORS-PACA / UMR-912
64
ARV procurement strategies in Sub-Saharan African
countries
Source ETAPSUD ANRS / ORS-PACA / UMR-912
65
Innovative treatments The case of the FDC
Triomune

• Today (estimated) half of all patients on ARVs
  in developing countries depend on Indian generic
  ARVs

• A major innovation the fisrt FDC
• More generally a large spectrum of generic
  ARV available before 2005,
• Most of them being now pre-qualified by WHO
• India and Thailand as
• pharmacies of the South

66
The post 2005 scene

• Changes in the legal context
• End of the transitional period (Amended Indian
  Patent Act)
• Spread of TRIPS plus Agreements
• Changes in the scale of population under ART
• Relevant increase in the number of patients
  under ART (3 millions in 2008)
• Along with changes in the therapeutic
  recommendations (WHO) with inclusion of new much
  more costly ARVs, most often protected by patents
  (TDF, LPV/r)
• Rapid acceleration of people in need of 2nd and
  3rd line treatments within the national
  therapeutic programs
• yearly, 10 of each cohort has to pass to 2sd
  line regimen
• New hindrances to the Sustainability of HIV/AIDS
  Programs in Southern Countries

67
Impacts of the new legal framework on access to
HAART (1/2) The case of 1st line regimens prices
68
Impacts of the new legal framework on access to
HAART (2/2) The budget surge for 2sd line
treatment
Median price paid in 2007 by developing
countries for the most commonly used second-line
antiretroviral treatment (abacavir didanosine
lopinavir/r), compared with first-line regimen
(lamivudine statuvidine nevirapine)
Source WHOs Global Price Reporting Mechanism
(2007)
69
Using TRIPS flexibilities lessons from case
studies

• Understanding TRIPS Flexibilities
• Bolar Exception for scientific use
• Parallel Imports
• Pre-Grant Oppositions
• Compulsory Licenses ? different alternatives
  provided by article 31 of the TRIPS agreement,
  including Governmental Use, National Emergency,
  Public Interest

70
Pre-grant opposition and Compulsory Licensewhat
is it about ?

• Pre-grant opposition
• documents and information intended to assist the
  examination may be filed by (any) interested
  persons between publication of the application
  and completion of the examination Brazils
  legislation, article 30 of Law 9279/96
• Issuing of Compulsory License
• limited exceptions to the exclusive rights
  conferred by a patent, provided that such
  exceptions do not unreasonably conflict with a
  normal exploitation of the patent and do not
  unreasonably prejudice the legitimate interests
  of the patent owner (article 30).

71
The case studies in a nutschel (1/2)

• 3 key drugs EFV, TDF, LPV/r
• 3 major countries
• India 1st world provider of generics
• Brazil largest HIV programme in the South
• Thailand major producer of generics with large
  national programme of access to care
• 2 types of flexibilities
• Pre-grant opposition (TNF)
• Compulsory licenses (EFV, LPV/r)

72
The case studies in a nutschel (2/2) Post-2005
uses of TRIPS Flexibilities

• Compulsory License
• Thailand issues a CL on Efavirenz (2006)
• Thailand issues a CL on Lopinavir/r (2007)
• Brazils Compulsory License of Efavirenz (2007)

• Pre Grant opposition
• Thais Pre-Grant opposition to AZT3TC patent
  application (2006)
• Indias Pre-Grant opposition to Tenofovirs
  patent application (2006)
• Brazils Pre-Grant opposition to Tenofovirs
  (2007)

73
Positive Outcomes

• Pre-grant on TDF (India, 2006, Brazil 2007)
• Offers at lower prices from patent owners (the
  quality of the patent was known as poor)
• Surprisingly US PTO in a recent move has
  negated some of the claims first granted
• India (and Brazil) have refused to grant a patent
  to the drug
• Compulsory licences
• EFV
• Many successive offers at lower prices by patent
  owners in different countries
• Since feb 2007, already (in generic form)
  available in Thailand
• Since March 2009, ditributed in Brazil
• LPV/r still in process in Thailand

74
Positive Outcomes of the use of IP flexibilities
the case of EFV
Source MSF (2007)
75
But serious limits too .

• Complex mechanisms
• Implemented always under high political pressure
• The case of Brazil 2006 (LPV/r)
• India 2006 and 2007
• Thailand
• Subject to oppositions and litigations by patent
  owners
• Mechanisms not available for countries lacking of
  technological capabilities
• Few uses, to date
• 3 countries, 3 drugs only !
• (even if used successfully in some minor
  countries)
• Total impact on costs remains very modest

76
Questions arising from the case study on the use
fo TRIPS flexibilities

• Should the future of 3 millions people under ART
  (to morrow much more !...) be dependant of battle
  fought on judicial grounds ?
• Need of innovative mechanisms guaranteeing the
  procurement of drugs, especially the new most
  innovative and efficient ones (2sd line, and
  switch to new 1st ones)
• More then ever creativity is required to put in
  practice the Doha Statement
• the TRIPS Agreement does not and should not
  prevent Members from taking measures to protect
  public health

77
General Conclusion

• Preserve open science
• Excessive tightness of the IPR regime even in the
  North
• A real issue for global RD and perhaps - and
  its productivity
• Opportunities in the light of the restructuring
  of the pharma industry
• There are methods for softening the problem
• expanding local markets through the construction
  of better health systems
• Are size of the market and patent protection
  substitutable? Incentives and volumes of RD
  expenditure