EEP 143 Lecture 25 Valuing Biodiversity

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EEP 143 Lecture 25Valuing Biodiversity

• Re-visit 3 cases introduced last lecture
• Analyze alternate outcomes
• What should we wish for?

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Access and Benefit Sharing Results?

• Initial optimism
• LDC countries too small/poor to get most of
  consumer benefits from medical or agricultural
  innovations
  
• Instead get benefits via royalties or other
  consideration
  
• E.g. Debt forgiveness swap for Amazon forest
  conservation
  
• Merck-INBIO Costa Rican deal 1M plus royalties
  as first success
  

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Are deals for access to indigenous
products/knowledge sufficient to conserve
biodiversity?

• Logic
• Maybe 1/3 of drugs derive from plants
• Some drugs are worth billions
• A royalty of 10 would be worth hundreds of
  millions

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Are deals for access to indigenous
products/knowledge sufficient to conserve
biodiversity?

• How as access and benefit sharing worked out?
• INBIO no news of successful products
• Read Cori Hayden (also Shane Greene if interested)

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Case Studies (Koo and Wright 1999)

• Rosy Periwinkle
• Pacific Yew
• Rice (Oryza nivara) resistant to brown plant
  hopper

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Rosy Periwinkle

• Used in indigenous medicine
• Specimens collected in Madagascar
• Contains 2 alkaloids
• vinblastine increases remission rate from
  Hodgkins disease from 20 to 80
  
• vincristine provides 90 remission rate for
  childhood leukemia
  
• Drugs sold by Eli Lilly (Velban, Oncovin) for
  more than 200M per year
  

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Rosy Periwinkle

• 15 tons of leaves yield 1 oz of Vincristine
• Reports of depletion of the plant in Madagascar
• Scant reward to Madagascar
• What should we conclude?

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Pacific yew tree

• weed tree of pacific Northwest forests
• Historical use is now gone (what was it?)
• In 1986, bark extract (initially called Taxol)
  found by novel screening method to be useful for
  combating ovarian cancer
  
• 4 to 6 trees give enough bark for 1 patient

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Pacific yew tree

• CRADA auction
• Bristol-Myers Squibb was high bidder
• Agreed to invest 100M in trials
• Exclusive partnership with National cancer
  Institute
  
• Cooperation with Forest Service, BLM

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IP note

• BMS purchased the trademark of a cough remedy
  called and stopped others using name now
  generically paclitaxel

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Pacific yew tree

• Initially BMS had orphan drug protection, 200,00 women as potential users
  
• Later Taxol found effective against breast
  cancer, 1B market
  
• Abandoned orphan status
• Now one of largest drugs on market

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Pacific yew tree

• Controversies
• Contract collectors using live trees not just
  dead trees
  
• Complaints of excess profits to BMS
• What do you think?

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Pacific yew tree

• Substitutes found
• Yew in Nepal also useful
• Needles can be used for extract
• Yew farms
• Bacterial source?
• Synthesis?

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What do these examples tell us?

• Rosy Periwinkle
• Should Madagascar have been compensated?
• Was it indigenous to Madagascar?
• Seems do, despite my statement referencing Myers
  and Simon
  
• (hazards of writing in interdisciplinary field)
• Where did the useful knowledge come from?
• Targeted by pharma because of its use for an
  anti-diabetic tea (Goldman 1994) in Jamaica and
  Philippines
  
• Should Jamaica and Philippines be compensated?

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What does Rosy Periwinkle example tell us?

• More generally, center of origin is not
  necessarily center of diversity or knowledge
  
• May be many national centers of either
• Wheat is another example of this (Ethiopia v.
  Middle East)
  

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What does Pacific Yew example tell us?

• Contract failure in harvesting?
• Commitment problem for public sector when
  probability of success is low, so profits if
  successful must be high
  
• Enforceability of fair pricing language in
  CRADA
  
• Effectiveness of orphan drug provisions as
  alternative to patents
  
• Low ex ante value of prospect with huge value ex
  post (confirmed by open auction)

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What do these examples tell us?

• What should we wish for?
• An indispensable plant?
• A plant for which a good substitute can be
  found?
  
• What are implications for conservation?

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What do these examples tell us? What should we
wish for?

• An indispensable plant?
• Rosy Periwinkle was indispensable plant
• So Madagascar plants were by some accounts
  practically eliminated
  
• Say there was full compensation to Madagascar?
• Is this conservation??

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What do these examples tell us? What should we
wish for?

• A plant for which a good substitute can be
  found?
  
• The pacific yew bark had (eventually) good
  substitutes
  
• Himalayan yew is this a good solution?
• Yew farms for needles
• So one less reason to preserve the Pacific Yew?
• Is this sustainable conservation?

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Third example Oryza nivara and resistance to the
brown plant hopper

• Brown plant hopper spread in HYV (high yield)
  rice in Asia in 1960s-1970s
  
• Carrier of grassy stunt virus
• Search of ex situ IRRI gene bank yielded one
  virus resistant variety, Oryza nivara, among 6700
  breeding lines and wild and farmer varieties
  
• Used to create, via crossbreeding and an embryo
  rescue technique, a resistant commercial variety
  in 1976

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Oryza nivara and resistance to the brown plant
hopper

• Resistance (of the rice) to the virus broke down
  in a decade
  
• New resistant varieties were found
• Were these indispensable?

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Oryza nivara and resistance to the brown plant
hopper

• New resistant varieties were found
• Were these indispensable?
• No, reduced pesticide use solved the problem by
  allowing plant hopper predators to survive and
  control the pest
  
• Change of management substituted for genetic
  resources in this case (and reduced pesticide
  harm)
  

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Can payments by Pharma save (all) the Amazon
forest?

• An intellectual challenge from a simple model
  (Simpson et al. 1996)
  
• Consider the search for one trait (e.g. malaria
  control) in a forest
  
• Assume each trees probability of having the
  trait is independent (favors high value)
  
• Assume a constant cost of search per tree

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Can payments by Pharma save (all) the Amazon
forest?

• Assume 1 million trees
• 2 extreme cases
• Each tree has a very high probability of having
  the trait
  
• Is this good for the value of the forest?
• Is this good for the case for conserving all the
  trees?

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Can payments by Pharma save (all) the Amazon
forest?

• Assume n1 million trees
• 2 extreme cases
• Each tree has a very high probability p of having
  the trait
  
• Is this good for the value of the forest?
• Is this good for the case for conserving all the
  trees?

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1. Each tree has a very high probability p of
having the trait

• Marginal value is p(1-p)(n-1) V ,
• (probability marginal tree has the trait) x
• (probability all other trees do not) x V
• Total value of trees, V, may be high , but
  marginal value is very low p(1-p)(n-1) V.
  

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Second extreme case

• 2. Each tree has a very high probability p of
  having the trait
  
• Is this good for the value of the forest?
• Is this good for the case for conserving all the
  trees?
  

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2. Each tree has a very low probability p of
having the trait

• Marginal value is p(1-p)(n-1) V,
• (probability marginal tree has the trait) x
• (probability all other trees do not) x V
• Total value of trees, V, may be high , but
  marginal value is again very low
  
• p(1-p)(n-1) V.

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Results can differ if number of species increases
with area of forest

• But relation is increasing but CONCAVE, according
  to ecologists
  
• Same general dilemma seems to arise
• This message was not well received by ecologists
  initially!

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What to conclude?

• If wealthy countries want the Amazon conserved,
  they will have to
  
• pay for conservation (as in debt-for nature
  swaps)
  
• Medical beneficiaries will have to share some of
  their surplus with Brazil, beyond the drug price

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What about drugs for the poor?

• Consider linear demand for drug, with demand
  proportional to income
  
• Will a monopolist who cannot price discriminate
  serve all who need the drug?

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What about drugs for the poor?

• Consider linear demand for drug, with demand
  proportional to income
  
• Will a monopolist who cannot price discriminate
  serve all who need the drug?

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What about drugs for the poor?

• Consider linear demand for drug, with demand
  proportional to income
  
• Will a monopolist who cannot price discriminate
  serve all who need the drug?
  
• Case for subsidy?
• Case for price discrimination?
• Effect of TRIPS?

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My research

• EBI projects
• Effect of IPRs on biofuels research
• Overview of relevant economics of IPR
• Patent landscape for biofuels
• Survey of effects of IPR on work of EBI scientists

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My research

• EBI projects
• 2. Effect of biofuels on food security
• New interaction of food, energy markets
• Estimation of effects of energy disturbances on
  food production variation, commodity markets and
  commodity stocks levels and variation

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My research

• Patenting of research tools
• Model of energy resources exploration, resources
  and reserves
  
• Methods of analysis of stochastic models of
  commodity markets and price expectations

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