Malaria mosquito. Photo courtesy of CDC (<a href="" target=_blank>PD</a>).
Malaria mosquito. Photo courtesy of CDC (PD).

Policy Innovations Digital Magazine (2006-2016): Briefings: WHO Pushes Pharmaceutical Innovation

May 31, 2007

The world needs more researchers like Colombian physician Manuel Elkin Patarroyo Murillo. In the 1990s, Patarroyo developed a promising malaria vaccine—and donated the patent to the World Health Organization, refusing to commercialize it. Malaria kills one to three million people each year, overwhelmingly in the developing world where the disease persists in symbiosis with extreme poverty. The Patarroyo vaccine targeted one of the most virulent strains and early results showed 30 percent effectiveness, though later trials failed to produce the robust outcomes that would have ensured further development.

Patarroyo's generosity seems to defy the incentives that underlie the patent system. Inventors usually try to cash in on the exclusive rights that their patents grant—in effect a monopoly with an expiration date. This system motivates projects with the potential for quick or high returns on investment, but it does little to foster innovations that might solve the dire and protracted problems of the world's poor.

The patent system's innovation gap is especially troubling in the pharmaceutical industry, where only a small portion of research funding goes toward the diseases that affect the most people. As Joseph Stiglitz wrote recently, "Companies direct their research where the money is, regardless of the relative value to society. The poor can't pay for drugs, so there is little research on their diseases, no matter what the overall costs."

Diseases such as HIV/AIDS, malaria, and tuberculosis have become research priorities for the pharmaceutical industry because markets for such drugs are also found in developed countries. Diseases like Chagas and Leishmaniasis that primarily afflict the developing world receive far less attention—only 13 of the 1,393 new drugs approved between 1975 and 1999 were specifically indicated for tropical illnesses.

The World Health Organization responded to this dilemma in 2006 with the creation of the Intergovernmental Working Group on Public Health, Innovation and Intellectual Property (IGWG). The group's focus is on promoting sustainable, needs-driven medical R&D for the diseases that disproportionately affect developing countries.

Scheduled to deliver its final recommendations to the World Health Assembly in May 2008, the IGWG has become a hotbed for debate on pharmaceutical innovation. The big split between developing and developed countries centers on the IGWG's examination of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). TRIPs requires all member countries to provide patent protection for new inventions, including drugs, for at least twenty years.

The evolving draft of the IGWG plan of action has raised eyebrows with its advocacy of new financing mechanisms for drug research, and "technical and policy support" for countries wishing to use flexibilities in the TRIPS agreement. TRIPS flexibilities allow countries to negotiate and issue compulsory licenses to obtain cheaper medicines during public health crises. For instance, if patented drugs are too costly, government authorities can issue a compulsory license to an agency or company to manufacture or import a lower-cost version. Thailand and Brazil have used the compulsory license provision to procure HIV/AIDS drugs, invoking the ire of the pharmaceutical industry and praise from global health advocates.

The debate over TRIPs highlights the high stakes of human health. There is an imperative to save lives, and it was in this spirit that Brazilian President Luiz Inacio Lula da Silva issued a compulsory license to produce Merck's antiretroviral Efavirenz. According to the Brazilian government, it asked Merck to reduce the cost of Efavirenz to 65 cents per dose from $1.57. Merck offered to reduce its price to $1.10 and Brazil rejected the offer. A generic version of the drug would save Brazil about $240 million by 2012, when Merck's patent on Efavirenz expires. But Lula's actions run the risk of being seen as anti-business, or even as a minor breach of rule of law, potentially discouraging foreign direct investment that is badly needed.

The WHO working group is also exploring new mechanisms to fund drug research. James Love and Tim Hubbard have proposed a WHO-administered international agreement through which countries would commit to making minimum levels of investment in medical R&D based on their national income. In a manner similar to the trading of carbon emissions under the Kyoto Protocol, countries that provide health services would receive "credits" against their funding commitments. Qualifying services include technology transfer, research and development for neglected diseases, and the creation of "open-access" medical databases.

The funding idea that has received the most attention is the prize system. Under this scheme, governments would offer significant monetary awards to the innovators of drugs that meet public health needs, and the drugs would then be made available as generics at low cost. The amount of prize money would be determined in each case by the relative health benefits of the innovation. Thomas Pogge and Joseph Stiglitz have praised this scheme and have proposed to finance it with funds presently used for prescription drug benefits and foreign assistance programs.

As with most ideas that involve public funds, especially programs with defined budgets, difficult decisions would be required. If governments are to determine which diseases are of greatest priority, will they select the ones that infect the most people globally or the ones most harmful within their own borders? Will lesser-known diseases that nonetheless kill many people end up stealing attention from the major killers that already receive a disproportionate share of funds?

The pharmaceutical industry has its own questions about such proposals. They point out that even Stiglitz recognizes that the prize system would complement the patent system, not replace it. Many of the patent system's deficiencies, the pharmaceutical industry argues, come from not being able to know in advance which methods will lead to innovation, what the worth of a given innovation may be, and what cost will deter an innovator from turning down a prize. A prize system may work in areas where needs are well-known and clear goals can be set, but for innovations that solve problems or meet needs that have not previously been widely recognized, the patent system would still play a role.

The pharmaceutical industry also argues, somewhat ironically, that there is too much attention on new drugs as the best means to improve health and eradicate disease in developing countries. They point out that strengthening infrastructure throughout the developing world—especially in health care, education, and transportation—would improve general health dramatically. Although this is true, infrastructure projects are essential components of long-term goals. In the short term, the developing world faces millions of unnecessary deaths that can be largely prevented by reduced prices for drugs.

At the very least, the WHO working group has brought developed and developing countries together to discuss and negotiate this critical issue. Despite the continued divisions, the shortfalls of the present system give every party reason to reach agreement. Responsible developing countries must answer the health needs of their people, and the pharmaceutical industry will have to adjust its business plan to account for the risk of compulsory licenses. Innovation will prove palliative.

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