Bringing Neglected Diseases Back to the Marketplace: Encouraging a Pharmaceutical Industry Response through Market-Driven Strategies Mahbod Hosseinian TABLE OF CONTENTS Part I: Introduction ......................................................................................................................... 2 Part II: Defining the Problem .......................................................................................................... 5 Neglected Diseases ............................................................................................................. 6 Global Failure to Develop Treatment for neglected diseases ............................................. 8 Costs Involved in Developing a New Drug ........................................................................ 9 Part III: A Move Towards A Free Market Solution ...................................................................... 10 Public-Private Partnerships: The Social Venture Capitalists Approach .......................... 10 Drugs for Neglected Diseases intiative ............................................................................. 12 Back to the Marketplace ................................................................................................... 13 Part IV: The Relationship between TRIPS and neglected diseases ............................................. 14 Evolution of TRIPS........................................................................................................... 15 TRIPS and Neglected Diseases ......................................................................................... 18 Part V: Strategies for Promoting Innovation ............................................................................... 19 Existing Strategies ............................................................................................................ 20 Immunity to Compulsory Licenses ................................................................................... 21 Criticism: Ineffective Incentive ............................................................................ 22 Criticism: Hinders Access..................................................................................... 22 Exclusivity of Alternate Drug ........................................................................................... 23 Criticism: Prevents Access to Other Drugs .......................................................... 24 Criticism: Forced Charity ..................................................................................... 25 Biobanking ........................................................................................................................ 26 Summary of Strategies ...................................................................................................... 28 Part V: Conclusion ....................................................................................................................... 28 Bibliography ................................................................................................................................. 30 1 PART I: INTRODUCTION Third world access to medicines is one of today’s foremost global concerns. Almost two billion people have inadequate access to essential medicines whereby an improvement in access could save ten million lives each year, four million of whom would be saved in Africa and South East Asia.1 Developing and least developed countries are plagued by diseases such as HIV, malaria, tuberculosis, and other diseases of poor, which not only hinders economic growth but also constitutes a major humanitarian crisis. The inadequate health of third world citizens is a result of factors such as poor nutrition, access to clean water, and shortage of medical personnel; however, the problem is founded in the third world’s lack of access to affordable medicines. One third of the world’s population does not have access to the most basic essential drugs, a figure which increases to one half in the poorest parts of Africa and Asia.2 Third world medicine shortages can be attributed to inadequate infrastructure, substandard drug quality, incorrect selection, inappropriate and wasteful use, and shortages in production.3 This paper will investigate two additional factors that affect third world medical access. The main issue addressed is neglected diseases, defined as diseases with non-existent treatments and insufficient market potential to attract pharmaceutical response.4 Neglected diseases are discussed while taking into account another major element of the overarching problem, the inaccessible price of existing medicines resulting from international patent monopolies. Syed Ahmed, “New But Not Improved: A Critique of Compulsory Licensing of Pharmaceuaticals for Exporte as a means of Improveing Access to Medicises in the Developing World” (Osgoode Hall Law School, 2007) at 5 [Ahmed]. 2 Ellen ‘t Hoen, “TRIPS, Pharmaceutical Patents, and the Accesss to Essential Medicines: A Long Way form Seattle to Doha” (2002) 3 Chi. J. Int’l. L. 27 at 28 [Hoen]. 3 Ibid. 4 “Fatal Imbalance: The Crisis in Research and Development for Drugs for Neglected Diseases”, online: Medicins Sans Frontieres <http://www.msf.org/source/access/2001/fatal/fatal.pdf> at 11 [Fatal Imbalance]. 1 2 The relation between accessible medicine and international intellectual property rights is defined by The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In April 1994, TRIPS was established by the World Trade Organization to institute global intellectual property reform. TRIPS mandates a global 20 year minimum patent on medicines, giving developers a monopoly aimed at reimbursing them for their large investments.5 These monopolies drive up the price of medicine, making them unaffordable for developing nations. Although TRIPS includes a mechanism for countries to issue compulsory licenses in times of emergency6, it is ineffective for the developing nations as they generally lack the ability to manufacture their own drugs. The negative impact of TRIPS on world health was acknowledged by the World Trade Organization (WTO) at the 2001 Ministerial Conference in Doha, Qatar, where a declaration was made that seemed to unequivocally recognize the primacy of public health over commercial issues.7 The Doha Declaration led to the implementation of a system allowing countries to issue compulsory licenses for export to eligible countries.8 While still in the early stages of development, the new scheme represents a laudable step by the WTO to aid the developing world9; however, this WTO humanitarian achievement fails to address the other leg of the accessibility problem, neglected diseases. Pharmaceuticals still lack the incentive to develop drugs for the poor. Maxwell R. Morgan, “Medicines for the Developing World: Promoting Access and Innovation in the Post-TRIPS Environment” (2006) 64 U.T. Fac. L. Rev. 45 at para. 20 [Morgan]. 6 Annex 1C of the Marrakesh Agreement Establishing the World Trade Organization, 15 April 1994, Article 31, online: WTO < http://www.wto.org/english/docs_e/legal_e/27-trips_04c_e.htm> [TRIPS]. 7 Uche Ewelukwa, “Patent Wars in the Valley of the Shadow of Death: The Pharmaceutical Industry, Ethics, and Global Trade”(2005) 59 U. Miami L. Rev. 203 at 205, [Ewelukwa]. 8 Decision of the General Council of 30 August 2003, WTO Doc. WT/L/540, online: WTO < http://www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm>. 9 Ahmed, supra note 1. 5 3 Recently, the global failure to address neglected diseases has led advocates to take a step back from the marketplace and the pharmaceuticals. Since 1996, numerous public-private partnerships have emerged, each one with a very specific mandate or disease it seeks to eradicate.10 Using funding obtained from philanthropy and the public sector, these partnerships utilize a venture capitalist approach to efficiently invest their funds in advance of their cause. The 2003 establishment of Drugs for Neglected Diseases initiative (DNDi) represented a complete shift from the marketplace. DNDi aims to independently develop drugs for neglected diseases while primarily relying on the public sector and philanthropy for financial support.11 The purpose of this paper is to provide a preliminary analysis of the issues encompassing neglected diseases and the potential for solutions within the marketplace. I will demonstrate that, despite the fact that the international community has thus far failed to address neglected diseases via the marketplace and the pharmaceuticals, those routes must not be abandoned. I posit that the devastating effect of neglected diseases requires a sustainable solution outside of publicprivate partnerships and DNDi whose success is dependent on philanthropy and public sector donations. While the pharmaceuticals currently have no incentives to cure neglected diseases, using a combination of strategies pharmaceuticals can be motivated by the market to become a sustainable agent in curing neglected disease. The TRIPS mandate must be adapted to induce, rather than discourage, pharmaceuticals to invest into generally non-profitable drugs. In addition, innovative solutions such as utilizing the value of Biobanks must be fostered by enacting property rights over one’s own biological tissues. Craig Wheeler and Seth Berkley, “Initial Lessons from Public–Private Partnerships in Drug and Vaccine Development” (2001) 79 Bull. World Health Org. 8 at para. 4, online: SciELO < http://www.scielosp.org/scielo.php?script=sci_arttext&pid=S0042-96862001000800008> [Wheeler]. 11 “Questions and Answers”, online: DNDi < http://www.dndi.org/> [DNDi Q&A]. 10 4 The paper is divided into four parts. Part II introduces the issue of neglected diseases by explaining its impact, the global failure to respond, and the costs that underlie the problem. Part III begins with a discussion of PPPs and DNDi, their merits and shortcomings, and concludes that any viable and sustainable solution must include the pharmaceuticals. The nature of pharmaceuticals must be realized and compensation for their endeavors must be provided by means of market-driven strategies. Part IV reviews the evolution of TRIPS and the significance of the 2001 Doha Declaration.12 Although the Declaration targeted access to existing medicines, it demonstrated the flexibility of TRIPS in favour of public health, which sets the stage for possible solutions. Part V presents a series of strategies and their respective criticisms. Given the inherent moral urgency to improve the current situation, my approach in this paper is strictly practical; analyzing the problem with an eye on feasibility and results, not ethics and morality. With this paper, I hope to begin the discussion of issues pertaining to neglected diseases and provide a starting point for further analysis. PART II: DEFINING THE PROBLEM As mentioned above, this section provides the landscape in which the subsequent discussion will take place. To define the problem I provide a description of neglected diseases and their impact, the extent to which these diseases are ignored and where the system fails them, and the costs involved in developing drugs which is at the heart of the problem. 12 Declaration on the TRIPS agreement and public health, WTO Doc. WT/MIN(01)/DEC/2, online: WTO <http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm> [Doha]. 5 NEGLECTED DISEASES Neglected diseases are defined as diseases which exclusively threaten a market population that is too poor to provide the financial incentive that pharmaceuticals require to perform research and development (R&D).13 Due to the low purchasing power of third world populations, pharmaceuticals will not receive adequate return on their R&D investments in neglected diseases. These diseases include malaria, tuberculosis, certain strains of HIV, and a series of tropical diseases. Malaria is present in over 50 countries, threatening half the world’s population.14 Every year over 350 to 500 million are afflicted worldwide, killing approximately 1 million people15, most of which are children and pregnant women in sub-Saharan Africa.16 Malaria is the number one killer of children under five in Africa17, killing approximately 3000 children per day.18 Moreover, Malaria constitutes 10% of Africa’s overall disease burden.19 In addition to the deaths, Malaria has a detrimental effect on the growth of developing nations. It is estimated that the disease causes African nations $12 billion a year in lost GDP, although it could be controlled for a fraction of that amount:20 “When a substantial proportion of a country's population is ill with malaria for five or six months each year, sustained economic development is very difficult to achieve.”21 Treatments for Malaria do exist, but over the past few decades the two most 13 Fatal Imbalance, supra note 4 at 11. “Neglected Diseases”, online: DNDi <http://www.dndi.org> [DNDi ND]. 15 Ibid. 16 Kelley A. Friedgen, “Rethinking the Struggle between Health & Intellectual Property: A Proposed Framework for Dynamic, Rather than Absolute, Patient Protection of Essential Medicines”, (2002) 16:2 EmoryInt’l L. Rev. 689 at 690 (HeinOnline) [Friedgen]. 17 “Malaria in Africa”, online: Roll Back Malaria < http://www.rbm.who.int/cmc_upload/0/000/015/370/RBMInfosheet_3.htm> [RBM]. 18 DNDi ND, supra note 14. 19 RBM, supra note 17. 20 Ibid. 21 Friedgen, supra note 16 at 731. 14 6 successful drugs, chloroquine or sulphadoxine pyrimethamine, have become increasingly ineffective due to drug resistance, triggering the need for new drug development.22 HIV has a devastating effect on the developing world23, yet it is difficult to imagine HIV as a neglected disease and thereby a subject to this analysis. However, the types of HIV found in the developed and developing world are different.24 The drugs being developed are aimed at the strains afflicting the developed nations25, thus the strains prevalent in the third world can be deemed neglected diseases. Tropical diseases such as Human African Trypanosomiasis (HAT or sleeping sickness), Visceral Leishmaniasis (VL), and Chagas disease exist in markets so poor that it is believed no amount of tinkering with market forces will likely lead to interest from pharmaceuticals26; therefore, they are referred to as the most neglected diseases. HAT is fatal if left without treatment, it infects 50 000 to 150 000 people per year, and puts 50 million people in subSaharan Africa at risk.27 VL is also fatal without treatment, it infects 12 million people, and jeopardizes the health of 350 million people in poor, remote areas.28 Finally, Chagas disease is a potentially fatal disease affecting 8 million people, with another 100 million at risk in South and Central America.29 The existing treatments available for these diseases are inadequate as they are expensive, difficult to administer, toxic, and/or ineffective.30 22 DNDi ND, supra note 14. Hoen, supra note 2 at 1. HIV kills almost 3 million people per year in the developing world 24 Bradly J. Condon and Tapen Sinha, "Global Diseases, Global Patents and Differential Treatment in WTO Law", (2005) online: Social Science Research Network <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=664621> [Condon]. The most common subtypes of HIV-1 (the most common HIV infection) occurring in Europe and North America are subtype B, while in Africa the most common subtypes are A,C,D, and 02_AG (CRF02_AG). 25 Ibid. at 35. 26 Fatal Imbalance, supra note 4 at 11. 27 DNDi ND, supra note 14. 28 Ibid. 29 Ibid. 30 Ibid. 23 7 GLOBAL FAILURE TO DEVELOP TREATMENT FOR NEGLECTED DISEASES The international community, including the private and the public sector, has thus far failed to adequately address the diseases of the poor. From 1975 to 2004, 1556 new drugs were marketed around the world. Of those new drugs, only 10 targeted the most neglected diseases or 18 if malaria is included.31 These diseases account for 12% of the global disease burden.32 In comparison, 173 new drugs were devoted to cardiovascular diseases which accounts for only 11% of the global disease burden.33 Moreover, of the money annually invested in health related research, only 0.2% is aimed at pneumonia, diarrhoeal diseases, and tuberculosis, yet these sicknesses account for 18% of the global disease burden.34 In fact, of the $73 billion annual health-related investments worldwide, only 10% goes to diseases that comprise 90% of the global disease burden.35 Although pharmaceuticals represent a powerful potential to help eradicate the diseases that paralyze third world development, due to market economics they lack the financial incentives required to invest into neglected diseases. Developing countries constitute threequarters of the world population, yet they account for less than ten percent of the global pharmaceutical market.36 The discrepancy is even more dramatic in Africa. In 1998, Africa’s spending on medicine amounted to only 1% of the global spending.37 Pierre Chirac & Els Torreele, “Global framework on essential health R&D” (2006) 367 Lancet 1560, online: The Lancet <http://www.thelancet.com/journals/lancet/article/PIIS0140673606686728/fulltext> [Chirac]. 32 Fatal Imbalance, supra note 4 at 10. 33 Fatal Imbalance, supra note 4 at 10. The figures for cardiovascular drugs are for the years from 1975 to 1999, thus the 173 new drugs is an underestimate of the true value. 34 Hoen, supra note 2 at 95. 35 “10/90 Report on Health Research 2003-2004”, online: The Global Forum on Health < http://www.globalforumhealth.org> at 35 [GFH]. Measured in Disability Adjusted Life Years. 36 Hoen, supra note 2 at 28. 37 Michael Kremer, “Pharmaceuticals and the Developing World” (2002) 50 J. Econ. Persp. 67 at 70 (Jstor) [Kremer]. 31 8 COSTS INVOLVED IN DEVELOPING A NEW DRUG The reason behind the shortage of new drugs directed at neglected diseases is lack of compensation for enduring the high cost of developing safe drugs. Pharmaceutical companies endure great costs, effort, and risks to develop novel drugs. The costs of R&D have increased by 147% from 1994 through 2003.38 It is estimated that the cost to develop a new drug runs anywhere from $100 to $500 million.39 This process involves four steps: drug discovery, preclinical testing, clinical trials on volunteers, and FDA approval.40 On average, the whole process takes 15 years.41 The development of drugs for neglected diseases generally fails in the transition between drug discovery and pre-clinical research. On average, only 5 in every 10 000 compounds successfully complete these two stages. In addition to the cost, there is a great deal of risk involved in development; only one out of every 10 000 compounds discovered is approved as a safe drug by the FDA.42 Regardless of the costs, pharmaceuticals are very profitable. In 2007, there were 12 pharmaceuticals on the Fortune 500 list of most profitable companies.43 This introduces opportunity cost as yet another factor which must be taken into account. When investing their resources to cure neglected diseases, these companies are not only sacrificing expenditures in R&D, they are sacrificing the potential discovery of the next “blockbuster drug” such as Lipitor 38 U.S., Government Accountability Office Report. New Drug Development: Science, Business, Regulatory, and IP Issues Cited as Hampering Drug Development Effort (2006) online: Challenges in IP Course Page <http://osgoode.yorku.ca/Quickplace/pinadagostino> [New Drug Development]. 39 Fatal Imbalance, supra note 4 at 17. 40 New Drug Development, supra note 38 at 6. 41 Ibid. 42 Ibid., at 8. 43 “Fortune 500 Global 2007, Industry: Pharmaceutical”, online: CNNMoney <http://money.cnn.com/magazines/fortune/global500/2007/industries/21/1.html>. 9 or Plavix which could individually profit large pharmaceuticals billions of dollars.44 Such opportunity costs must be respected and considered in the assessment of compensation for pharmaceuticals. PART III: A MOVE TOWARDS A FREE MARKET SOLUTION This section presents two types of initiatives that constitute a shift away from a marketdriven approach to drug development for neglected diseases. However, as the programs rely on public funding and philanthropy for funding, they are not a sustainable solution. pharmaceuticals must be part of the equation. The This section concludes with an assertion a pharmaceutical response can be achieved through the marketplace and therefore such options must be exercised. PUBLIC-PRIVATE PARTNERSHIPS: THE SOCIAL VENTURE CAPITALISTS APPROACH Between 1996 and 2000, three public-private partnerships (PPP’s) were established, each setting out to develop treatment for HIV, malaria, and tuberculosis respectively. 45 These partnerships focus on high-risk and high-cost projects by exploiting the venture-capital approach to investing.46 Using a small management team, they screen potential projects for feasibility, providing funds to selected projects while ensuring that the goals and assets of the investing organizations match the goals and needs of the projects47. They fund projects involving forprofit organization in a manner that serves both parties’ agendas. For example, the International “10 Most Profitable Drugs”, online: howstuffworks <http://health.howstuffworks.com/10-most-profitabledrugs.htm>. With respective annual sales of $12.9 billion and $5.9 billion, Lipitor and Plavix were the top earning drugs of 2005. 45 International AIDS Vaccine Initiative, Medicines for Malaria Venture, and Global Alliance for TB Drug Development. 46 Wheeler, supra 10 at para.3. 47 Ibid., at 23. 44 10 AIDS Vaccine Initiative (IAVI) gives relatively large grants to biotechnology firm but foregoes a substantial equity in the firm. The firm retains rights to their products in the industrialized world and the private sector of the developing world, however, IAVI has the right to transfer the technology if the firm does not market the medicines at an affordable price in the public sector.48 The success of such partnerships has led to the launch of numerous other PPP’s49, which are expected to produce eight to nine drugs by 2011.50 PPP are exactly the type of innovative approach required to solve the problem of neglected diseases. However, these partnerships are still dependent on philanthropy and government donations for funding. They are innovative in the manner in which they spend their funds. These funds may not be sustainable, however, especially when considering that a large fraction is donated by a single source, the Bill and Melinda Gates Foundation.51 In addition, there is a funding gap of several hundred million dollars because existing initiatives move into the more expensive stage of clinical trials.52 Also, even if the eight or nine drugs are successfully developed, it is not enough to change the overall situation.53 Finally, PPP’s are at least partially depending on the existence of appreciable market prospects in developed countries to attract private interest54, thus PPP’s have a limited impact on the most neglected diseases.55 48 Friedgen, supra note 16 at 714. Wheeler, supra 10 at para. 5. They include Leishmania Vaccine Initiative, Malaria Vaccine Initiative, Alliance for Microbicide Development, Cooperative Research Centre for Vaccine Technology, Concept Foundation, Epidemic Meningitis Vaccines for Africa, Hookworm Vaccine Initiative, and Sequella Global TB Foundation. 50 Chirac, supra note 31 at 1561. 51 Ibid. 52 Ibid. 53 Ibid. 54 Morgan, supra note 5 at para. 24. 55 DNDi Q&A, supra note 11. 49 11 DRUGS FOR NEGLECTED DISEASES INTIATIVE In 2003, seven organizations56 joined forces to create a not-for-profit foundation that could revitalize drug development as a public responsibility instead of a strictly market-driven enterprise.57 DNDi has begun developing drugs for the most neglected diseases, HAT, VL, and Chagas disease. Currently it has 10 drugs in the discovery stage, 4 in the pre-clinical phase, and 6 being tested in clinical trials.58 For the past five years, the funding for DNDi has been supplied by Medecins Sans Frontiers (MSF); however, there is a shift towards receiving funding from the public sector and private sources. DNDi’s strategy is to take the development of drugs for the most neglected diseases out of the marketplace and encourage the public sector to take responsibility.59 Breaking the tie to the marketplace is viewed as the only effective way to advance R&D aimed at neglected diseases, especially for the most neglected diseases. Although DNDi’s achievements are highly commendable, shifting away from the marketplace foregoes the great resources of the pharmaceuticals. First, the large pharmaceuticals have the financial means to ensure development progresses smoothly. If unexpected costs arise at some stage in development, the pharmaceuticals can easily overcome them with no set backs. The public sector is effective in discovering drugs but it is the pharmaceuticals that lead development from pre-clinical trials to regulatory approval.60 “About DNDi”, online: DNDi < http://www.dndi.org/cms/public_html/insidearticleListing.asp?CategoryId=87&ArticleId=288&TemplateId=1>. The partners include the Oswaldo Cruz Foundation from Brazil, the Indian Council for Medical Research, the Kenya Medical Research Institute, the Ministry of Health of Malaysia and France’s Pasteur Institute; one humanitarian organisation, Médecins sans Frontières (MSF); and one international research organisation, the UNDP/World Bank/WHO’s Special Programme for Research and Training in Tropical Diseases (TDR). 57 Valerie J. Brown, “Pharmaceuticals. Paying Attention to Neglected Diseases” (2004) 112:1 Environmental Health Perspectives A24 (Jstor) [Brown]. 58 “DNDi's Portfolio Map”, online: DNDi < http://www.dndi.org >. 59 DNDi Q&A, supra note 11. 60 Fatal Imbalance, supra note 4 at 20. 56 12 Second, the pharmaceuticals already have access to their own patents, which is advantageous in the development of new drugs. The shear size of pharmaceuticals gives their scientists access to a huge pool of patents, a privilege that DNDi simply does not have. A third factor to consider is the issue of sustainability. The number of not-for-profit organizations developing drugs themselves is limited.61 Furthermore, DNDi currently depends solely on funds from the humanitarian organization MSF. To stay afloat it requires funding from the public sector which could be inconsistent. Thus, we should not depend on DNDi to address neglected diseases because if their public and charitable funding extinguishes, replacement organizations will not fill the void. BACK TO THE MARKETPLACE The resources of pharmaceuticals must not be overlooked when solving the issue of neglected diseases. Organizations that rely on donations may take great strides, but nonetheless, they may not be sustainable and may not have the resources required to continuously meet the medicine needs of the developing world. They are “woefully under-funded in terms of investment levels typically required to foster optimal levels of dynamic pharmaceutical innovation.”62 We cannot become dependent on such schemes as our sole solution because they could fall short of making substantial progress. While these organizations are doing their part, strategies must be conceptualized and implemented allowing the market to naturally motivate the pharmaceuticals to develop drugs for the third world. Inducing a sustainable pharmaceutical response necessitates a complete accommodation of the corporate bottom line, profits. The morality underlying the multinational pharmaceutical 61 62 Other than DNDi, I was unable to find any non-profit organizations developing medicines themselves. Morgan, supra note 5 at para. 24. 13 companies is not at question in this paper; for better or worse, they are the most capable agents in developing medicines and must be made part of the solution. The pharmaceuticals are simply a product of the free market; if they do not please their shareholders they will be consumed by their competitors. The high cost of developing drugs is an unfortunate reality for which pharmaceuticals are not at fault. Given their corporate nature, it is essential to regard them as faceless bodies and set aside expectations of good will. A viable solution can only be attained by accepting and respecting their needs. A sustainable solution requires a market configuration that leads to a natural response from the corporations. This is obviously an arduous task, illustrated by our historic inability to achieve results, and the shift away from the marketplace (discussed above). Furthermore, as will be discussed below, international laws have not provided a framework that fosters research for neglected diseases. Despite all this, pharmaceutical response via the marketplace is possible. The international community must implement new laws to indirectly compensate and encourage corporate involvement. Moreover, a set of novel property rights should be developed to exploit the current emergence of Biobank sciences. Individually, these strategies may not provide reimburse pharmaceuticals for their R&D costs but a multifaceted approach utilizing a number of them could be adequate. In the following sections I will elucidate the various strategies available and give an assessment of their feasibility. PART IV: THE RELATIONSHIP BETWEEN TRIPS AND NEGLECTED DISEASES This section seeks to demonstrate how TRIPS and the Doha Declaration can advance the neglected diseases cause. The 2001 WTO declaration set forth an initiative including provisions that allow for compulsory licenses for export. Such measures are a major step towards 14 improving access to existing medicines. Although, the provisions do not explicitly address the issue of neglected diseases, they set forth a doctrine allowing for flexibility in the interpretation and implementation of TRIPS to “promote access to medicines for all.”63 The underlying objectives expressed in the Doha Declaration can be exploited to justify provisions promoting the development of medicines for the poor. At the very least, they provide an illustration of the WTO’s resolve to improve third world health conditions, suggesting the plausibility of the strategies discussed in the later sections. EVOLUTION OF TRIPS In April 1994, TRIPS emerged from the Uruguay Round of Multilateral Trade Negotiations that established the WTO64, setting out minimum standards for the protection of intellectual property, effective in most of the developed and developing world.65 All WTO Member states are obligated by TRIPS to provide patent protection for any inventions, in all fields of technology, including pharmaceuticals. Protection must be granted for a minimum of 20 years from the date of filing, giving the patentee exclusive rights to prevent third parties from making, using, offering for sale, selling, or importing for such purposes, a product that is the subject of his or her patent.66 TRIPS underlies the world’s primary model for developing new medicines. Patent can be viewed as instruments of social policy, serving as the primary incentive for the private sector to invest into R&D, thereby generating long-term dynamic efficiency and economic growth.67 The 63 Doha, supra note 12 at para. 4. “The WTO”, online: WTO < http://www.wto.org/english/thewto_e/thewto_e.htm>. 65 Friedgen, supra note 16 at 695-7. The agreement was signed by 117 nations, including India and Brazil which until then had no phramaceutical patent protection, therefore their populations where provided with generic medicine. 66 Morgan, supra note 5 at para.20. 67 Morgan, supra note 5 at para. 14. 64 15 pharmaceutical industry is particularly dependent on patent protection because of the immense cost of developing new drugs and their vulnerability given the relative ease of reverseengineering those drugs.68 “Essentially, a bargain is struck between the patent owner and society. In return for a limited period of monopoly granted to the patent holder, society gains full disclosure of the new invention, which anyone can then copy upon patent expiration.”69 These patents allow pharmaceuticals to manipulate the strong demand and limited supply with inflated prices, offsetting the prior R&D expenses. As mentioned, TRIPS is fiercely criticized for driving up the cost of essential medicines, especially in poor countries in dire need of treatments. TRIPS came as a packaged deal with WTO membership, resulting in inflated drug prices in developing countries least able to afford them. The agreement included provisions allowing for compulsory licenses in special circumstances such as emergencies.70 However, as per section 31(f), compulsory licenses were only allowed for domestic use of drugs71, rendering them useless to countries without the means to produce drugs. The prohibitive prices are arguably in violation of Article 12 of the International Covenant on Economic, Social, and Cultural Rights, a treaty ratified by a majority of the United Nations’ member states.72 1. The States Parties to the present Covenant recognize the right of everyone to the enjoyment of the highest attainable standard of physical and mental health. 2. The steps to be taken by the States Parties to the present Covenant to achieve the full realization of this right shall include those necessary for: …(c) The prevention, treatment and control of epidemic, endemic, occupational and other diseases;73 68 Ewelukwa, supra note 7 at 208. Morgan, supra note 5 at 14. 70 TRIPS, supra note 6 s.31. 71 Ibid., s.31(f). 72 Friedgen, supra note 16 at 697. 69 16 Pressures from various sources, chiefly the UN Human Rights Commission and the WHO, led to a reconsideration of the TRIPS mandate and the compulsory licensing scheme, which was expressed at the November 2001 Ministerial Conference in Doha, Qatar.74 The Doha Declaration on the TRIPS Agreement and Public Health represented a symbolic stride, affirming the importance of global public health. The Declaration begins with recognition of “the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics,”75 and stresses that TRIPS be “part of the wider national and international action to address these problems.”76 Next, it recognizes the importance of intellectual property rights for development of new medicines along with the concerns about its effect on prices.77 Paragraph 4 boldly asserted the primacy of public health. 4. We agree that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all. In this connection, we reaffirm the right of WTO members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose. 78 Paragraph 6 instructs the Council for TRIPS to find an expeditious solution to the section 31(f) problem mentioned above.79 After two years of negotiations, an agreement was reached and paragraph 6 was implemented, establishing a compulsory licenses for export scheme.80 73 International Covenant on Economic, Social, and Cultural Rights, 3 October 1975, 993 U.N.T.S. 3 (entered into force 23 March 1976) online: UNHCHR < http://www.unhchr.ch/html/menu3/b/a_cescr.htm>. 74 Friedgen, supra note 16 at 698. 75 Doha, supra note 12 at para. 1. 76 Ibid., at para. 2. 77 Ibid., at para. 3. 78 Ibid., at para. 4. 79 Ibid., at para. 6. 17 TRIPS AND NEGLECTED DISEASES The patent system has been effective in developing treatments for global disease but has failed to do so for neglected diseases.81 The 20 year monopoly can only recover R&D costs by means of a market that can afford inflated prices; therefore, R&D for diseases that only affect poor populations are financially unsound. Neglected diseases, such as Malaria and Tuberculosis, have received some attention due to a minor demand in wealthy countries82, whereas, the most neglected diseases have yet to provide any incentives through the market. Furthermore, patents often hinder innovation by placing limits on research knowledge. Molecules that could be promising for the treatment of neglected diseases become inaccessible for research.83 The recent provisions compelling licenses for export represent a great improvement in terms of access medicines84; however, they do not address neglected diseases and arguably, they thwart the cause. Compulsory licenses only affect pharmaceuticals rights to withhold existing medicines. Furthermore, it is argued that compulsory licensing makes developing drugs for neglected diseases even more unattractive because those drugs are more likely to be subject to compulsory licenses. 85 Such an assertion is not supported by empirical data86, nevertheless, it is an important concern for pharmaceuticals. Frederick M. Abbott and Jerome H. Reichman, “The Doha Round’s Public Health Legacy: Strategies for the Production and Diffusion of Patented Medicines under the Amended TRIPS Provisions” (2007) 10:4 J.Int.Econ. L 921 at 935 (LegalTrac). The agreement was in fact a rejection of an administratively simple solution sought by developing nations, and instead an administratively complex solution was adopted as envisioned by the EU and the United States. However, the practical merits of this plan are not discussed in this paper. 81 Morgan, supra note 5 at para. 13. 82 Ibid., at para. 9. 83 Fatal Imbalance, supra note 4 at 22. 84 There have been strong critism of the new regime allowing for compulsory licenses for export (see paper and Abbott). However, for the purposes of this paper, the new regime is a great improvement in terms of access to existing medicines. 85 Condon, supra note 23 at 37. 80 18 Although the Doha declaration and the subsequent implementation of its instructions are only directed at access and not towards innovation, it did encourage a mandate that may justify the implementation of new strategies promoting R&D. The general goals discussed above apply to innovation as much as they apply to access. In paragraph 4, the declaration expresses the importance of “protecting public health” and promotes “access to medicines for all.”87 Development of essential drugs is fundamental to both those objectives. Furthermore, as will be explained in the following section, the language allows for the inclusion of cross border policy, whereby one country may enact domestic laws to promote access in another.88 At the very least, the Doha Declaration recognizes the primacy of public health over commercial interests and demonstrates the flexibility of TRIPS in the pursuit of public health, which includes development of essential drugs. “TRIPS is a reality that must be taken into account in any strategy to remedy the gaps in access and innovation in developing world pharmaceutical markets.”89 PART V: STRATEGIES FOR PROMOTING INNOVATION This section provides a series of possible market based strategies that can form part of the incentive for a pharmaceutical response. The two components of the issue of access to medicines are fundamentally different in nature, which characterizes the respective solutions available. Access to existing medicines generally requires rules that deny pharmaceuticals their rights to protect their patents in limited 86 Ibid. The risk of compulsory licenses has not deterred investment in the U.S. market where compulsory licenses are permitted. 87 Doha, supra note 12. 88 This is demonstrated by Compulsory Licenses for Export as that regime essentially removes domestic protection of patents for the benefit of another country. 89 Morgan, supra note 5 at para. 19. 19 situations. On the other hand, lack of R&D aimed at neglected diseases requires positive laws90 that are inappropriate in the free market economy. Therefore, the laws and strategies must encourage R&D by providing incentives that currently do not exist. EXISTING STRATEGIES One strategy used to promote innovation in non-profitable fields is tax breaks. Tax breaks are effective in promoting development if the targeted disease is located in the same country as the developer.91 When the developer is located in a different country from the class of individuals benefiting from the new drug, international agreements establishing a system of reciprocity that grants tax breaks might be necessary.92 Currently there is no precedence for such a system.93 R&D grants and advance purchase commitments (APC) are two donor-financed strategies that directly award innovation. International and domestic R&D grants are push mechanisms94 that motivate companies by providing money upfront. APC seeks to mimic the real market by guaranteeing to buy the neglected disease drugs once developed; thereby, they have the advantage of only financing drugs which are actually developed.95 The success of an APC program is contingent on the commitments being credible and a sufficient quantity of drugs purchased to make the endeavor worthwhile.96 Despite their simplicity, both R&D grants and An example of positive duties is given in MSF supra (pg28). “Essential research obligations” are mandates forcing pharmaceuticals to reinvest a percentage of sales into R&D for neglected diseases. Such a level of regulation is highly unlikely in a free market economy. 91 Brian Su, “Developing Biobanking with an Oliver Twist: Addressing the Needs of Orphan and Neglected Diseases” (2006) 66 La. L. Rev. 771 at 804 (HeinOnline) [Su]. 92 Ibid. 93 Ibid. 94 The Public Private Partnerships discussed earlier are a subset of these push mechanisms. 95 Morgan, supra note 5 at para. 128. 96 Ibid., at para. 129. 90 20 APC are flawed because they require public donations or philanthropy for financing; therefore they suffer from the same weaknesses as PPPs and DNDi. IMMUNITY TO COMPULSORY LICENSES Pharmaceuticals can be enticed to invest in neglected diseases if they are given immunity within the compulsory licenses in exchange. Immunity would alleviate the negative impact of compulsory licenses discussed earlier. There are several variations to this doctrine, including immunity to domestic compulsory licenses and immunity to compulsory licenses for export. Immunity to domestic compulsory licenses could be very beneficial to the pharmaceuticals. When a country invokes their rights to compulsory licenses, the developer stands to lose, even when considering that the developer must be compensated. There are economic advantages to negotiating private licensing agreements as opposed to determining compensation in court.97 Furthermore, immunity removes the threat of compulsory licenses. Countries such as Brazil have used the threat of compulsory licenses to negotiate lower price on drugs for their national programs.98 Immunity will likely be ineffective against compulsory licenses in cases of emergency since most nations can enact new laws in states of emergency that override previous obligations. While compulsory license immunity may alleviate the inherent deterrent it creates for pharmaceuticals, the immunity could specify limits regarding which countries can import drugs so that only the most desperate countries are included. Furthermore, immunity could come with the obligation to market the product at a reasonable price; not the price of generic drugs, rather, simply less than the highly inflated drug monopoly prices. At a minimum, attaching limits and Amanda Mitchell, "Tamilflu, the Takings Clause, and Compulsory Licenses: An Exploration of the Government’s Options for Accessing Medical Patents”(2007) 95 Cal. L. Rev. 535 at 544 (HeinOnline). 98 Morgan, supra note 5 at para. 84. 97 21 conditions ensures that the compulsory licenses for export system will not hinder innovation of neglected disease drugs. Criticism: Ineffective Incentive The first criticism speaks to the effectiveness of such an immunity to actually motivate the corporations. Given the fact that neglected diseases exist in poor markets, the pharmaceuticals do not stand to lose anything if compulsory licenses are invoked, rendering immunity valueless and providing no motivation for R&D: “drug development for neglected diseases will not automatically increase, no matter how strong the level of intellectual property protection.”99 Therefore, immunity to a mandate that could compromise such protection will not increase development either. In response, there are numerous neglected diseases that are somewhat present in rich nations such as AIDS, malaria, and tuberculosis. These drugs could have potential markets in countries that may exercise their rights to compulsory licenses, which would act as a disincentive to develop the drugs in the first place. It follows that immunity to compulsory licenses would remove this threat and consequently remove the disincentive. Granted, this reasoning depends upon the existence of some market potential. Immunity to compulsory licenses is much less effective to battle the most neglected diseases affecting a population with no market potential. Criticism: Hinders Access Immunity is also criticized for compromising access to essential medicines, which is contrary to the overarching goal of public health. By protecting the pharmaceuticals’ restrictive monopolies under all circumstances, we are in fact protecting their rights to make drugs 99 Fatal Imbalance, supra note 4 at 22. 22 inaccessible. Therefore, the scheme is in fact self-defeating, and possibly in complete conflict with access to medicine. In response, immunity is granted on drugs that are non-existent, and that would remain non-existent without such incentives. Immunity is not being granted for drugs that would otherwise potentially reach populations in need; immunity is being granted for drugs that would otherwise not exist. Once the drugs have been created and the 20 year patent runs out, the people in most need will finally have access to them. Despite the 20 year restrictive patent, this situation is more advantageous when compared to a scenario where no drug is developed in the first place. EXCLUSIVITY OF ALTERNATE DRUG Typical market exclusivity programs make it easier for pharmaceuticals to invest in high risk, low return diseases.100 The U.S. Orphan Drug Act101 provides an example; by means of a series of incentives, including exclusivity, the Act successfully promotes R&D for diseases which are unattractive to pharmaceuticals because they impact a limited population.102 Market exclusivity means that developers have a seven year exclusive marketing right on Orphan drugs that are otherwise not patentable.103 However, market exclusivity could potentially drive up the cost of drugs.104 Furthermore, the drugs being developed are for a population with no market potential, thus market exclusivity would be worthless. 100 Su, supra note 91 at 805. U.S., Bill H.R. 5238, Orphan Drug Act, 97th Cong. 2d session, 1983 (enacted). 102 Su, supra note 91 at 785-6. The Orphan Drug Act was enacted in 1983 to promote research into diseases affecting less than 200 000 persons. By providing a series of incentives, including exclusivity for seven years, they successfully increased innovation. Between 1973 and 1983 only 10 treatments had been developed for Orphan diseases, however, between 1983 and 2003 the Act had encouraged the development of 1100 treatments. 103 William H.E. von Oehsen, “Orphan Drug Act on congressional agenda” Physician Executive (5 January 1989) online: HighBeam Encyclopedia <http://www.encyclopedia.com/doc/1G1-8134773.html>. 104 Su, supra note 91 at 805. 101 23 A modified system of exclusivity could be implemented where a pharmaceutical is not given market exclusivity of the neglected disease drug, but instead they are given market exclusivity of a different non-patentable drug with a profitable market. In other words, in exchange for investing into unprofitable diseases, they are given favourable treatment in a different market on a different drug. Ideally, a wealthy country would grant the favourable treatment, increasing the value of the incentive. This modified exclusivity system requires developed world governments to enact laws with a wider scope than is presently dictated by TRIPS. Such practice would not run contrary to TRIPS because TRIPS only sets minimum protection standards.105 A country is free to implement laws that protect drugs not covered under TRIPS.106 Details such as the length of the exclusivity period and the extent of the protection it offers will not be discussed in this paper; those elements require in depth research outside the scope of this paper. The strategy being proposed is for governments in wealthy countries to provide market exclusivity for otherwise non-patentable drugs, which would provide an incentive for the pharmaceutical to cultivate drugs targeting the developing world. Criticism: Prevents Access to Other Drugs Exclusivity reduces access to drug or treatment which do not qualify under traditional patent rules107, thus the system partially undermines the existing patent system and decreases access to medicines. This strategy’s effect of lessening access raises the same concerns that were Peter Drahos, “Developing Countries and International Intellectual Property Standard-Setting” (2006) 5:5 J. World I.P. 765 at 789. 106 The exclusivity laws would be limited by the anti-competitive agenda. 107 Morgan, supra note 5 at para. 20. TRIPS requires patents for inventions which are new, involve an inventive step and are capable of industrial application. 105 24 voiced in regards to the immunity strategy above; the strategy could run in countenance of its main objective: increasing access to medicine. However, this solution can be distinguished from immunity in that the neglected disease drug is itself not subject to the exclusivity. The protected drug could be immaterial in terms of public health. For example, the treatment could be cosmetic in nature or it could be one of several viable treatments for an ailment. Admittedly, the strategy is self-defeating if the protected drug is an essential medicine. This introduces an additional element to the strategy; the protected drug must not be essential. In further response, the drug could target a wealthy market that could afford the increased costs. This leads into the next criticism: why should wealthy populations bear the cost of third world diseases? Criticism: Forced Charity Restricting access in developed world markets and thereby increasing costs, in effect, passes on the cost of R&D for neglected diseases to the consumer. The consumer may not need the protected treatment, but regardless, they are unwillingly required to spend more in support of a foreign cause. It is not the responsibility of the developed world to finance third world agendas. The response to this consumer-shifting criticism pertains to all the strategies presented. The moral question of “Who should pay?” is not addressed in this paper. Inherent in all my arguments is that eradicating the detrimental impact of neglected diseases is paramount, therefore the question I am answering is simply “Who will pay?” I am working under the presumption that the market will determine morality; if the consumer buys the medicine, they must be able to afford it. Regarding the specific issue at hand, given that the medicine being 25 offered is not essential, the consumer has the freedom to choose whether to purchase the product at the inflated price or to spend their money elsewhere. They are not suffering an injustice if they freely opt to buy the luxury product. BIOBANKING Recent scientific innovation has actually created a situation where the pharmaceuticals may need citizens of the developing world, giving those individuals leverage to spur R&D for neglected diseases. In Brian Su’s paper, “Developing Biobanking with an Oliver Twist: Addressing the Needs of Orphan and Neglected Diseases”, a plan is proposed wherein neglected populations can use the value of their own biological tissue samples as compensation for R&D. I will briefly discuss this strategy to demonstrate how innovation could lead to solutions outside of simple financial compensation. Also, such technological advances need to be supplemented with innovative laws to effectively give poor people a voice. Biobanks are the fuel for the emerging field of bioinformatics, which was formed by the merger of information technology and genomics.108 This promising new field involves biological information processing systems which “mine” genotypic and phenotypic data to identify genes, model protein structure, and to discover drug targets.109 Bioinforomatics has prompted demand for large collections of tissue samples, since each sample provides only a small amount of data.110 Consequently, these tissue samples have become inherently valuable to the pharmaceuticals, which could potentially supply the developing world with a bargaining chip.111 PXE International, which represents a group of people afflicted with a rare disorder 108 Su, supra note 91 at 774. Ibid. 110 Jocelyn Kaiser, “Population Databases Boom, from Iceland to the U.S.” Science 298:5596 (8 November 2002) 1158 (Jstor). 111 Su, supra note 91 at 775. 109 26 named PXE, is an example of a diseased group successfully harnessing the power of biobanks,. The organization acquired over a thousand samples and only gave access to research aimed at PXE, thereby using the biobank for the benefit of the donors themselves.112 For biobanking to effectively give poor people a voice there is a need for sound international policy addressing issues such as ethics, exploitation, informed consent, and privacy113. Another fundamental issue is the means by which the donors can guarantee R&D for neglected diseases in exchange for their tissue samples. PXE International used contractual property rights to ensure that donors received their end of the bargain114. However, contractual rights can lead to uncertain results since contracts generally cannot be enforced against third parties that may subsequently exploit the tissues.115 On the other hand, property rights over one’s own biological tissue would be enforceable against the world116; the interest would be vested in the donor thus their control over who can access their tissues would be protected. As technology advances, we must develop laws that not only regulate such technology but also supplement it to realize its true potential. Biological tissues are becoming increasingly vital for the pharmaceutical industry, as such, laws must be enacted to protect the donor’s rights. The new mandates must be quasi-property law to protect the physical tissue samples, but also quasi-intellectual property law to protect the genetic data contained within the tissue samples. Biobanking is a unique opportunity for the actual people affected by neglected diseases to create incentives to pharmaceuticals; therefore, to encourage such potential, governments and courts must be innovative and develop novel property rights to ensure the poor can take advantage of their biological resources. 112 Su, supra note 91 at 779. Ibid., at 792. 114 Ibid., at 793. 115 Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. , [1915] A.C. 847 at 853 (H.L.). 116 Su, supra note 91 at 793. 113 27 SUMMARY OF STRATEGIES This section provided potential strategies that would encourage pharmaceuticals investment into neglected diseases using market forces instead of charity. The strategies are in their preliminary form, requiring R&D of their own. Once implemented, it is unlikely they will individually provide sufficient compensation to entice R&D of new drugs. However, if they are used in conjunction with other strategies, they could constitute a viable incentive to promote a pharmaceutical response. PART V: CONCLUSION There is an urgent need to promote pharmaceutical involvement in the eradication of neglected diseases. This paper aims to provide preliminary insight into the issues surrounding neglected diseases and analyze the reasons why progress has been inadequate. Recently, initiatives serving neglected diseases have shifted away from the marketplace and the pharmaceuticals. Such a trend is disturbing and signals the urgent need for the international community to develop programs to prompt a pharmaceutical response through the market. Pharmaceuticals are the only parties that have the resources required to significantly improve the situation. We must accept the nature of the companies and compensate them for their R&D in unprofitable diseases by providing market-driven sustainable programs that do not rely on government funding or philanthropy. The Doha Declaration provides a symbolic recognition by the WTO that public health should prevail over commercial interests. The objectives ascertained in the Declaration pave the way for a series of strategies which could help achieve substantive results. These include 28 provisions in our patent laws that give pharmaceuticals compulsory licensing immunity or exclusivity for alternate drugs in exchange drugs for their participation in curing neglected diseases. Furthermore, governments and courts may need to step outside the boundaries of customary laws and create biological property rights that would supply the poor with a bargaining chip to promote innovation. Considering the enormous cost of developing drugs, these suggestions are not likely to provide adequate compensation by themselves, however, in conjunction with each other they could suffice. On October 4, 2007, Canada became the first country to give authorization to a generic manufacturer to produce a patented drug for export under the WTO provisions of 2003117, establishing Canada as a pioneer in the promotion of access to medicines. In a similar spirit, Canada must lead the charge against neglected diseases, designing and implementing programs that can finally cure these diseases of the poor. 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