BY MARIA WAGENBERG
About a third of the world’s population, or roughly two billion people, lacks even the most basic access to essential medicines. Each year an estimated 25 million individuals, 10 million of them children, die of treatable and preventable diseases. A large share of those deaths could be averted by low-cost access to pharmaceuticals developed and patented by U.S. universities. University patents are found in a quarter of HIV/AIDS drugs and a fifth of high-impact drugs approved between 1988 and 2005. The number of university patents has been on the rise since the 1980 passage of the Bayh-Dole Act, which gave universities title to patents arising from federal funding. Once a university obtains a patent, it will typically license the patent to pharmaceutical companies for further development and commercialization. However, unlike pharmaceutical companies, which are tied to profit margins, universities are non-profit actors whose work is largely financed by public funding. Therefore, universities have a special obligation to ensure access to their research.
In 2001, a group of Yale students learned that d4T (stavudine), an HIV antiretroviral drug patented by Yale and licensed to Bristol-Myers Squibb, was being sold at outrageous prices overseas, blocking off access for HIV patients living in South Africa and other developing countries. Troubled that Yale-developed drugs were being priced out of reach for HIV patients, the students joined in a publicity campaign that eventually pressured the university and pharmaceutical company into reducing the price of the drug and making it available for generic production in South Africa. Today, the organization those students founded, Universities Allied for Essential Medicines (UAEM), continues to advocate making university-developed drugs available to poor countries at low cost.
On November 9th, the campaign for increased access scored a significant victory when Harvard and five other research universities signed a statement of principles pledging to “promote the availability of health-related technologies in developing countries for essential medical care.” The policy represents an important step forward for Harvard, which is both a research powerhouse for diseases such as AIDS and malaria, as well as a leader in the global technology access movement. However, the policy does not go far enough in several important ways.
First, it is not clear the new policy represents an improvement over current licensing practices. Harvard has included global access provisions in only 5 of the 62 licenses concluded over the past two years. However, these licensing agreements are secret, so the nature of the access provisions, the number of medical licenses, and even the identity of the drugs covered, remain opaque. The new policy promises that Harvard’s intellectual property will not pose a barrier to essential medicine access in the developing world. It also commits to applying “meaningful metrics” to evaluate the success of its efforts. This commitment is extremely vague. It does not address what the metrics are or how they will be applied in the context of individual agreements. How meaningful will the composite, retrospective metrics be, especially when so few agreements are concluded each year?
Second, while the policy also sets out a menu of licensing options, it does not assemble these options into a coherent plan that would facilitate access to Harvard licensed drugs. University licenses can impose global access conditions on pharmaceutical licensees in a variety of ways. Some of the most discussed options include: (1) Requirements that NGOs receive the rights to distribute discounted or donated drugs for humanitarian purposes (though NGOs rarely have the capacity to meet the needs of all patients in poor countries). (2) Tiered pricing for low-income and high-income patients in countries with a significant income gap, such as China or India (a difficult policy to administer and enforce). (3) “March-in rights” which allow the patent holder to revoke the licencee’s rights and license the patent to another company, if, for example, a global access condition is breached. (4) Financial incentives, such as forgiveness of university royalties, for licensees in exchange for providing low-cost drugs in the developing world. (5) Mandatory sub-licenses to specific generic manufacturers in developing countries. (6) Non-patenting policies, where the university simply does not patent in poor countries, allowing any manufacturer to make generic versions of the drug without a license.
The new policy requires universities to select among these options with the goal of “align[ing] incentives among all stakeholders.” This is a vague standard. Future policies should instead guarantee that a minimum level of access is negotiated into all relevant licenses; alternately, universities should commit to making access a primary consideration in negotiating global access provisions. A mandatory policy would reduce the need for transparency and oversight and might also give universities greater leverage and credibility in negotiating agreements with pharmaceutical licensees. As it stands, however, the policy does not articulate a clear, access-based strategy.
Third, under the new policy, Harvard will continue the practice of asserting patents in the so-called “BRIC” countries (Brazil, Russia, India, and China), in addition to patenting in developed regions such as Europe and North America. The BRIC countries produce over 40 percent of the active ingredients in the world’s generic and over-the-counter pharmaceuticals, and remain the only source of generic drugs outside the developed world. The effect of patenting in BRIC countries would be to close the “pharmacy to the developing world,” shutting down all sources of generic production bound for developing countries. Generic manufacturing represents the most sustainable option for delivering drugs to the poor, compared to the relatively stopgap measures of sublicensing and royalty forgiveness.
Finally, Harvard has stated that the policy will not apply to drugs for non-communicable diseases, even though these diseases are major killers in the developing world. The developing world now accounts for 80% of the world’s deaths from non-communicable diseases such as heart disease, cancer, and diabetes. While HIV/AIDS and malaria are often the first things to come to mind when thinking about global health, the problem of access extends beyond those two high-profile causes.
The policy for non-communicable disease drugs might be explained by a deference to three pharmaceutical company concerns. The first concern is “parallel importation” – the idea that discounted or generic drugs meant for distribution in the developing world will be smuggled back to the developed world and sold through black markets. Unlike malaria or tuberculosis drugs, non-communicable disease drugs have significant markets in both the developed and developing worlds. There is scant evidence that parallel importation of donated or discounted drugs exists or poses a threat to industry profits. HHS estimates that about 10 million shipments of unapproved prescription drugs entered the U.S. in 2003; however most of these originated in Canada or Mexico. It is not clear what percentage, if any, of these imports represented discounted or donated drugs that were destined for poor countries. A fair portion of these parallel imports consist of counterfeit or illegal drugs, rather than legitimate generic or brand-name drugs, according to HHS. The European Union allows parallel importation among its member states, but even the EU has experienced very few instances of parallel importation of drugs destined for the developing world. After incidents like the one in 2002 when GlaxoSmithKline discovered a trader had diverted 44,000 packs of HIV/AIDS medications from five African countries, governments have cracked down on these types of shipments. Manufacturers have also adopted techniques like color-coding and special pa
ckaging to counter smuggling. As long as drugs are sold at a lower price in the developing world than the developed world, there will be an incentive for parallel importation. However, the solution is not to sell drugs to the developing world at the same price as the developed world, but rather to combat the smuggling.
The second concern is that pharmaceutical companies, and by extension universities, will lose profits by forgoing potential pharmaceutical sales in the developing world. Pharmaceutical companies have publicly stated that they will seek to recoup any profits lost as a result of healthcare reform by raising prices in poorer nations (see, for example, “Drug Firms See Poorer Nations as Sales Cure,” Wall Street Journal, July 7, 2009). Medications for chronic, long-term diseases like heart disease, cancer, and diabetes, are lucrative pharmaceutical sellers, and thus represent the best way for pharmaceutical companies to maintain their double-digit profit margins. However the developing world represents a miniscule portion of pharmaceutical profits. PhRMA, the industry lobby, concedes that Africa comprised only 0.5% of sales in 2007, with China and India at 0.6% and 0.2% respectively. By comparison, the U.S. represented 67.7% of 2007 world sales. With the developing world accounting for such a small percentage of overall sales, pharmaceutical companies cannot claim that global access provisions would drastically alter their R&D incentives or lower their profit margins. Moreover, universities rarely make money off of their licenses. In 2007, Harvard University had about $1.88B in total research expenditures, but only $12M in license income. Universities will occasionally hit the jackpot with isolated blockbuster drugs – New York University and Columbia had the highest licensing revenues in 2007 with $791.1M and $135.6M respectively, each from single deals. These amounts are almost never high enough to offset universities’ research expenditures.
The third concern is that global access provisions will serve as a “poison pill,” discouraging pharmaceutical companies from licensing with universities that require such provisions. This risk is probably overstated. Pharmaceutical companies will still compete to license promising drugs. Furthermore, licenses are primarily made with small companies (49.9% of deals) or start-ups (16.5%), many of them formed by the researcher who originally discovered the technology. These companies take the drug a bit further down the development pipeline before licensing to a big pharmaceutical company. Global access provisions are unlikely to change the first licensee’s decision to license, especially if the licensee has discovered the drug. For the second licensee, often a large pharmaceutical company, global access provisions are unlikely to discourage licensing for a drug with demonstrated value.
Since these concerns remain unproven, they should not serve as a basis for unnecessary concessions to pharmaceutical companies. If Harvard continues to enforce its patents in a way that prevents generic manufacturing of essential medicines, it will create a real barrier between these drugs and the people in developing countries who need them the most.
Maria van Wagenberg is a 2L.
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