Pogge and Hollis on the Trade-off between access and incentives

This is a comment on the references to compulsory licensing in the Hollis/Pogge HIF book that are quoted below.

http://www.keionline.org/blogs/2008/11/18/excerpts-from-hif-compulsory-licensing/
Aidan Hollis and Thomas Pogge, The Health Impact Fund, Making New Medicines Accessible for All, A Report of Incentives for Global Health, 2008.

Strengthened intellectual property protections in the less developed countries burden the poor immediately by pricing vital medicines out of their reach. Yet, such protections may benefit only future poor people, starting in 2025, when patents on medicines that owe their existence to such protections expire. Appealing to this time difference, one might then propose to resolve the dilemma in favor of Pre-TRIPS on the ground that it is morally impermissible to cause severe harms, including death, to poor people now for the sake of protecting millions of poor people from similarly severe harms later on. Many endorse such a principled stance. Yet, one can not be satisfied with such an outcome in view of all the harm that stimulating new drug development could avert from so many future lives.

. . . compulsory licenses weaken the innovation incentives that were supposed to result from the extension of strong intellectual property rights into the less developed countries. Pharmaceutical companies will understandably discount any such incentive if they are uncertain whether and to what extent they will actually be allowed to reap the financial reward from inventing a new medicine. . .

Third, while systems of compulsory licensing may provide an expedient solution to short-term health problems, they discourage investment in R&D for diseases whose remedies may become targets for compulsory licenses. The welcome relief from the problem of high prices compulsory licenses bring thus aggravates the neglect of diseases concentrated among the poor. Pharmaceutical companies spend less on the quest for vital medicines — especially ones needed mainly by the poor — when the uncertainties of development, testing, and regulatory approval are compounded by the additional unpredictability of whether and to what extent successful innovators will be allowed to recoup their investments through undisturbed use of their monopoly pricing powers. Compulsory licensing may thereby even exacerbate the health crisis facing developing countries over the medium and long terms (Pogge 2008b, 240).*

I was struck by the HIF discussion on this topic, because Thomas Pogge has a background in ethics, and Aidan Hollis was involved in a competition case in South Africa in 2003, where these tensions were explored.

Missing from the Hollis/Pogge discussion was a realistic assessment of the quantitative impact of the access and incentive trade-offs.

During the first major compulsory licensing meeting in Geneva in March 1999, Dr. Richard Laing put up a slide that showed that the entire continent of Africa represented about 1 percent of the global market for pharmaceuticals. He said, patent protection Africa was irrelevant to the pharmaceutical company decisions about whether or not to develop a new drug. This was certainly true in 1999. It is certainly true for a number of market segments where consumption of high priced patented medicines are basically zero. When the Thailand government sought a compulsory license for patents on Plavix, for use in the public sector health programs, there was zero consumption of this product in that market. When fluconazole was too expensive for HIV patients in Thailand and South Africa, there was almost no access to this drug. In these and in countless other cases, the harm from the lack of access is huge, and the incentive effects are incredibly small. These empirical realities are quite important in evaluating the trade-offs.

In a 2003 patent dispute, a number of economists and human rights scholars looked at this issue, including the economist William Jack of Georgetown University, and Aidan Hollis. Hollis noted that when “patent protection has very weak effects on stimulating innovation but large effects in terms of harming poor consumers . . . government-granted compulsory licenses can be used to mitigate the negative effects of government-granted patents.” This point is missing from the HIF book, which now could easily be quoted by patent owners to oppose compulsory licensing requests.

In 2006, the WHO Commission on Intellectual Property, Innovation and Public Health issued a report that also addressed the relative quantitative significance of the effects of patents on innovation and access developing countries:

Intellectual property rights have an important role to play in stimulating innovation in health-care products in countries where financial and technological capacities exist, and in relation to products for which profitable markets exist. In developing countries, the fact that a patent can be obtained may contribute nothing or little to innovation if the market is too small or scientific and technological capability inadequate. In the absence of effective differential and discounted prices, patents may contribute to increasing the price of medicines needed by poor people in those countries. Although the balance of costs and benefits of patents will vary between countries, according to their level of development and scientific and technological infrastructure, the flexibility built into the TRIPS agreement allows countries to find a balance more appropriate to the circumstances of each country (page 22). . .

There is no evidence that the implementation of the TRIPS agreement in developing countries will significantly boost R&D in pharmaceuticals on Type II, and particularly Type III diseases. Insufficient market incentives are the decisive factor. (page 85)

There is very little real evidence, one way or the other, on how the availability or possible use of compulsory licences will affect willingness or reticence to invest in R&D. (page 120)

The WHO CIPIH even saw a positive role for compulsory licenses in promoting research:

2.10 Countries should provide in their legislation powers to use compulsory licensing, in accordance with the TRIPS agreement, where this power might be useful as one of the means available to promote, inter alia, research that is directly relevant to the specific health problems of developing countries. (page 55)

I would like to know from Aidan Hollis or Thomas Pogge if they think the HIF book was in error in not providing the more compelling case for the use of compulsory licenses, in light of the issue of the relative quantitative impact on innovation and access?

This is particularly interesting since quotes from their book on the topic of compulsory licensing may later be used by patent owners to oppose compulsory licenses in developing countries.

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*It is interesting to compare the issues raised in the HIF Book in opposition to compulsory licenses to the views set out by Harvey Bale of the IFPMA in 1999; http://lists.essential.org/pharm-policy/msg00060.html.

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