Patent Law, Drugs, and the Health Crisis in the Developing World
William W. Fisher[*] & Talha Syed[+]
Draft paper to be presented at Modest Proposals 2.0 Conference, Cardozo Law School, February 24-25, 2005 – Please do not cite or circulate without permission
Patent Law, Drugs, and the Health Crisis in the Developing World
William W. Fisher & Talha Syed
I. The Problem 3
A. The Health Crisis in the Developing World 3
B. Causes 8
C. Barriers to Effective Drug Delivery 11
II. Pharmaceutical Research & Development: The Current Model 18
A. Where Drugs Come From 18
1. The Traditional Model 18
2. Recent Improvements 21
B. The Need for Governmental Innovation Strategies 29
C. Governmental Stimuli in the Public Sector 33
1. Public Funding 33
2. Public Sector Values 41
3. The Bayh Dole Shift 45
D. Governmental Stimuli in the Private Sector 51
1. Domestic Legal Protection: Patents and Hatch-Waxman 51
2. International Legal Protection: TRIPS and TRIPS-Plus 51
E. How Well Does the System Work? 52
1. Innovation: The Output and Direction of R&D 53
2. Access: International and Domestic Aspects of Drug Prices and R&D 73
3. Some Additional Deleterious Effects of Proprietary and Rent Incentives 83
III. Overall Plan 86
IV. Reform Options 86
A. Facilitating Differential Pricing of Drugs 87
B. Controlling the Conduct of the Drug Companies 93
1. Exercise Bayh-Dole “March-in” Rights 94
2. Foreign Filing License 94
3. Mandate Aggregate DALY/Revenue Ratios 107
4. University-Leveraged Pricing Requirements 114
C. Reducing Drug Patent Protection in Developing Countries 118
1. Compulsory Licenses 118
2. “Regulated” Licenses 133
3. TRIPS Compliant Patent Reforms 137
4. A New Multilateral R&D Treaty 147
D. International Assistance to Developing Countries 159
1. Aid from International Donor Community 159
2. Drug Donations from Pharmaceutical Companies 161
E. Treating Unauthorized Bioprospecting as “Inequitable Conduct” 164
F. Alternative Innovation Policies: The “Pull” to “Push” Spectrum 168
1. General Pull: Reward System as Access Tool 173
2. Selective Pull: Patent Purchase Programs as Access Tools 177
3. Modified General Pull: Rewards as Incentive Tool 181
4. Selective Modified Pull: Advance-Purchase Commitments 185
5. Push: Direct Funding for R&D on Developing Diseases 198
6. “Mixed” and Hybrids: Public/Private Partnerships and “Competitive Intermediaries” 201
V. Putting the Pieces Together 203
I. The Problem
A. The Health Crisis in the Developing World
People live substantially longer, healthier lives in some countries than in others. For example, the “healthy life expectancy”[1] of people born in 2002 in Japan was 75 years, while that of people born in 2002 in most of the countries of sub-Saharan Africa was less than 40 years.[2] Figure 1, below, shows the comparable numbers for all of the member countries of the World Health Organization. [3]
The primary cause of this radical disparity is variation in the frequency with which the residents of different countries suffer and die from communicable diseases. As Table 1 shows, noncommunicable diseases – cancers, cardiovascular diseases, neuro-psychiatric disorders, noncommunicable respiratory diseases (such as chronic obstructive pulmonary disease), diabetes, noncommunicable digestive diseases (such as cirrhosis of the liver), and musculoskeletal diseases (such as rheumatoid arthritis) – are distributed fairly evenly across the globe. In other words, the “disease burden” associated with those ailments (the total losses they cause measured by “disability adjusted life years” [DALYs][4]) in each section of the world roughly matches the number of residents of that section. By contrast, communicable diseases are distributed highly unevenly. For example, developed countries house 19.4% of the world’s population but bear only 3% of the communicable-disease burden, while high-mortality developing countries house 41.4% of the world’s population but bear 82% of the communicable-disease burden.
Table 1:2002 Regional Disease Burdens (in Thousands of DALYs)
/ High-Mortality Developing Countries[5] / Low-Mortality Developing Countries[6] / Developed Countries[7] / Totals
Communicable Diseases[8] / 501,059
(82%) / 92,250
(15%) / 18,287
(3%) / 611,596
Non-communicable Conditions / 265,905
(38%) / 262,209
(38%) / 167,181
(24%) / 695,295
Totals / 766,694
(59%) / 354,459
(27%) / 185,468
(14%) / 1,306,991
Percentage of World’s Population / 41.4% / 39.3% / 19.4% / 100%
Sources: WHO, World Health Report 2003;[9] population figures from UN, World Population Prospects: The 2002 Revision (2003)
The most important and most notorious of the communicable diseases is HIV/AIDS, and it alone explains much of the high mortality rates in developing countries.[10] Of the estimated 40 million people infected with the HIV virus worldwide, approximately 95 percent live in developing countries, and 70% live in sub-Saharan Africa.[11] The global death toll in 2003 is estimated to be in the range of 2.5 to 3.5 million, with 2.2 to 2.4 million of those deaths occurring in sub-Saharan Africa.[12] Given such numbers, it is understandable that HIV/AIDS has been the central focus of attention in public debate. However, it is important not to lose sight of the huge costs associated with other illnesses that are equally or even more highly concentrated in developing countries. For example, in 2002, measles took the lives of 439,000 Africans, mostly children, while malaria claimed 1.09 million African lives. In high-mortality developing countries, 1.51 million people died of diarrhoeal diseases, while tuberculosis caused 1.52 million deaths in the developing world as a whole.
Set forth below is a list of the major communicable diseases for which developing countries bore more than 95% of the total global disease burden. These are commonly referred to as “developing-country diseases,”[13] and we will conform to that usage throughout this essay.
On the right side of the chart, we have identified several subsets of the set of developing-country diseases. These labels are not always used consistently in the literature on this subject, but most commentators would accept the following definitions:[14] “Neglected diseases” refers to all developing-region diseases except for HIV/AIDS – on the theory that only HIV/AIDS has attracted significant research and development (a topic to which we will return shortly). “Tropical diseases” refers to the set of ailments especially common in tropical regions, as determined by the WHO. “Priority diseases” refers to that subset of neglected diseases that a joint roundtable of the WHO and the International Federation of Pharmaceutical Manufacturers Associations (IFMPA) has identified as most in need of additional research: tuberculosis, malaria, trypanosomiasis (African sleeping sickness), leishmaniasis, and chagas disease.[15] Finally, “childhood diseases” are those noted in Table 2 that most severely affected children.
B. Causes
Why, then, are communicable diseases so much more prevalent in developing countries? In addition to less easily specifiable causes which accompany “underdevelopment”,[16] we can isolate four main factors. First, the warm climates and poor water and sanitation systems of most developing countries facilitate the spread of viruses and bacteria.[17] Second, poor educational systems leave many residents of those areas without the knowledge of how to avoid infections. Third, inadequate health care in those countries means that many infections are undiagnosed or untreated. Fourth, the residents of developing countries often lack access to drugs that either would immunize them against communicable diseases or would provide them effective treatments or cures.
As Michael Kremer has shown, during the nineteenth century, most of the improvements in the life expectancies of the residents of what we now classify as developed countries occurred through non-medicinal factors such as improvements in income, diet, water, sanitation and education. In developing countries today, by contrast, some of the greatest opportunities for relatively inexpensive gains lie in the third and fourth zones of direct health care interventions.[18] On the basis of a thorough review of the pertinent literature, Kremer concludes that most improvements in worldwide health in the twentieth century have “resulted from technological advances rather than from income growth.” Estimates for the period between the 1930s and 1960s are that income growth accounted for only 10 to 25 percent of the growth in world life expectancy, with the diffusion of technological advances being a major additional contributor, at all income levels. For the subsequent period from 1962 to 1987, 74 percent of the decline in infant mortality rates has been attributed to technical progress, 21 percent to increased education and only about 5 percent to income growth.[19] While “technical progress,” as Kremer uses the term, includes non-pharmaceutical innovations such as forms of medical therapy other than drug treatment (e.g., oral rehydration therapy), nonmedicinal precautions (e.g., the increased use of mosquito nets and the dissemination of inexpensive condoms), and communications technologies (e.g., the deployment of radios in public health campaigns), there is little doubt that the development and effective dissemination of drugs and vaccines have played crucial roles.
Some examples support this generalization: As of 1992, an estimated three million lives per year were saved by a standard package of off-patent vaccines that is administered to roughly 75 percent of the world’s children through the World Health Organization’s Expanded Program on Immunization.[20] From 1999 to 2002, the WHO/UNICEF’s comprehensive immunization strategy with respect to measles is estimated to have resulted in a 30 percent global reduction in deaths from measles (35 percent in Africa).[21] In the case of malaria, the WHO has recently stated that “more than 600 million people, most of them children living in sub-Saharan Africa, face the daily threat of death from malaria because new, effective treatments are not available where they live.”[22] Regarding HIV/AIDS, the WHO points out that “people living with HIV but benefiting from the latest medical developments can hope to lead normal lives in many respects.” The effective use of the treatment of combination chemotherapy with antiretroviral agents (ARVs) can render AIDS “a chronic and treatable disease more like diabetes than other serious viral diseases.” The availability of such treatment has enabled “many people with advanced AIDS [to] have resumed their normal lives” in Australia, Europe, Japan and the United States, while in poorer countries and among the poorer segment of the developed countries, “HIV remains a death sentence.”[23]
In sum, one of the ways in which we might reduce the extraordinary amount of human suffering caused by communicable diseases in developing countries is by getting into the hands of people threatened or afflicted by those diseases effective vaccines and drug therapies. To be sure, we can and should also strive to improve the water, sanitation, and educational systems and to increase the availability of qualified doctors and health-care workers in those countries. But a crucial component of an effective overall plan to address the health crisis in the developing world is a system for making effective pharmaceutical products available to the residents.
C. Barriers to Effective Drug Delivery
So what stands in our way? Three things. First, for many developing-country diseases there is a dearth of vaccines or cures that are safe, effective and suitably tailored to the circumstances of developing world health care. The treatments that do exist are sometimes quite outdated, having been developed decades ago, and with strong negative side effects (as in the case of melarspol for sleeping sickness and certain TB drugs).[24] Other older treatments have been rendered increasingly ineffectual against the development of new drug-resistant strains (such as chloroquine for malaria).[25] Further, in the case of a number of priority illnesses such as TB, malaria and leishmaniasis, more effective courses of treatment are often too cumbersome and prolonged to be properly administered.[26] Especially in the context of many rural developing-country communities, poor administration of treatments, in turn, accelerates the development of drug-resistant strains and thus exacerbates the trend of existing treatments becoming less effective.[27]
The reason for this dearth of suitable treatments for developing-region diseases is not that these diseases are unusually difficult to understand or interdict. It’s that pharmaceutical research and development has concentrated on diseases and circumstances that are more common in the developed world. Although aggregate data on the precise proportion of R&D tailored to developing region needs is unavailable, the following figures suggest the seriousness of the bias. A 1996 WHO Report found that in 1992 only 5 percent of global R&D expenditures were directed at developing-country diseases other than HIV/AIDS.[28] More recently, the co-chair of Medecins Sans Frontieres’ Drugs for Neglected Diseases initiative estimated in 2002 that “less than 10% of the worldwide expenditure on health research and development is devoted to the major health problems of 90% of the population.”[29] These estimates find support from a review of the lists of “new medicines in development” provided by the Pharmaceutical Research and Manufacturer’s Association of America (PhRMA), the industry association for U.S. research-based pharmaceutical companies. In 2003, there were estimated to be 1122 new treatments undergoing testing in the drug development pipeline;[30] of these, only 26 (2.3%) had indications for neglected diseases.[31] Another indirect source of evidence on R&D expenditures are the lists of new drugs approved by the FDA. From 2001 to 2003, PhRMA members received approval for 62 new chemical entities and 31 new biologics, for a total of 93 new treatments. Of these, three (3.2%) had indications for neglected diseases, all for children’s illnesses.[32]
In terms of priority diseases, the numbers are even grimmer. A 1999 study found that of the 1,223 drugs licensed worldwide between 1975 and 1997, only 13 (1.1%) were for malaria or other tropical diseases and of these, only four were developed by pharmaceutical firms specifically for tropical diseases for humans.[33] A later study revealed similar numbers: of 1,393 drugs licensed worldwide between 1975 and 1999, a total of 16 (1.1%) were for tuberculosis, malaria and other tropical diseases.[34] Data covering more recent years suggest that the proportion remains dismally low. In a 2001 survey of twenty large pharmaceutical firms in the U.S., Europe, and Japan, of the 11 respondents (representing a combined 29% of the worldwide pharmaceutical market in 2002), eight had done no research over the past year in tuberculosis, malaria, African sleeping sickness, leishmaniasis, or Chagas disease, and seven spent less than 1% of their R&D budget on any of these disorders.[35] These findings are corroborated by our review of PhRMA members’ research: of 1122 treatments in the pipeline in 2003, only 12 (1.1%) were for these priority treatments.[36]