1.

Problem definition: India became a signatory to Trade-Related Aspects of Intellectual Property (TRIPS) when it joined the World Trade Organization (WTO) on January 1, 1995 and fully implemented TRIPS on March 23, 2005 . The purpose of TRIPS is to standardize the protection of intellectual property (IP) rights under common international rules, establishing minimum levels of protection that each government has to give the IP of fellow WTO members . The reasoning is that IP protection promotes innovation and stimulates research and development and that the short term costs to society will be balanced by the long term benefits . India is recognized for its world-class generic pharmaceutical industry, which is a vital source of affordable medicines for people across the developing world . Prior to 2005, India did not grant patents for pharmaceutical products and so generic versions of many medicines were freely produced in India, where they were used not only by its own population but perhaps more importantly for export to developing countries. With the adoption of TRIPS, India has had to start granting pharmaceutical patents to comply with the WTO rules. As a result, India can no longer produce affordable generic versions of new drugs without infringing on the patents held by the originator companies . The problem that exists is that the costs of new patented drugs are unaffordable to those in low- and middle-income countries, resulting in poor access to medicines. 2. Assemble some evidence: Prior to 2005, India freely produced generic versions of many drugs and exported them to developing countries. Many of these generic drugs have been shown to be very cost-effective, with equal efficacy to originator drugs at a fraction of the price. The World Health Organization (WHO) has a Prequalification

Programme where it evaluates the effectiveness of medicinal products on the standards of quality, safety and efficacy . Multiple drugs by Indian manufacturers have been approved for use in this program and many donor organizations including the Clinton Foundation Health Initiative and the Global Fund encourage the use of cost-effective prequalified drugs for Human Immunodeficiency Virus (HIV), Malaria and Tuberculosis (TB) treatment . Also, the AIDS drugs that are used by Mdecins sans Frontires to treat over 100,000 patients worldwide are primarily supplied by Indian generic manufacturers . However under the TRIPS legislation, any new drug produced must be patented by the WTO member country for 20 years with the patent-holder maintaining exclusive rights over the manufacture and sale of the drug . Without the competition offered to originator companies by generic companies, such as those in India, the costs of newer drugs will not decrease and will remain unaffordable to those in the developing world. For example, generic competition has resulted in a huge price decrease for the fixed-dose combination antiretroviral Triomune (3TC/d4T/NVP) from $10,000 per year in 2001 to $87 currently. On the other hand, Tenofovir is recommended by WHO as a first-line drug regimen for AIDS, but inclusion of this drug in the regimen increases the price of treatment from 2 to 11 times more than the previous cost, affecting the ability of many countries to access this drug for treatment of their patients . The WTO alleges that IP protection will increase research and development (R&D) for all of society, especially after the patent expires when the inventions enter the public domain. Originator pharmaceutical companies agree that patent protection and the resultant profit generated as a result will stimulate R&D . However, big pharmaceutical

companies have little incentive to innovate medicines for diseases primarily affecting developing countries due to the lack of profit, and so the incentive effect of intellectual property rights is limited, and these companies do not focus R&D on neglected diseases . The TRIPS agreement also allows governments to issue compulsory licenses as a safeguard against a patent owner who refuses to supply the product in their market, allowing a competitor to produce the product or use the process under license. But this can only be done under certain conditions aimed at safeguarding the legitimate interests of the patent-holder . This WTO-enforced monopoly of drugs not only permits originator pharmaceutical companies to charge high mark ups and set their own prices for their drugs in all countries, it also allows them to make the drugs available to only those countries which they so choose, effectively denying complete access to many developing countries. Since much of the needed evidence already exists, it is very feasible to do an analysis of the literature to obtain information on drug pricing, drug affordability and access, numbers of individuals at risk, compulsory licensure use, voluntary differential pricing that has already been attempted, etc.. Furthermore, gathering information on patent buy-out proposals and strategies for an international R&D treaty is also quite feasible . The feasibility decreases considerably, however, when consideration is given to conducting a pilot project, involving evaluating one disease or a family of drugs to ascertain whether the various alternatives do in fact increase drug affordability while not harming the R&D of pharmaceutical companies. 3. Construct the alternatives:

a. Compulsory licensure: Compulsory licensure allows any country to use a patent without permission, while not affecting the patent owners rights in other countries. For example, Country A may issue a compulsory license in order to protect public health of its members at its own discretion which is completely legal within TRIPS . Another exporting country, Country B could then produce a generic version of the patented drug for use only in Country A. Country A would then pay a royalty to compensate the patent holder. This process would need to be repeated for each drug needed. This has been used previously by a few countries, including the U.S. (compulsory license for Bayers Cipro during the anthrax scare) and has led directly or indirectly to the lowering of the price of the originator drug. Furthermore, it has not been found to damage global pharmaceutical innovation . b. Voluntary differential pricing: The originator companies provide the drug at reduced prices for some low-income populations but still retain ownership of the IP. This could be effective if used for all essential drugs (as defined by the WHO) but has been shown to be ineffective in reality , with prices remaining unaffordable for many countries. Originator companies fear pharmaceutical arbitrage from low- to high-income markets but this has been rarely observed . c. Patent buy-outs: A global mechanism could be created (via donors, international funds, etc.) to purchase pharmaceutical patent rights for low- and medium-income populations and subsequently donate them to the public domain. Generic companies could then manufacture the drugs and distribute them globally at lower market prices . This would also allow the originator

company to continue R&D, partially funded by the purchase of the patent. The buy-out prices for drugs in low-income countries have been estimated to be quite modest but need to be high enough to optimize innovation and low enough to be affordable as a finance mechanism . d. Global R&D treaty: A global treaty on medical innovation has been proposed to serve as a coordination mechanism preventing high-income countries from violating patents while specifying the conditions of R&D for low- and middle-income countries . It would not commit any particular method for meeting R&D obligations: maintaining patents, government financed R&D, patent buy-outs, etc. Since each country could choose its own mechanism for innovation, different drug price levels would probably result and pharmaceutical arbitrage may become a concern. e. Status Quo: Allow current trends to continue undisturbed. The alternatives selected are based on those that have been addressed by prominent actors in the fields of economics, law and medicine. They were found to be the most useful proposals generated and studied. Two alternatives were eliminated. Firstly - Modification of the TRIPS policy to exclude patent legislation of essential medicines. This alternative did not appear to be feasible since there would be strong opposition from WTO members, new legislation would be needed and essential medicines would be difficult to define (changing with changing innovation). Secondly - Voluntary patent pools. Although currently being undertaken by UNITAID, it was not considered as an independent alternative partly

because it is considered too complicated and not feasible to devise patent pools for every disease but primarily because it has many similarities to patent buy-outs in the analysis. 4. Select the criteria: a. Affordability of drugs for low- and middle-income countries: Whether the alternative will result an increased affordability of drugs for patients in low- and middle-income countries is of prime importance. Affordability is defined as the number of days wages required for the lowest-paid government worker to purchase a 1-month supply of the drug . b. Feasibility of implementation: The relative ease or difficulty of the implementation of the alternative should be considered. Legal, time and resource perspectives are of importance as well consideration as to whether such an alternative can be implemented on a worldwide scale. c. Fairness: A measure of whether the alternative fairly allocates resources especially based on need, equity, etc. is important. The alternatives being considered should allow drugs to be available fairly and equitably. d. Research and development: Since one of the major arguments in support of IP laws and resulting patent legislation is to stimulate R&D for all diseases, the impact that the alternative will have on R&D should be considered. The criteria of affordability, feasibility and R&D are the major issues that surface when IP laws are discussed. Fairness is added to ensure that those who are most in need equitably benefit from the alternative. The affordability criterion is weighted most important as it is the exact problem that is being addressed. Feasibility is considered

secondly since it is unlikely that pharmaceutical companies and the WTO will agree to completely change the TRIPS policy. Fairness and R&D are fairly equally weighted. Project the Outcomes: Status Quo Affordability Feasibility Fairness R&D 0 0 0 0 Compulsory licensure + + Voluntary diff. pricing ++ ++ + Patent buyouts ++++ + ++ ++ Global R&D treaty ++++ -+++ +++

a. Compulsory licensure: By utilizing this alternative, the licensing country should be able to obtain an affordable generic drug via the exporting country. (However, since only one drug will be produced at a time, the price will not be as low as through generic competition). This alternative is legal and has been undertaken before, but the true compulsory licensing process is very cumbersome and time-consuming and is often challenged at many levels, hence reducing the feasibility of this option. This alternative is also not very fair in being able to provide affordable to drugs to those in need. The complicated process has to be initiated by a low-income country using significant legal representation and involving substantial time and expense (authors own experience with Canada's Jean Chrtien Pledge to Africa Act); this is not fair for those countries that lack in these required human and material resources. However, this alternative will generate R&D since originator companies will maintain their IP protection and will recoup on their development costs and should continue to invest in innovation. b. Voluntary differential pricing: This alternative does result in greater affordability than the status quo, since originator companies preferentially lower prices for some countries. However, this alternative has been shown to be inconsistent and still

unaffordable to most of those in need . It is quite feasible and has already been used many times by originator companies. Fairness is judged to be low since originator companies retain full control and solely decide the differential price which is often too expensive and/or not truly available for those in need . This alternative should also generate R&D since originator companies will maintain their IP protection and will recoup on their development costs and should continue to invest in innovation. c. Patent buy-outs: This alternative should significantly increase affordability of drugs since competition will permit the widest possible distribution at the lowest possible market price (similar to pre-1995). It should be feasible from a legal point of view; however the process to establish the global mechanism will be time-consuming and complicated. Furthermore, the source of the money for the patent purchase would need to be determined and have guaranteed sustainability. A model similar to that of the Global Fund to fight Aids, Tuberculosis and Malaria may be possible. (Some experts do not recommend buy-outs at all but suggest forcing pharmaceutical companies to choose between having a patent for a drug in high income or low- and middle-income countries but not both ). Although this approach appears to be more sustainable, the legal procedures and opposition for the pharmaceutical companies would have to be considered.). This approach would be very fair for those in need, allowing generic medications to become available at lower prices through competition. R&D should also be high since pharmaceutical companies would have money from the patent buy-outs to continue to fund innovation. d. Global R&D treaty: This alternative should also significantly increase affordability of drugs by separating the global market for innovation from the market for drug sales

. The feasibility of the treaty is not very high since it would require completing changing the current TRIPS agreement and although various models have been proposed there has not yet been success in producing affordable drugs. Also, different drug price levels would result in various countries and so opposition by pharmaceutical countries citing possible cross-border arbitrage is likely. With respect to fairness, it is ranked the highest since it allows every country to determine its own method of meeting its R&D obligations and would probably result in the most equitable distribution of resources. The treaty is projected to increase R&D, especially for neglected diseases through cost sharing rather than protecting property rights. e. Status Quo: This is used as a comparison for the other policy alternatives. 5. Confront the trade-offs: One alternative does not dominate any other but since Compulsory licensure is consistently the lowest ranked in all of the evaluative criteria, it will be eliminated from consideration. For the remaining 3 alternatives, trade-offs will have to be realized regardless of the alternative chosen. Based on the weighting described in section 4 above, affordability followed by feasibility and then fairness and R&D will be ranked in order of importance. Patent buy-outs and the global R&D treaty give equal affordability of drugs for low- and middle-income countries. Voluntary differential pricing is found to be the most feasible option, patent buy-outs has good feasibility and the global R&D treaty is not thought to be very feasible currently. The global R&D treaty ranks the highest for both fairness and R&D, followed closely by patent buy-outs and lastly by voluntary differential pricing, which is not considered to be very fair overall.

If voluntary differential pricing is selected, it will be more feasible than the other 2 alternatives but will be relatively less fair and will generate less R&D. If patent buy-outs is selected, it will generate more affordable drugs but it will not be as feasible as voluntary differential pricing. And if the global R&D treaty is selected it will generate affordable drugs, have good fairness and R&D potential but it will not be as feasible as either voluntary differential pricing or patent buy-outs. If weighting of criteria is altered, depending on ones priorities and beliefs, the tradeoffs will also be affected. 6. Decide: I would recommend the alternative of patent buy-outs. This alternative will result in affordable drugs for low- and middle-income countries which will directly address the problem. Also, it should be feasible to accomplish since the existing IP and patent system could remain in place. Although the buy-out of patents (funding and mechanism) may be somewhat complicated, it is possible to achieve and can be modeled after existing programs. This alternative is also fair to those in need (and to the pharmaceutical companies as well) and will continue to stimulate R&D. Although the global R&D treaty would also result in many positive outcomes, its poor feasibility resulted in it not being chosen as the current best alternative. 7. Tell your Story: The audience is the WTO members at their next meeting, where I would attempt to give a short presentation on the above. The short summary is: The costs of new patented drugs are unaffordable to those in low- and middle-income countries, resulting in poor access to medicines. If we leave IP laws undisturbed and arrange a system to purchase pharmaceutical patent rights for these populations, consequent generic competition will result in affordable prices for drugs while the

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payment for patents to originator companies will contribute towards much needed R&D.

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Mdecins sans Frontires Campaign for Access to Essential Medicines. (2008a). Patent barriers. Retrieved 10/15, 2009, from http://www.msfaccess.org/main/hivaids/introduction-to-hivaids/patent-barriers/ Mdecins sans Frontires Campaign for Access to Essential Medicines. (2008b). Promoting generic competition. Retrieved 10/12, 2009, from http://www.msfaccess.org/main/hiv-aids/introduction-to-hivaids/promoting-genericcompetition/ Mdecins sans Frontires Campaign for Access to Essential Medicines. (2008c). Untangling the web of antiretroviral price reductions: 11th edition Outterson, K. (2006). Fair followers: Expanding access to generic pharmaceuticals for low- and middle-income populations Swissinfo/Swiss Radio International (SRI). (2006, NGOs attack novartis over drug access. The Global Fund. (2009). The global fund to fight AIDS, tuberculosis and malaria. Retrieved 10/15, 2009, from http://www.theglobalfund.org/en/ World Health Organization, Health Action International. (2003). Medicine prices: A new approach to measurement. World Health Organization: Prequalification Program. (2009). WHO list of prequalified medicinal products. World Trade Organization. (2008). Understanding the WTO: The agreements: Intellectual property: Protection and enforcement Retrieved from http://www.wto.org/english/theWTO_e/whatis_e/tif_e/agrm7_e.htm

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