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The Recommendations the UN High-Level Access to Medicines Panel Should Be Making

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In November 2015, United Nations Secretary-General Ban Ki-moon convened a high-level panel tasked with studying the relationship between intellectual property rights (IPRs) and access to medicines. The panel was charged with “review[ing] and assess[ing] proposals and recommend solutions for remedying the policy incoherence between the justifiable [intellectual property] rights of inventors, international human rights law, trade rules, and public health in the context of health technologies.”

Were this a panel pursuing a comprehensive research program considering the complete range of factors impacting access to medicines and incorporating a diverse set of voices representing the patients using and the enterprises producing those medicines; the governments and their health-care systems (public and private) procuring, distributing, and disseminating those medicines; and engaging the viewpoints of a broad range of stakeholders, it could have represented a serious and constructive dialogue toward tackling a significant global health challenge.

But the panel has given the game away from the outset. First, by starting from a position of supposed “policy incoherence” between IP rights, innovation, and affordable access to medicines; and, second, by focusing exclusively on IP as the main determinant of access to medicines. The German government reacted to this approach by writing to the panel that “the discussion on international health care policies should not be limited to questions of patent law.” Likewise, the U.S. State Department has noted that the panel’s exclusive focus on IP represents a “critical flaw” in its work. Beyond that, the panel has included scant representation from government and industry representatives and has offered little opportunity for public review or input into its developing report.

But that a United Nations panel should be starting from a point critical of IP should not be surprising. Unfortunately, it concords with an increasingly skeptical attitude towards intellectual property at the UN, well reflected in the United Nations Conference on Trade and Development’s (UNCTAD’s) 2014 Trade and Development Report, which, stunningly, contended that, “Strong IP protection may have little or no impact on innovation, while reducing the diffusion of foreign inputs and technologies and increasing their costs.” In short, it appears this is just another UN panel where IP is a plot by the developed North to keep the developing South down, this time with regard to public health.

If the UN panel is seriously concerned with promoting the discovery and diffusion of life-saving and life-improving medicines, its final report should cover at least four key points: a recognition of the fundamental role IP plays in the discovery of new medicines; the damage that biopharmaceutical price controls do to the machinery of the medical discovery process; the need to invest more in both biomedical research and public health systems, including subsidies for drugs; and the need to reduce tariffs and taxes on biopharmaceutical products.

First, the panel should recognize the key role that IP rights play in creating innovative environments that sustain the long-term discovery of innovative medicines—which is the fundamental first step in the world’s access to them. The panel could start by recognizing already existing work in this space, such as the Organization for Economic Cooperation and Development’s (OECD) report Trade & Innovation: Pharmaceuticals, which attributes part of the success of the pharmaceutical sectors of Brazil, China, and India to the introduction of patent protections. Moreover, that report demonstrates that stronger patent protection—alongside less stringent price controls—tends to encourage more or faster launches of drugs, while IPRs lead to much greater introduction of foreign pharmaceutical products into developing markets and helps contribute to the globalization of clinical trials.

They could move on to cite Margaret Kyle and Yi Qian’s work in Intellectual Property Rights and Access to Innovation: Evidence from TRIPS (the agreement on Trade-Related Aspects of Intellectual Property Rights), which examined the effect of pharmaceutical patent protection on the speed of drug launch, price, and quantity in 60 countries from 2000 to 2013 and found, among other things, that stronger IP rights can increase the availability of new treatments to patient populations in developing countries.

Likewise, they can consider the Hudson Institute’s new report, The Patent Truth About Health, Innovation and Access, which documents progress made since TRIPS was signed in 1994, such as how health funding in developing countries has multiplied five-fold since 1990. Or it could consider a Matrix Insight report, Wealth, Health and International Trade in the 21st Century, which concludes, “Conferring robust IP rights is, in the pharmaceutical and other technological-development contexts, in the global public’s long-term interests. Without adequate mechanisms for directly and indirectly securing the private and public funding of medicines and vaccines, research and development communities across the world will lose future benefits that would far outweigh the development costs involved.” In short, as ITIF has written, by allowing innovators to capture an adequate portion of the benefits of their innovative activity, IPRs are indispensable in endowing innovators with the resources—and incentive—to pursue the next generation of innovative activities, engendering a virtuous cycle of innovation.

Second, the panel should recognize that countries which impose overly strict regulations on the prices of biopharmaceutical drugs inhibit innovation and disincentivize companies from entering markets to provide more innovative health-care solutions. For example, a study which examined the 28 largest pharmaceutical markets between 1980 and 2000 found that countries with strict price controls hurt both domestic innovation in the life sciences as well as domestic consumers. Indeed, as the OECD explains, “There is a high degree of correlation between sales revenues and research and development expenditures.” In short, overly restrictive price controls levied on biopharmaceuticals mean less revenue for companies to invest in R&D, which matters when research in pharmaceutical economics continually demonstrates that innovative pharmaceutical output is strongly linked to reasonable revenue streams.

Third, the panel should encourage more investment. Here, it should first take lessons from ITIF’s report, How National Policies Impact Global Biopharma Innovation: A Worldwide Ranking, which found that the global community is not doing enough to invest in life-sciences innovation, and accordingly encourage more governments (particularly in the developed world) to bear the true costs of biopharmaceutical discovery (both in terms of biopharmaceutical R&D and paying for innovative drugs). At the same time, the panel should also encourage low-income and developing nations to invest more to improve their health-care capacity and infrastructure and increase investment in domestic healthcare spending. This challenge is particularly acute because there is an estimated global shortage of at least 7 million health-care workers. And, in fact, the vast majority of drugs on the World Health Organization’s (WHO) Essential Medicines list are off-patent, but yet hundreds of millions of citizens in developing countries are not receiving them, in large part because of those countries’ underdeveloped health-care systems.

To abet this, developed nations should increase foreign aid to developing nations, particularly to help improve their health-care capacity, infrastructure, and drug requisition (although only if these countries enact strong IP protections and eschew extensive pharmaceutical price controls). Likewise, we should encourage drug companies to lower prices in poor nations and to expand access programs for the world’s poorest.

Finally, a related component of the underinvestment problem is the high taxes and tariffs that all too many countries continue to impose on biopharmaceutical products. For example, according to the World Trade Organization, in 2014, the average customs tariff applied to imported medicines reached 10 percent in India, 7 percent in Mexico, and 5 percent in China. At the same time, a 2011 World Health Organization study, Medicine Prices and Availability, found that the average domestic tax rate on medicines in selected low- and middle- income countries averaged approximately 14.8 percent and ranged from 2.9 to 34 percent. Such high tariffs and taxes on biopharmaceutical products can significantly inhibit their availability and affordability, and play a significant role in constraining access to medicines.

There’s clearly still much work that needs to be done to promote access to medicines in developing countries. But the reality is that, since the TRIPS agreement went into force, life expectancy at birth in low-income nations has increased by over 10 years. And a fundamental reason why is a global system of IP rights, embodied in TRIPS, that encourages novel, life-saving biomedical innovation while also allowing for pathways for novel drugs to eventually turn into generic drugs and for a broad set of mechanisms to diffuse drugs of both types to the world’s citizens. Intellectual property (alongside R&D) is the birthplace—not the inhibitor—of global access to medicines, and we would hope that as part of its mandate the UN high-level panel will give due consideration to all the factors that inform global citizens’ access to medicines.

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About the author

Stephen Ezell is vice president, global innovation policy, at ITIF. He focuses on innovation policy as well as international competitiveness and trade policy issues. He is coauthor of Innovating in a Service-Driven Economy: Insights, Application, and Practice (Palgrave MacMillan, 2015) and Innovation Economics: The Race for Global Advantage (Yale, 2012). Ezell holds a B.S. from the School of Foreign Service at Georgetown University.