Swallow the Pill and Jump in the Patent Pool

Swallow the pill and jump in the patent pool.

A study into how an HIV/AIDS patent pool would result in cheaper drugs and increased research for African sufferers.

Nathan Modell

(Intellectual Property Dissertation 2003)

Contents

I.  Abstract

II.  The present HIV/AIDS situation in Africa.

III.  A Brief history of the TRIPS agreement, its aims and objectives.

IV.  TRIPS guidelines on pharmaceuticals, Article 31 (f) and issues associated with it.

V.  The Doha declaration

VI.  Patent pools

VII.  The Manufacturers Aircraft Association (M.A.A.), the US Government’s use of patent pools as a solution to the patent problem.

VIII.  How the proposed HIV/AIDS Patent Pool (H.A.P.P.) would operate.

IX.  Which Patents would be included within the patent pool.

X.  Benefits of an HIV/AIDS patent pool to sufferers, especially those currently unable to afford them.

XI.  Benefits of an HIV/AIDS patent pool to Pharmaceutical companies.

XII.  Criticisms of patent pools

XIII.  Conclusion

I.  Abstract.

Under the guise of promoting free and international trade, the Trade Related
Intellectual Property Rights Agreement (T.R.I.P.s) imposes unfair,
detrimental and exploitative intellectual property obligations upon
developing countries. This article reports on these disadvantages by
focusing on the AIDS crisis in Africa, caused in part by the patenting of
pharmaceuticals. An essential healthcare patent pool
could be a solution to the current situation.

A patent pool is an agreement between two or more patent owners to offer licenses in those collective patents for a small licence fee. A patent pool would allow the
production and distribution of vital healthcare drugs to the millions of
AIDS sufferers currently unable to afford treatment. It would also
facilitate reasonable royalties to be distributed to drug companies who
currently receive little or no revenue from African countries. A Patent pool would benefit co-operation between pharmaceutical companies leading to a faster, more effective and cheaper product development.

II. The present HIV/AIDS situation in Africa.

More than 90 percent of the 10 million people who die from infectious diseases each year are from the developing world[1]. The leading causes of illness and death in Africa, Asia and South America, regions that account for four-fifths of the world’s population, are; human immunodeficiency virus (HIV), acquired immune deficiency syndrome (AIDS), respiratory infections, malaria, and tuberculosis.[2] This article is specifically concerned with the HIV/AIDS crisis in Africa.

There are, at present, 29.4 million HIV positive African’s[3], equating to approximately half the population of the United Kingdom. These figures are set to increase at a rate conservatively estimated at 15 percent per annum. The HIV/AIDS pandemic presently being witnessed in Africa has wide ranging socio-economic consequences from farmers not being able to farm their land and provide for their families to the governments of those countries defaulting further on the loans they owe to developed.

There is currently no cure for HIV or AIDS, there are however, drugs known as antiretrovirals (ARVs) which, when taken in combination with other drugs, help to contain and control the onset of the virus allowing the sufferer to maintain what is as close as is possible to a normal day-to-day existence[4]. The combinations of these drugs can be altered to provide medium to long-term treatment for the rest of the patient’s life or until a cure for HIV/AIDS is found.

The cost of treatment in the United Kingdom is approximately £10,000 per annum,[5] which is paid for by the National Health Service or in the US, for example, by health insurance companies.

Many Africans catch the virus, pass it on and die from it without even knowing they have it. There is little point in being diagnosed when there are no drugs to treat you, or more accurately where few can afford treatment.

The cost of treatment in Africa is considerably lower than in developed countries, but it is still prohibitively expensive at approximately $1000[6] per year. When this cost is compared to the income per capita in Malawi, an African state, of only $170[7] it is easy to see why so few are being treated.

The reason, in part, as to why pharmaceuticals are so expensive is the result of strong intellectual property protection in the form of patents.

Patents are an intellectual property right, a privilege granted to inventors which act as rewards for their invention. A patent is a monopoly over the invention for 20 years intended to be an incentive for innovation and to enable inventors to recover their costs[8]. In allowing individuals or corporations to own and exploit these rights those granting the rights, governments and trade organisations, balance the privileges of ownership with the public interest.

The balancing of patent privilege and public interest relies on those applying for patents and those granting being of equal bargaining power. With many large multinationals being worth more than some countries this may not always be the case, especially if such multi-nationals have the backing of their own governments, who may be applying pressure to protect corporations which in turn support them through donations.

The problem with pharmaceuticals, especially with regard to HIV and AIDS, is that a combination of drugs need to be used, each drug having its patent owned by different corporations each wanting their share of money.

The major pharmaceutical companies defend the high prices resulting from patented pharmaceuticals by arguing that these revenues are needed to fund new product development. The pharmaceutical companies estimate that the cost of developing a new pharmaceutical are as high as $802 million[9]. Critical observers believe these figures are over inflated, including the opportunity cost (the cost of not investing the money elsewhere), more reasonable estimates are between $100 million and $200 million[10].

Another obstacle to the development of new pharmaceuticals is the lack of co-operation between organisations, which charge extortionate licence fees or just refuse to co-operate.

When it is recalled that many new pharmaceuticals are researched and developed in co-operation with governments and publicly funded research from universities, such as azidothymidine (AZT)[11], patent ownership and exploitation seem even more absurd.

What results is more timely and expensive research to ensure that patents are not infringed. If pharmaceuticals were not patented, or an essential HIV/AIDS pharmaceuticals patent pool established then products could be developed more openly and patented drugs combined to form new more effective compounds.

If pharmaceutical organisations were to co-operate and share patents then a cure to HIV/AIDS would arguably be more easily found using existing patented pharmaceuticals rather that having to start from scratch each time.

III. A Brief history of the TRIPS agreement, its aims and objectives.

Patents in pharmaceuticals are, globally at least, a recent development. Until the Trade Related Intellectual Property rightS (TRIPS) agreement, many countries refused to recognise patents in pharmaceuticals. Pre-TRIPS, for example, the Indian Government did not recognise such patents, which has lead to a large and successful generic drug industry, including the Cipla organisation, which are able to supply life saving copies of drugs at a fraction of patent drug prices.

The TRIPS agreement came into existence as a replacement of the General Agreement on Tariffs and Trade (GATT) during the Uruguay round of World Trade Organisation (WTO) talks between 1988 and 1994[12]. The negotiations were lead by a group of 14 developed countries[13], the momentum was to establish an international system of recognising and protecting international intellectual property rights. Before TRIPS intellectual property rights were protected by the Berne and Paris conventions, both administered by the World Intellectual Property Organisation, to which not all WTO countries were members and there were no means of enforcing them.

TRIPS sought to overcome these issues by requiring all WTO member states to recognise and uphold substantial parts of both conventions ensuring international recognition and protection for copyrights, patents and trademarks.

The preamble of TRIPS states;

Members,

Desiring to reduce distortions and impediments to international trade, taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade.[14]

Drafting of the agreement places great emphasis on the intention to aid international trade.

Developing countries were initially resistant to intellectual property becoming part of the WTO’s portfolio, seeing such a development as damaging. Developing countries were told that in exchange for recognising and protecting intellectual property rights they would be able to trade more freely in developed markets.

In recognition of developing countries issues and disparities, the least developed countries were allowed a longer time period to implement TRIPS than developed countries. Developed countries had one year expiring on January 1 1996 and the least developed were granted an additional 10 years until January 1 2006 to implement.

There were several major changes to existing intellectual property agreements that TRIPS brought about relating to patents.

Article 27 (1) of TRIPS requires that patents be available in all fields of technology, provided that they meet the criteria of novelty, capability of industrial application and involve an inventive step. This includes pharmaceutical and biotechnological inventions.

Enforcement and dispute resolution was made available on an international level, under the control of a WTO dispute resolution panel. After an alleged infringement is reported a WTO panel of experts have at their disposal the use of injunctions backed up with the formidable threat of WTO trade sanctions.

IV. TRIPS guidelines on pharmaceuticals, Article 31 (f) TRIPS and the issues associated with it.

Compulsory licensing, or use without authorisation of the right holder is acknowledged under Article 31 for governments in a national emergency. This allows a government or an authorised third party to infringe a patent in certain circumstances. Article 31(f) however, states;

any such use shall be authorised predominantly for the supply of the domestic market of the Member authorising such use.[15]

This clause therefore limits the use of compulsory licenses to Member State’s that have the facilities available to them to facilitate the production of patented items. In the area of pharmaceuticals, which is a high-tech and expensive industry, very few countries have the ability and infrastructure to produce them. An example of modern compulsory licensing is the recent situation in the United States and Canada is for the production of Ciprofloxacine, a drug for the treatment of anthrax whose patent is owed by German pharmaceutical company Bayer. The US and Canadian governments were concerned that Bayer may not be able to produce enough Ciprofloxacine and offer it at a reasonable price in light of recent anthrax scares, so considered setting aside Bayer’s patent.[16]

A further limitation is placed on compulsory licensing through Article 31(h), which states;

that the patent holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorisation.[17]

TRIPS has resulted in a very significant shift in the balance in the intellectual property regime away from the public interest towards the monopolistic privileges of intellectual property rights holders,[18] allowing wealthy intellectual property owners to protect their interests at the possible expense of public interest.

V. The Doha declaration.

While TRIPS does offer safeguards to remedy negative effects of patent protection or abuse, in practice it is unclear whether and how countries can make use of these safeguards when patents increasingly present barriers to medicine access.[19]

An example of which was South Africa’s decision to implement compulsory licensing for HIV/AIDS treatment drugs, for which the US placed trade sanctions.

As a result of such confusion and international outrage against TRIPS and developed countries placing unfair sanctions on developing countries the WTO ministerial conference in 2001 at Doha, Qatar resulted in what seemed like a landmark declaration.

The declaration reaffirmed the recognition of intellectual property rights but stated that in the case of conflict with public health issues these may override commercial interests. It confirmed the right of governments to grant compulsory licences and to determine the ground on which they are granted. It also confirmed the right of governments to implement parallel importation, a process whereby legally produced patented products are imported from other countries where they are patented.[20]

The declaration acknowledges the right of countries to take measures to protect public health, if intellectual property rights prevent this then governments are entitled to override patents.

The declaration also grants an additional ten years to the least developed countries to implement pharmaceutical patent protection, up until 2016. Only time will tell if this declaration marks the turning point to readdressing the intellectual property balancing act between rewarding innovation and benefiting society, however it is clear that it is only a partial solution.

VI. Patent Pools.

A “patent pool” is an agreement between two or more patent owners to license one or more of their patents to one another or third parties. [21] It is usually a collection of patents essential to a specific area of technology that are held and administered by an independent entity that manufactures or licences the patents to third parties for a royalty payment, which is then distributed amongst the pool’s patent owners.

In the area of pharmaceuticals, especially HIV/AIDS treatment, such a pooling of patents would be beneficial in reducing the cost of treatment to patients and would be beneficial to pharmaceutical companies in that costs of research and development would be substantially reduced.

James Love made a presentation proposing the idea of an essential healthcare patent pool on July 8 2002 in Barcelona at the XIV International Aids Conference[22]. At this conference, James Love used as an illustration the example of the Manufacturers Aircraft Association (M.A.A.) patent pool, which the US government created in 1917, to end litigation over essential aircraft patents in order to build a domestic aircraft industry.

James Love envisaged a non-voluntary essential healthcare patent pool that would be administered independently of the drugs company, to which individuals could petition to have new drug patents added to the pool. The pool would consist initially of the drugs on the World Health Organisation’s Essential Healthcare list[23], of which at present there are only 20 patented drugs[24]. Additional patents would then be added and removed as the managers of the pool saw fit. A royalty fee would be payable by those using any of the patents within the pool, the amount of that royalty would be determined by the patent pool, based upon transparent royalty guidelines and expert opinion.