Open Licensing for Generic Medecines

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From the KEI blog, May 2008:

"two models are emerging for the supply of medicines and vaccines. Under the IFPMA/EU/Gates Foundation supported models, the innovator companies would be guaranteed exclusive rights to supply products, but in some cases, with pricing concessions negotiated with the governments or donors who buy or subsidize purchases of drugs and vaccines. The alternative approach, backed by many public health and development NGOs, emphasize open licensing of intellectual property rights and know-how to enable supply from a competitive generics sectors.

In the context of the debate over new “pull” mechanisms to act as incentives for R&D, there is a battle over these two approaches. The Advanced Purchase Commitment (APC) and Advance Marketing Commitment (AMC) models backed by various Gates Foundation funded groups and by certain European governments, include strong monopoly supply provisions. The prize models advocated by KEI, MSF, HealthGap, Barbados/Bolivia (the 2Bs) and others, emphasize a complete de-linking of R&D incentives from the price of the products, and the open licensing/competitive supply model.

If fact, both prizes or AMCs could be implemented with or without monopolies or open licensing. For example, the US Congress recently enacted a huge prize program for new medicines — the priority review voucher, which proponents say will be worth an estimated $300 million, just for registering a drug or vaccine for a neglected disease. If implemented as a fully tradable voucher, the full value of the prize will be available to any drug or vaccine developer, including non-profit ones like DNDi. This prize is not tied to any obligations on pricing or licensing of inventions. It is purely a “complementary” incentive, unlike the 2Bs prize proposals, which are all designed to be alternative incentives, tied to open licensing.

Most of the recent AMC proposals look like prize funds, albiet in some well-known cases with fairly rigid specifications of the technological outcomes that earn the prizes, and with only a limited number of known competitors expected to have the capacity to “win” the prizes.** These proposals could have been implemented with open licensing for the products themselves, but they were not. Conversations with European governments make it clear why. The political power of the big drug companies like GSK and Merck, who lobby against open licenses.

Recently the academic researchers Aidan Hollis and Thomas Pogge have proposed a Health Impact Fund (HIF). Although technical details remain elusive on key points, and are not forthcoming from Pogge yet (despite numerous KEI requests for clarifications), the HIF reward system seems to increasingly be modeled after the approaches set out in the first medical innovation prize fund proposals* — some type of reward for the impact of the products on health outcomes. Pogge make a lot of effort to say his fund is different from a prize fund, but it is hard to see why from the reward mechanism. What is different about the Hollis/Pogge HIF is the sole source (monopoly) supply feature. This is new, however, as both Hollis and Pogge recently advocated open licensing and competition for supply. Now they are firmly in the Gates/EU/IFPMA camp of sole source suppliers, at negotiated prices. Why the switch? Does it matter?

Under the HIF, companies “opt-in” for the prizes, in return for lower product prices. But they keep the monopoly, even if they take the prizes. Companies that “opt-out” of the prize/low price system can do whatever they like, including charging prices developing countries cannot afford. Developing countries could threaten compulsory licenses for high priced “opt-out” products. But who can supply the generic alternatives, unless there is a market, somewhere, for generic products? This is one of the problems with the HIF approach. Another is that it is deliberately being marketed to undermine support for “prizes” which Pogge says are a bad idea, as if the Hollis/Pogge reward system is anything more than a copy of the early prize fund reward systems.*

All of this matters a lot. Both China and India are now implementing the TRIPS, and it is becoming increasingly more difficult to find generic suppliers of APIs who are truly independent. Many of the leading Indian companies, like Ranbaxy, have been co-opted by the big pharmaceutical companies. If the “new” incentive mechanisms are wedded to monopolies, it will be harder, not easier, to get affordable prices, for both the ones receiving the prizes, and the one’s outside of the prize systems." (