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Understanding the Medical R&D Treaty Proposal
James Love, CPTech
MSF meeting on ensuring innovation for neglected diseases
London, 8 June 2005
Some context
The market for patented medicines
More than $500 billion globally
• Roughly 1.5 percent of global GDP
• Share of GDP is not highly correlated with incomes
• Africa is a little more than 1 percent of global market
Year Priority Standard
1993 13 12
1994 13 9
1995 9 19
1996 18 35
1997 9 30
1998 16 14
1999 19 16
2000 9 18
2001 7 17
2002 7 10
Total 79 180
Percent 31% 69%
US FDA Priority and Standard NME Approvals
Calendar Years 1993-2002
NCI Sponsored IND
50
No NCI IND27
Among All Anticancer Drugs That Received FDA Approval forMarketing in the United States as of January 1, 1996, 50 of 77products approvals relied upon National Cancer Institute SponoredClinical Trials
Source: National Cancer Institution, Division of Cancer Treatment,Program Information Booklet, Fiscal Year 1995.
US: Cancer Weapons, Out of ReachRobert Wittes, June 15, 2004, Washington Post
• Third-party payers will not react passively to pricing that increasingly threatens their balance sheets, especially as more drugs like these are commercialized over the next few years. They will carefully scrutinize all proposed uses of expensive new drugs. Historically, an FDA judgment of "safe and effective" -- the statutory criterion for drug approval -- has almost automatically triggered an agreement by payers to reimburse, which is the real gateway to widespread use and market success. We may now see payers deciding, for the first time, that certain novel "safe and effective" medicines are simply not worth paying for. In addition, payers will surely try to limit "off-label" uses of these drugs -- that is, uses other than the FDA-approved ones. Unlike other areas of medicine, physicians have commonly prescribed cancer drugs for a broader array of indications than specifically approved by the FDA, as clinical research routinely reveals additional uses after market introduction. A very high bar to new uses by payers is a virtual certainty.
Price of Singulair as a share of per capita income in South Africa
Income
decile
Percent of income
Novartis at the World Bank in 2004
• We consider India to be a market of 50 million
Research and Development
The patent system raises prices and investments in R&D, but it is a costly way to finance R&D, particularly for products that are new and better than existing products
Trade Disputes Involving Medicine
Agreements regarding intellectual property rights
• Multilateral– TRIPS, SLPT (TRIPS II)
• Regional– NAFTA, CAFTA, FTAA, APEC, etc
• Bilateral– US, EU
• Unilateral– US (301/AGOA, GSP, etc), EU (actions in
accession states, etc)
Selected countries with trade disputes over the price of medicine
• Australia - (US/AU FTA)• Canada - US unilateral trade pressure• Costa Rica - Government reimbursement policies raised
in CAFTA negotiation• Germany - US unilateral trade pressure• Korea - 1999 A7 pricing agreement, following US and
EU pressures, current US and EU disputes reimbursements
• New Zealand - US unilateral trade pressure• Thailand - Bush I/Clinton agreement to weak price
control measures• Turkey - Current EU unilateral trade dispute
Public Sector Investments in Medical R&D are left out of the “hard” trade framework, but remain part of the soft discussions
• Human Genome Project
• Fauci proposal at G8 for global AIDS vaccine effort
• Dozens of PPPs and other regional and multilateral collaborations
• Etc
Global frameworks compared
• Agreements that strengthen IPR and raise drug prices– Backed by dispute resolution– Unilateral trade sanctions
• Agreements to support public sector research, PPPs, priority research etc– Completely voluntary– Based upon moral suasion and public opinion
The Medical R&D Treaty as a new paradigm for
globalization
Main ideas
• Address the legitimate global issue of sharing the burden of financing R&D for new medicines– Include both public and private sector R&D– Flexible on choice of instrument to finance R&D,
including both push and pull mechanisms
• Introduce new mechanisms to address areas of priority
• Use economic incentives to drive research into areas of greatest need
Basic obligations1. Every country is required to support medical
R&DThe obligation would be a fraction of GDP
The fraction would depend upon the level of development
Minimum support for priority medical research
2. Countries would have flexibility in terms of how the R&D was financed and managed
Purchases of patented medicines, public sector research, prize funds, etc, would be allowed, to the degree that they stimulate R&D
Investments in certain projects will earn credits. These credits are tradable between countries
• Priority research/neglected diseases• Open research• Preservation and dissemination of traditional
medical knowledge• Technology transfer, capacity building• Exceptionally useful projects
Global and Local Decision making
• Global– Fraction of GDP to support medical R&D,
including priority R&D– Identification of prior projects– Accounting principles
• Local/National– Choice of R&D funding mechanism (public,
private, pull/push, etc)– Selection of specific projects
Impact on funding R&D for neglected diseases
• Driving investment– Credits for neglected disease R&D set at rate high
enough to stimulate investment– Credits can be used to satisfy treaty obligations.– Countries that have an excess of credits can sell
them to countries to are below treaty threshold.
• Capacity building and employment– Developing countries could become net suppliers of
R&D credits– Treaty also provides credits for technology transfer
and capacity building
Innovative pull mechanism – the US proposal for a medical innovation prize fund (HR 417)
• Radical change in method of stimulating private investment– Separate market for innovation and product– No marketing monopoly– .5 percent of US GDP in innovation prize fund– 10 year period of eligibility for new products
• Payments based upon evidence of incremental health care benefits– Some prize funds set aside for priority projects,
including $2.4 billion annually for neglected diseases
Treaty mechanisms overview
Country A
Treaty Secretariat
Purchase ofpatented drugs
13% PrizeFund
Directedresearch
Buy outApproveddrugs
InternationalProjectse.g. PPPs
Anothercountry’sproject
Country B
Report of treatyQualifying projects
Assembly for Medical Innovation (AMI)Treaty parties
Council Medical Innovation (CMI)
Committee on PriorityMedical Research (CPMRD)
Committee on OpenPublic Goods (COPG)
Committee on ExceptionallyUseful Projects (COEPUP)
Committee on openAccess publishing (COAP)
Committee on Technology,Transfer and Capacity (CTEC)
Committee on TraditionalKnowledge (CTK)
