Transcript Restrictions on exports of medicine: irrational public

Restrictions on exports of medicine: irrational public
policy, backdoor efforts to marginalize compulsory
licensing, or Northern protectionism?
James Love
The Trans Atlantic Consumer Dialogue (TACD) Committee on
Intellectual Property meeting on the Impact of Intellectual
Property Rules on Consumers of Health Care Services
October 31 and November 1, 2002
Carnegie Institution of Washington
Washington, DC.
Economies of Scale and Scope are important
●
Few countries have
large enough domestic
markets to sustain cost
effective production.
Know-How is scarce for some
products
●
Trade secrets and other
barriers to technology
transfer limit the
number of sources for
some products
Generic competition works best with
several competitors
●
The WHO used a "rule of fives" to determine the
number of competitors needed to get the best
price
What types of drugs should be
included
●
●
●
Novartis charges more
than $160 per day for
some Leukemia
patients who need
Gleevec
Compulsory licensing
was threatened in
Brazil to obtain lower
prices.
Korea has CL case
now.
Singulair?
●
In Belo Horizonte
Brazil, Asthma is the
leading cause of
hospitalization for
children under 5.
The pharmaceutical market is projected to grow at 7.8 percent
annually to $406 billion in 2002. North America, Europe, Japan and
Latin America are projected to account for 85.2% of the worldwide
pharmaceutical market.
●
●
●
●
IMS estimates Africa will
account for only $5.3 billion
in sales, 1.3 percent of the
global market, and less than
Australasia market
All of Eastern Europe is $7.4
billion, or about the same
size as the Indian subcontinent.
Few countries in Latin
America or Asia have large
domestic markets
The European market is is
divided among several
distinct national markets,
under WTO rules
Few countries have domestic drug markets large
enough to justify manufacturing without exports
●
●
●
In 1999, the top ten
national markets
represented 79 percent of
global pharmaceutical
sales
Only 5 European
countries, 2 Asian and 1
Latin American country
had a larger domestic
market than Canada.
Population is not highly
correlated with market
shares
Global Pharmaceutical Market was $337.2 billion in 1999
US
Japan
Germany
France
Italy
UK
Spain
China
Brazil
Canada
Mexico
Argentina
South Korea
India
Australia
Belgium
Turkey
Source: IMS
Market
$130.0
53.4
18.5
17.7
11.3
11.0
6.6
6.2
6.2
5.6
4.9
4.0
3.9
3.4
3.1
2.7
2.7
Share Cumulative
38.6%
38.6%
15.8%
54.4%
5.5%
59.9%
5.2%
65.1%
3.4%
68.5%
3.3%
71.7%
2.0%
73.7%
1.8%
75.5%
1.8%
77.4%
1.7%
79.0%
1.5%
80.5%
1.2%
81.7%
1.2%
82.8%
1.0%
83.8%
0.9%
84.8%
0.8%
85.6%
0.8%
86.4%
Canada
●
●
●
Compulsory licensing was hampered by requirements for domestic
production. When those restrictions were removed, compulsory
licensing was expanded.
From 1923 to 1969 only 49 applications for compulsory licenses
were submitted and only 22 of these were granted. The main factor
why compulsory licensing failed was the requirement that the drug
be manufactured in Canada. The Canadian market was simply too
small to support a manufacturing facility. Generic companies took
much greater advantage of compulsory licensing to import than
they ever did with compulsory licensing to manufacture primarily
because it is considerably less expensive to import a drug than to
manufacture it. Consequently, between 1970 and 1978, 142
compulsory licenses were issued on 47 prescription drugs.
Source: Joel Lexchin, Pharmaceuticals, Patents, and Politics: Canada and Bill
C-22. International Journal of Health Services, Vol. 23, No. 1, pages 147-160,
1993.
Canadian “Article 30” WTO case
●
●
●
“Very few countries had fully integrated brand name or generic drug industries
within their borders. Even in large countries, generic producers frequently had
to obtain ingredients such as fine chemicals from producers in other countries.
Many countries had no generic industries at all and had to obtain generic (as
well as brand name) products from other countries. Smaller countries that did
have generic industries did not have domestic markets sufficiently large to
enable those industries to operate on an economic scale. Those industries had to
export in order to be able to manufacture in sufficient quantities to achieve
economies of scale, so that domestic consumers could receive the benefits of
cost-effective generic Products.
“. . . the market in the United States was large enough for generic producers to
manufacture on an economic scale. Very few countries were in that position.
"Pre-expiration testing" exceptions that had the effect of confining all activities
to a single country were of little use to countries that, unlike the United States,
depended on international trade to obtain generic products.
WT/DS114/R 17 March 2000 (00-1012)
No exports from rich to poor
countries
–
Even when there is an abuse of patent rights in both
countries.
–
If there was no alternative supplier from developing
countries, a likely scenario for some products for rare
illnesses, this would result in the compulsory license
only benefiting the wealthy country.
No exports from poor to rich
countries
●
●
Developing country generic producers would be
barred from selling products in the US, Germany
or other countries with large domestic markets,
making it difficult to achieve efficient economies
of scale for products, thus unnecessarily driving
up costs in the poor countries.
Indeed, it is difficult to imagine how poor
countries benefit from a legal barrier to selling in
rich countries.
Germany Roche/Chiron case
●
Roche asked in Germany for compulsory license
to HIV blood screening patent
Consider extreme cases
●
Spread of global infectious disease
●
Nuclear accident
●
Biological warfare
Two things that would help protect
legitimate interests of innovative
pharma companies
●
Amend TRIPS to allow rational limitations on
parallel trade
–
●
Restrictions on exhaustion that depend upon country
income or level of development
WHA should have agreement on limitation of
reference pricing