Peter Pitts on Prizes

by Ben Krohmal

Peter Pitts took part in a brown bag discussion today at CPTech during which he covered several topics, including prize fund approaches to medical innovation like H.R. 417 (title from 109th Congress). Peter co-founded and currently works full time for the Center for Medicine in the Public Interest (CMPI), a group that is funded by major pharmaceutical companies. Peter previously served as the FDA’s Associate Commissioner for External Relations, and has held positions at the Hudson Institute, as well as the Washington Times, the New York Post, Readers Digest, McCalls, and other publications. (See his CMPI bio here).

Pitts was invited to CPTech to present his perspective after writing some critical posts about the prize fund on CMPI’s blog www.drugwonks.com. The visit consisted of a fruitful give and take with Peter asking as much as he was asked. Peter expressed a number of concerns about a prize system for medical innovation, but the main complain was this: Pitts did not want governments to determine the value of pharmaceutical innovations.

In response to the concern about government involvement, it was suggested that prizes should be compared the current system, which involves a government run patent system that is frequently gamed by pharmaceutical lawyers, and prices set by third-party payers, including employers, insurers and increasingly, governments. Indeed, the role of the government in setting "prices" is likely to expand following the Democrats' takeover of the US House and Senate this week. Peter agreed that the patent/monopoly price system for drugs was flawed, but was skeptical that a prize system could be better.

One key feature of the prize system approach was discussed at length. The Sanders bill from the 109th Congress (HR 417) would look at evidence of the "incremental therapeutic benefit" of a drug. Pitts was quite uncomfortable with the notion that the incentives to innovate would be focused on incremental benefits.

A related technical issue that was discussed concerned the ways that a Prize fund would treat products that were in development at roughly the same time, and how incremental benefits would be calculated in such cases -- a point earlier raised by Dean Baker. One proposal by participants was to consider drugs that were developed at roughly the same time as if they were simultaneous developments, for purposes of determining incremental benefits.

Noah Novogrodsky on “Compulsory Licensing in Ghana – the Continuing Barriers to Affordable Medicines”

by Ben Krohmal

Last Tuesday, November 7 2006, at the Consumer Project on Technology (CPTech) Washington, DC office, Professor Noah Novogrodsky gave a talk on attempts to improve access to medicines in Western Africa, using the example of Ghana’s compulsory license for HIV-AIDS drugs (slides).

Professor Noah Novogrodsky is a Visiting Professor of Law at Georgetown University Law Center and the Director of the University of Toronto Faculty of Law International Human Rights Program. For each of the past three years, Professor Novogrodsky has taught a seminar titled “The HIV/AIDS in Africa Project” in connection with the work of Stephen Lewis, the UN Secretary-General’s Special Envoy on HIV/AIDS in Africa. Professor Novogrodsky’s current research agenda focuses on the HIV/AIDS pandemic as a threat to human security.

The presentation provided background on the “traditional” compulsory license regime under article 31 of the TRIPS and the 2001 Doha Declaration as a realization of the Human Right to Health.

However, the majority of the presentation focused on the new compulsory license mechanism under the WTO August 30th 2003 decision that was recently incorporated permanently into the TRIPS agreement under article 31 bis. The August 30th decision permits countries with generic manufacturing capacity to manufacture and export generic versions of patented drugs to developing countries which lack such manufacturing capacity (the so-called Paragraph 6 mechanism).

Professor Novogrodsky explained the University of Toronto-based Access to Drugs Initiative (ADI) work with Ghana to use the WTO decision. These efforts were initially geared toward providing a test for the Canadian patent reform implementing the Paragraph 6 mechanism, “Jean Cretien’s Pledge to Africa Act” (formerly known as Bill C9), that was intended to enable Canada’s robust generic industry (robust due in part to past use of compulsory license flexibilities by the Canadian Government) to take advantage of the WTO decision for the benefit of developing countries.

ADI hoped that Ghana would become the first country to import drugs under C9, and offered technical assistance filing a compulsory license. However, the effort did not go smoothly. Noah reported that the HIV community in Ghana is marginalized and securing treatment did not always seem to be a high priority for government officials. Noah also described a lack of communication between the Ghana Department of Health and the Department of Justice, a generally unsubstantiated perception of pressure from the U.S. government, and evidence of threats by pharmaceutical companies to retaliate for compulsory licenses by raising prices for other drugs.

Besides difficulties with coordination in Ghana, features of C9 itself created further impediments, including restrictions on eligible drugs (Schedule 1), eligible recipient (only listed countries can use the mechanism, and not NGOs or others), and a limited 2 year duration for the compulsory license that makes it difficult for generic manufacturers to recoup their costs.

Noah and the attendees commented on three attempts that have been made to modify the list the drugs eligible for exportation under the Canadian C9 regime:

First: The unsuccessful request by Essential Invention with the drug Glivec.
Second: The successful request by MSF that lead to the addition of AZT/3TC.NVP on September 2005.
Third: The successful request by Biolyse that lead to the addition of Oseltamivir on September 2006.

ADI was not able to obtain a Canadian Compulsory License to export, but Ghana finally issued a compulsory license in October 27, 2005 to allow importation of ARVs for government use. The supplier was an Indian generic manufacturer.

The presentation concluded with Noah’s proposal for a bigger picture solution. Noah suggested that it would be preferable for one country to obtain a license and then export drugs that it manufactures or imports to its neighbors with similar health needs. If this were permissible, he argued, Ghana could further develop its limited generic manufacturing capacity to serve the whole region, especially Nigeria, a country with a large HIV+ population.

Noah suggested implementing a regional arrangement to permit exports under GATT article 24. He claimed this would permit a developing country that is a party to a regional trade agreement (RTA) to export a product imported or locally produced under a compulsory license to neighboring countries belonging to the RTA. Noah suggested the Economic Community Of West African States (ECOWAS) as an example of a potential platform to do this, and he reported that ADI has worked with Ghana to incorporate an exception into its law based upon Article 24 of the GATT.

Noah and audience discussants debated if Article 24 of the 1947 GATT would actually allow this. There were also discussions of other efforts to reduce the need for redundant compulsory licensing including those operating through TRIPS article 6 (exhaustion of rights), anti-competitive grounds of article 31.k of the TRIPS Agreement, proposals for the use of patent pools. Some also speculated about the potential of the "goods in transit" exceptions.