[Ip-health] Economic Times: Why India needs to back a new R&D treaty in health sector

Thirukumaran Balasubramaniam thiru at keionline.org
Thu Jul 5 06:17:31 PDT 2012


5 Jul, 2012, 06.02AM IST, Naren Karunakaran,ET Bureau 
Why India needs to back a new R&D treaty in health sector

Barely weeks before the bedazzling display by India on economic growth stratagems at Rio+20, a similar opportunity at the 65th World Health Assembly (WHA) on an issue of equal import-the health of millions in India and other developing countries-was surprisingly squandered. 

On debate by member-states of the World Health Organisation (WHO) was an 'R&D convention': a new, and binding, R&D treaty between nations that aims to fix the current iniquitous framework, which is industry-driven and fails to meet the health needs of the developing world. 

The treaty aims to address this imbalance by shifting the onus from companies to countries. 

High drug prices, access issues and industry's reluctance to research 'type-II' and 'type-III' diseases- that, typically, afflict the developing world-were in focus at the WHA. 

"The drugs, vaccines and diagnostics we have to treat people are often unavailable, unsuitable or unaffordable," insists Unni Karunakara, international president of the Geneva-based humanitarian treatment organisation, Medecins Sans Frontieres (MSF). "Today's medical innovation system is driven by market needs and not health needs." 

Yet, Indian government representatives remained low-key at the WHA, even as Europe, the US and powerful big pharma lobbies essentially endeavoured to derail the treaty. And Indian firms, which stand to benefit from a treaty, ignored the proceedings. 

The ministry of health, when contacted, declined to comment. 

"It was plain lack of homework and coordination between the ministries of commerce, health, and our foreign missions," explains DG Shah, secretary general of the Indian Pharmaceutical Alliance, who is familiar with WHA processes. "As for Indian companies, they will not react till their tails are on fire." 

The WHA, on stiff opposition from the EU and the US, and on sustained pressure from Brazil and the Union of South American Nations, settled for a compromise: a process for national-, regional- and global-level consultations on the possible convention is to be initiated immediately, and the issue would be taken up at the WHO's executive board meeting in January 2013. 

90% Neglect 

Such an R&D treaty is a pressing issue today. According to the consultative expert working group (CEWG) constituted by the WHO to examine the rationale for a global treaty, global health research spending stood at $160 billion in 2005, the latest available. 

Most of this came from industry and went towards lifestyle diseases. By comparison, the spend on 'neglected diseases'-a crude proxy for the health needs of developing countries-was just $3.2 billion a year, with only $525 million coming from industry. 

Diseases of the poor are not worth the while of corporate labs. The present pharma model functions on patent-protected monopolies. It takes $1.3 billion for a company to steer a drug from lab to market. Since R&D costs are high, drug prices too are pegged high, to recover investments. 

It is this link between R&D costs and product pricing the R&D treaty seeks to demolish. Other sources of funds need to be identified to pay for research, keep prices low and ensure access. 

The CEWG, upholding the principle that attaining the highest possible standard of health is a fundamental human right, examined several possible sources to shore up global R&D financing: indirect tax, voluntary contributions from business and consumers, taxation of repatriated pharma industry profits and philanthropic funds, among others. 

It concluded that the only viable, sustainable option is for all countries to band together and commit at least 0.01% of their GDP on government-funded research to meet the health needs of developing countries. It's expected to raise at least $6 billion annually. 

India, for example, spends just 0.0020% of its GDP on R&D in neglected diseases. The CEWG also suggests 20-50% of each country's funding obligation go to a global pooled funding mechanism. 

"Traditional incentives and mechanisms in R&D do not work for poverty-related diseases," explains Bernard Pecoul, executive director of the Geneva-based Drugs for Neglected Diseases initiative (DNDi), a not-for-profit product development partnership (PDP). "A systemic response is now required, and the R&D convention is the only current  initiative that provides that." 

New Industry Models... 

Governments and big pharma concede the problem. "So, while they accept the diagnosis, governments are now fighting over the cure," says Karunakara of the intense lobbying at the WHA. Big pharma is also taking the position it did as it's in the midst of a painful churn in the face of numerous challenges. Original new drug approvals have fallen even as R&D spends, reported by members of Pharmaceutical Research and Manufacturers of America, have increased from $15 billion in 1995 to $49 billion in 2010. 

Sales per dollar of R&D spending has dropped 70% between 1996-2004 and 2005-2010. To add to their misery, generic prescriptions are on the rise, now accounting for 78% of the US market by volume, up from 49% in 2000. 

The industry is searching for new business models, while trying to stave off the tag of profiteers. Its voluntary offerings to critics include drug donations and tiered-pricing of drugs. 

A radical model-the Health Impact Fund- that seeks contributions from nation states, like the proposed treaty, is also being bandied. Companies are also increasingly participating in PDPs. 

For example, GlaxoSmithKline has capped its drug prices in poor countries at no more than 25% of the prices it charges in the West. 

"We are also adopting a flexiblepricing approach for middle-income countries, which sets prices at levels based on a country's ability to pay," says a UK-based GSK spokesman. "Within a country also, we may adopt a level of tiered pricing between private and public sectors." 

...Have Limitations 

Tiered pricing, however, has its limitations. "It cannot match the access gains that can be achieved through generic competition," insists Karunakara. 

Then, there are drug donations. In the last decade, industry donated 2.4 billion medicine treatments to developing countries. Novartis provides free drugs to patients of leukemia and gastrointestinal tumour. Merck donated drugs and vaccines worth $66 million in 2011. But donations, again, are not a sustainable model for access. 

Even the Advanced Market Commitment (AMC) pilot, driven by donations (See box), is suspect. "The pneumococcal vaccines AMC is a form of corporate welfare," says Karunakara. "Donor money is not being used wisely, as a win-win with industry has meant paying relatively high prices for vaccines already in companies' portfolios." 

Cryus Poonawalla, chairman & MD of the Pune-based Serum Institute of India (SII), a vaccine manufacturer, agrees. "We can supply the vaccine at $1.75 per dose, when these big players are being paid $7 under the AMC," he says. When Bill Gates visited his facility a few weeks ago, Poonawalla pointed this out and wanted the Gates Foundation, the mechanism's prime mover, to "cancel the AMC". 

Of the recent initiatives to address market failures, the most successful are PDPs, many supported by philanthropic money. In recent years, 16 new products for neglected diseases have been launched by 15 PDPs. 

But, these are mostly 'incremental' in nature. "The danger lies in seeing the successes of 'ad hoc solutions', including those of public-private partnerships, as a panacea," warns Pecoul. Medical breakthroughs will require a new, sustainable order, and the world is drawing around to the idea that governments will have to inevitably step in and take responsibility for treatments to be delivered as public goods. 

New Treaty, New Paradigms 

An R&D treaty can usher in a new paradigm in medical innovation. It can harness collaborative models to deliver R&D in cost-effective ways; it can enhance capacities of drug manufacturers from developing countries; it can ensure medical needs and affordability are built into the product development process right from the beginning; and it can encourage openness and sharing of medical research, surmounting debilitating intellectual property barriers. 

Serum Institute's vaccine against Meningitis A, which ravaged sub-Saharan Africa, is perhaps a precursor to the potential of a facilitative global mechanism. 

The Meningitis Vaccine Project, a partnership between PATH and WHO, identified and licenced the technology from the US drugs regulator, and signed up with the Serum Institute to produce the vaccine at an affordable price. 

The Men-A vaccine was rolled out in 2010 across Africa for a mere 43 cents a dose. "We now have the capacity to even develop highly complex sub-unit and conjugate vaccines," says Poonawalla, predicting big pharma will have to change its ways. 

An R&D treaty can add a new dimension to the global R&D regime that is coming apart. Yet, the West is unmoved. "Even within the WHO there is resistance," says Shah, indicating even its director general Margaret Chan is not favourably disposed to a treaty. 

"The treaty, will not replace the existing R&D system," says Leena Menghaney of MSF India, making a case for EU, US and big pharma to shed their resistance. "It will only complement what exists." 

But there is hope. An official in the Indian ministry of health, who did not want to be identified, has indicated that a working group is to be constituted soon to fast-track the issue. India, and other BRICS nations will have to, once again, as in Rio+20, get their act together, to heal the world. 

R&D and Access Innovations 

Advanced Market Commitment 

The AMC rationale is to 'match the lifetime revenues' a company would have typically earned from a new product in profitable, western markets, so that it has an equal incentive to develop a product for low-income countries. The pilot AMC for pneumococcal diseases has raised $1.5 billion. 

Both GSK Biologicals and Pfizer have agreed to supply 48 million vaccine doses annually, for which they receive $360 million each from the AMC. They receive $3.5 per dose, and an additional $3.5 for 20% of supplies. Companies get an assured order, over 10 years, and poor nations assured supplies at a low price. 

Product Development Partnerships 

PDPs are alliances between academia, public sector, private firms and philanthropic institutions to research, develop or deliver drugs, vaccines and diagnostics for neglected tropical diseases. PDPs, with open innovation and cost sharing mechanisms, have pared research costs-Drugs for Neglected Diseases initiative has lowered it to 1-40 million for improved treatments and 100-150 million for new chemical entities. 

Prize Funds 

They seek to replace the patent regime as an incentive by offering prize money for achieving a set of R&D objectives. These can be 'milestone prizes', for stages in the research process, or for reaching an end point-a new drug or tool. The Bio Ventures for Global Health is working on a $155 million proposal for point-of-care fever diagnostics. In the US, a Prize Fund for HIV/AIDs Act is under debate. 

Patent Pools 

Once a research-based pharma company licenses its patents to a pool, generic companies, on paying royalty, may take out licences from the pool for manufacture and sale of the licensed products within a geography. Examples: the UNITAID Pool, the Medicine Patent Pool on HIV/AIDS.


Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)

thiru at keionline.org

Tel: +41 22 791 6727
Mobile: +41 76 508 0997

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