[Ip-health] IP Watch: Inside Views: Health Impact Fund – Raising Issues Of Distribution, IP Rights And Alliances

Krista Cox krista.cox at keionline.org
Mon Sep 26 06:10:38 PDT 2011


Inside Views
Health Impact Fund – Raising Issues Of Distribution, IP Rights And Alliances
Published on 26 September 2011 @ 11:07 am

Disclaimer: the views expressed in this column are solely those of the
authors and are not associated with Intellectual Property Watch. IP-Watch
expressly disclaims and refuses any responsibility or liability for the
content, style or form of any posts made to this forum, which remain solely
the responsibility of their authors.

Intellectual Property Watch

By Sakiko Fukuda-Parr and Proochista Ariana

In this piece, the authors raise several issues with the public health
financing proposal called the Health Impact Fund. It questions the relative
distribution of costs and benefits; the persistent issue of intellectual
property rights; as well as a lack of alliance with existing efforts to
increase innovation of and access to essential medicines for the poor.

On 7 September, Professor Thomas Pogge addressed the Annual Conference of
the Human Development and Capabilities Association (HDCA) and presented his
Health Impact Fund (HIF) proposal. It was an inspiring and provocative
lecture about one of the greatest injustices of our times – poverty related
deaths. We find much merit in the proposal as a practical remedy to this
global injustice, but also some concerns. We raise here for discussion
issues of distribution, intellectual property rights, and alliances.

Distribution of the Costs and Benefits

How are the costs and benefits (direct and indirect) allocated amongst
various stakeholders? And who are the short- and long-term winners and
losers of this scheme?

Our more significant concern is with the burden sharing of costs. The scheme
is expensive, with direct costs estimated at USD60 billion per year to cover
pay outs to the inventors, and operating costs which include making complex
calculations of the health impact of inventions and the production costs of
medicines. These costs would be borne by the global taxpayers, paid
according to the GDP of their countries. The inventors (primarily
multinational corporations) do not bear direct costs. They incur an
opportunity cost as they give up the right to charge monopoly prices but
they are compensated by the fund an amount determined by the estimated
impact of their invention. They moreover keep their patents for any future
benefits. The end result is that their immediate and future direct and
opportunity costs would be neutralized.

Broadly, the main beneficiaries would include those in need of medicines or
for whom medicines would be invented. However, it is unclear whether under
the mechanisms proposed the benefits reach the poorest of the poor. As
Ingrid Robeyns raised at the conference, the criteria for allocating the
funds depends on quantifying the cumulative health gains. But such estimates
may allot less weight to the gains for, or entirely overlook, the poorest or
most needy populations. This crucially depends on how impact will be
determined and whether it will incorporate elements of equity weighting.
Indeed, the logistical issues of how impact is to be assessed and attributed
to a particular drug in a complex context of change are technically far more
difficult than the proposal conveys.

Another beneficiary includes governments who would benefit from more
affordable healthcare and subsequently healthier populations. Healthier
populations in turn, according to human capital arguments, can then fuel
economic development.

In addition to the recipients and their governments, the producers also
stand to gain substantially from the HIF scheme. An evident beneficiary
would be the inventor who gains the innovation award and profits in a way
equivalent to that under the existing patent mechanism. There is, however,
no objection made by the HIF proposal to the very high profits for
healthcare innovations or any acknowledgement of health as a public good. As
such, the proposal indirectly condones pharmaceutical practices of profiting
from ill health and effectively undermines efforts to encourage open access
to knowledge and innovation in the area of health (more on this below).

In addition to the inventor, the company who manufactures the drug,
potentially a smaller generic manufacturer from the global South, would also
benefit from the HIF scheme. However, there are no guarantees that the
manufacturer, the company who offers the most competitive bid, would be from
the global South. Nor is there any consideration of the broader benefits of
supporting such an industry for some countries with limited manufacturing

As it stands, the inventor and producer gain the most in the short term
while the recipients are expected to be the long-term beneficiaries.
However, while the gains to the producers are clear and direct, the actual
gains to the recipients have yet to be determined.

Intellectual Property and the Social Determinants of Health

The second issue concerns the management of intellectual property. The
concept of prize funds is motivated by the search for an alternative to
monopoly rights as an incentive to invest in research and development (R&D).
The HIF is designed to allow the inventor to keep the monopoly. There is no
obligation to allow open licensing. Although the inventor loses the ability
to earn monopoly profits on that particular drug they retain the other
benefits of patent monopoly. In particular, they can prevent other generic
firms from acting independently to manufacture the drug. It may also stymie
further innovation based on that invention and stifle market competition to
produce the drugs at as low a cost as possible. In its current form, the HIF
condones the increasing concentration of the pharmaceuticals industry in the
hands of the few multinational companies (big Pharma). It fails to support
small and medium scale companies, especially those that specialize in the
generics markets.

Moreover, while the HIF is designed to encourage investment in neglected
diseases and expand immediate access to some medicines, it does not
contribute to addressing the structural causes of poverty and premature
death. Using limited resources to tackle the social determinants of health
would have far wider benefits for the given costs than any one drug could
hope for. The HIF retains a focus on treatment as the way to address the
unacceptable rates of illness which persist in the world today despite the
advances in knowledge and technology to overcome them. As Thomas McKeown
famously demonstrated for turn of the century England, it was not medical
technology (i.e., antibiotics and vaccines) that led to the decline of
diseases evident at the time but rather improved living situations and
enhanced nutrition. Such improvements, as Simon Szreter illustrates with his
historical research, were the result of social mobilization and political
will that culminated in the necessary regulations that improved the dismal
living conditions.

While healthcare is undoubtedly important, it is naive to assume that it
provides the solution to the kinds of health problems the poor face today.
It certainly is not the most cost-effective approach and as such less likely
to be a sustainable solution to the growing burden of ill health. Efforts
that address root causes (ranging from water and sanitation to housing
conditions and livelihoods) will serve to alleviate more than just one
disease and thereby have further reaching impact on the lives of the poor.
The donor governments and their taxpayers, therefore, are more likely to
improve health and sustain such improvements if they enhance their efforts
at alleviating poverty more generally.


The third issue is one of alliances, strategy and tactics necessary to
remove injustice. Governments of the South, civil society organizations of
the North and South, and generics companies of the south have worked
together on many strategic initiatives. Surprisingly, HIF has not allied
with these groups and indeed many of the leading organizations have been
critical of the HIF. The HIF does not follow the strategic priorities of
these networks that are working together towards open access and
encouragement of generics – strategies that address the systemic issues of
the pharmaceuticals sector.
Health injustices continue on a massive scale yet much has been achieved in
the last decade through the alliances:

- In 2001 the global market prices for HIV/AIDS drugs was some $12,000 a
year, and even the deepest discounts from the big Pharma companies made
under threats of compulsory licenses were still unaffordable. Now they have
come down to below $70 a year.

- In 2001, the case against South African governments’ health act seeking to
expand access brought by the big Pharma corporations with the backing of the
US government was still on. The companies have now withdrawn the case due to
civil society outrage in both the North and the South.

- In 2001, WIPO was an international organization that denied the relevance
of intellectual property to the problems of global poverty – since then they
have adopted a ‘development agenda’ pledging to address issues of global
poverty and marginalization of LDCs from global technological progress;

- In 2001, WTO negotiations were challenging the legitimacy of compulsory
licensing, parallel imports and other TRIPS [Agreement on Trade-Related
Aspects of Intellectual Property Rights] flexibilities. Since then, we had
the Doha Declaration affirming the right of national governments to take
steps to protect public health and provide access to medicines for all. The
use of compulsory licensing has expanded.

- In 2001, the World Health Assembly was nervous about pressures from the US
and other governments that were influenced by the pharmaceutical companies
in addressing issues of access to medicines. Since then, access to AIDS
retrovirals has been adopted as an MDG target. The WHA has adopted many
proactive measures to move forward different solutions for expanding
innovation and access for health technologies for the poor. The most recent
initiative is the WHO Consultative Working Group on R&D Financing (CEWG)
chaired by Norway and Brazil.

Numerous proposals have been made to find alternative models for financing R
& D, especially but not limited to neglected diseases. They include
government and NGO backed prize fund proposals in the WHO process that
feature open licensing and an open source dividend to enhance access to
knowledge with creative arrangements to finance costs and address
monopolies. Some have gained real traction such as UNITAID’s patent pool, or
the two bills in the US Congress to fund prize funds for AIDS research.
These gains illustrate how systemic issues in the structure of the global
pharmaceuticals markets are being addressed. They are introducing reforms to
the implementation of the intellectual property rules and opening space for
national governments and creating opportunities for the generics sector. The
HIF does not do this.

The gains of the last decade are a phenomenon that has parallels with the
democratic pressure that prevented famines in India in the 20th century.
This is democracy at work. Instead of India in the 20th century, here we are
witnessing global civil society networks putting pressure on national
governments, corporations, and international organizations to remove the
injustice of people who have lost their entitlement to healthcare.
International networks of civil society activists – MSF, Oxfam, HeathGap,
ActUp, CPTech/KEI, Health Action International, Third World Network, strong
civil society movements in South Africa, Kenya, Brazil, Thailand, Indonesia,
Malaysia, Peru, Chile, Columbia and India – have been at the forefront of
these struggles.

But it is not the NGOs alone who are behind the changes; they are providing
support to national governments and companies in the South. They work with
delegations to influence negotiations in the WTO and the World Health
Assembly. They are allied with think tanks – such as the South Centre, an
inter-governmental research center – who worked closely with the governments
of Brazil and other like minded countries to push forward the WIPO
Development Agenda, a significant reform of an international organization.
These governments take the positions they do in WIPO and WTO as a result of
pressure from local civil society organizations at home. The breakthroughs
in the TRIPS agreement and the massive decline in the price of HIV/AIDS
drugs resulted from the existence of Rambaxy, Cipla and other generics
manufacturers in the south that would compete with the big Pharma
multinationals. It was the supply of generics from Cipla and Rambaxy and
their deal with the MSF to supply the drugs at a fraction of the patented
price from big Pharma that opened up negotiations with big Pharma to cut
prices for poor countries.

The politics of this movement is complex, with multiple players: national
governments of the South and the North, local NGOs of the South,
international NGOs, international organization secretariats and their
inter-governmental governing boards, and the private companies that include
not only big Pharma but the small generics companies of the South. The
picture and the dynamics are complex; it is not a simple matter of North
versus South. There are different interests and ethical demands within each
country. For example, a New York Times series of articles on Brazil’s policy
on access to HIV/AIDS treatment proved a critical factor that turned around
public opinion in the US.

The HIF is oddly out of sync with this global network. It is surprising that
the HIF has not allied with other civil society actors, nor pursued their
core strategies that address the systemic issues of the global
pharmaceutical industry. Removing injustice in the global economy surely
calls for not only alleviating the sufferings of the poor but addressing the
root causes and creating more inclusive institutions.

Sakiko Fukuda-Parr is Professor of International Affairs at The New School
University, New York, and Director of the Human Development Reports
Proochista Ariana is Lecturer in Global Health and Development at the
University of Oxford; and Secretary of the Human Development and Capability
Association (HDCA).

Krista Cox
Staff Attorney
Knowledge Ecology International
(202) 332-2670

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