Lead Author: David Rosenberg
The Panel is seeking solutions for remedying the policy incoherence between the justifiable rights of inventors, international human rights law, trade rules and public health in the context of health technologies. We do not believe that such incoherence has been demonstrated. If it exists, we believe that its impact on health is small compared to that of other factors, such as lack of purchasing power, poor healthcare infrastructure, sanitation and nutrition.
GSK believes that the IP model reflected in TRIPs is indispensable and balanced. It has largely worked well and will continue to work well to promote innovation benefitting patients in most areas of health technology.
GSK does not believe that IP is generally a barrier to access. We invite the Panel to take note of some emerging evidence that TRIPs standards of IP are associated with improvements in access and that the price premiums for IP-protected products may be lower than is often claimed, especially in poorer countries.
We propose that:
1. The Panel should consider holistically all factors which impact on access to medicines, and the relative weight of their impact.
2. Companies, innovative and generic, should be encouraged to implement pricing models which take into account value and ability to pay in different geographical or even, where possible, different in-country market segments. Countries should facilitate and enable such models and not implement measures that undermine them, such as reference pricing and parallel trade.
3. The Panel should focus on both patented and generic medicines. Millions of people do not have access to the medicines that comprise the Essential Medicines List, the vast majority of which are generic. Focus on ensuring access to these medicines will likely have as much, or more, impact on health, be more cost- effective and thus be more practical than focussing on patented medicines.
4. Countries should, according to their means, devote sufficient resources to health, 1 including reasonable funding for purchasing priority medicines.
5. Where funding is insufficient, external procurement funding should be provided.
6. Where voluntary licensing is likely to be effective, countries should facilitate it and not act to undermine it through reference pricing and parallel trade.
7. Medicines should be made more affordable by reducing taxes, tariffs and mark ups in supply chains for all or certain classes of medicines.
GSK’s mission is to enable people to Do More, Feel Better and Live Longer. We have an important role and responsibility in improving the health of people around the world.
GSK is evolving its business model based on the twin imperatives of achieving sustainable innovation and access. We will invest in R&D to discover and develop medicines and vaccines to meet unmet needs. We will then seek a return on that investment, and measure our commercial success, by providing access to those products for as many people as possible.
Pricing of medicines must balance the needs of multiple stakeholders. We aim to strike a fair and appropriate balance between the need to reward innovation with the broader cost expectations of payers, patients, and other stakeholders.
Prices should enable optimal use of resources for healthcare systems, recognising the potential for medicines to slow the progression of illness and prevent costlier medical care; improve access to value-adding medicines for patients; and reward added-value to encourage further research and scientific breakthrough.
Access to medicines is a multi-faceted problem
The problem of access to medicines is multi-faceted and involves many stakeholders including international organisations, UN members, civil society and the innovative and generic pharmaceutical industries. It will only be resolved by all stakeholders collaborating; each must do what it does best. Building upon successful initiatives is more likely to make more progress more quickly than unpicking existing frameworks and models and trying to create and agree new ones.
The access problem is rooted in poverty. Poverty impacts the causes of disease, healthcare infrastructure (including hospitals, numbers and accessibility of healthcare professionals), rational use of medicines, distribution systems and public and private expenditure on medicines, all of which are important factors in access to medicines.
There is clear evidence that patents are not a significant barrier to access. To focus on patents is misleading and potentially harmful if it results in a wilful weakening of the patent system. It will not resolve or alleviate access problems, but will damage the system that has a proven track record in bringing medicines to patients.
The Panel should recognise this and seek practical solutions to real problems. If it succeeds in doing this, it will make a valuable contribution.
This submission outlines GSK’s proposals to increase access to medicines, while at the same time preserving incentives that have been proven to work for innovation.
In a separate submission, we address the issue of how to facilitate innovation for those situations cases where the current incentives for innovation are insufficient, notably where there is no viable commercial market for the medicines.
IP is a powerful incentive for pharmaceutical innovation
The IP system has proved to be a successful model for incentives for biopharmaceutical innovation. While we acknowledge the contributions of others to this innovation (for example the academic sector and public funders), the pharmaceutical industry has been instrumental in the development of all, or nearly all, the medicines we have today which benefit hundreds of millions of patients.
Where a viable commercial market exists, the IP-based R&D system has led to virtually all of the breakthroughs in medicines and vaccines over the last 50 years from antibiotics, to vaccines, to HIV and Hep C treatments, to powerful cancer and cardiovascular medicines. These innovative products are the generic medicines of tomorrow.
Developing an innovative pharmaceutical product or vaccine is a costly and risky activity. It requires:
1. the discovery of active substances suitable for treating or preventing the medical condition
2. developing them into formulations suitable for administration to patients
3. satisfying the regulatory authorities in all countries where the product is to be sold that it is safe and effective.
The cost of developing a new medicine is significant. Approximately 5-10,000 compounds are synthesised for every one that comes to market. Those that show some type of potential medical activity undergo pre-clinical and, if this is successful, large-scale clinical testing before applications to approve the product are made. Substantial numbers, often thousands, of patients undergo clinical trials. Following approval, post-marketing surveillance of the product is required.
Approximately 70% of the cost of bringing a product to market arises after discovery of the compound, and most of this is usually borne by the innovative pharmaceutical industry.
Only one in three medicines which are brought to market is profitable.
Companies would not incur the huge risk and cost of innovative R&D if, shortly after launch of their products, a cheaper copy could be launched by a competitor who had the competitive advantage of not incurring development costs and risk.
A period of freedom from competition from copies is therefore needed to provide the incentive to innovate for the benefit of patients. Patents are a vital way of providing this incentive and reward. The period of exclusivity conferred by a patent relates to the specific patented product, not to therapeutic classes, for example. This means that innovative products that do not infringe the original patent can be, and usually are, launched to provide competition to other innovative treatments. So patented compounds from one company often compete with patented compounds from another, and unpatented (generic) products often compete with patented products. It is rare that there is no competition in a therapeutic area from innovator and generic products.
In this way, the patent system facilitates competition in innovation and creates the new products which sustain the generic industry; it therefore creates benefits for patients and payors. We support this model and the incentives provided by the TRIPs agreement. We also acknowledge its flexibilities, such as the right to use compulsory licensing, though we do not always agree with claims by others as to what those flexibilities are.
We seek to take a flexible approach to IP issues. For example, while we support the TRIPs model, we do not believe that WTO enforcement actions are always the best means of resolving disputes about TRIPs compliance, nor do we advocate for inclusion of TRIPs-plus provisions in all FTAs.
We take a flexible approach to patent filing and enforcement. For example, we do not apply for any patents in the majority of LMICs. And we very rarely enforce patents in LMICs or LDCs, even where we see infringements.
GSK pursues multiple models in its approach to R&D. Most are underpinned by intellectual property protection. In some cases we rely on the exclusivity that patents provide; in others, particularly collaborations where the costs and risks of R&D are shared (for example, product development partnerships (PDPs)), we allow third parties to use our patents and other IP.
IP is not generally a barrier to access
There is manifest evidence that IP is not generally a barrier to access.
- The vast majority of the medicines on the WHO Essential Medicines List are not patentprotected, yet many hundreds of millions of people in the developing world do not receive them. First-line treatments for killer diseases like malaria and TB are available as generic products at very low cost, and yet many people do not have access to them.
- Access to medicines was a major (but largely unappreciated) problem long before the TRIPs agreement and long before most poorer countries introduced patent protection for pharmaceuticals even though some countries, notably India, had large and high quality generics industries.
- One 2012 study found that 22% of the products on the WHO’s Model List of Essential Medicines (17th version) are indicated for NCDs, and none of these medicines have patentability issues that could prevent their generic production.2
- Some of the world’s most healthcare challenged countries, namely the LDCs, have a waiver on their TRIPS commitments and need not grant or enforce patents.
- There are few patents on medicines in India, which has a large and high quality generic industry, yet India has a huge access problem
This undeniably low access to medicines that have no patent protection suggests that IP cannot be the cause. The problem is caused by other barriers, related to poverty and weak health systems and lack of political will to deal with them. These include insufficient funding of health systems, shortages of health workers, mark-ups in the distribution chain and inefficient regulatory and procurement systems.
For the reasons described above, we believe that it is misleading and counter-productive to focus disproportionately on patents in the access debate. However, there may be situations where IP could potentially be perceived as a contributory factor in access problems. The most commonly cited criticism of IP as a barrier to access is that patents allegedly prevent generic competition and enable higher pricing than is affordable. GSK acknowledges that price is a factor in affordability and that affordability is a component of access. GSK also acknowledges that patents can be a factor affecting price. However, clearly, this can only have an impact when patents exist. As demonstrated above there are significant access problems where there are no or few patents. More attention should be paid to, for example, supply chain issues, including taxes, tariffs and mark-ups, and their impact on affordability.
Further, price premiums associated with patented medicines may be more modest in developing countries than is commonly assumed. We invite the Panel to take note of a presentation by M Kyle, citing her own unpublished 2015 study, which states that “patents are associated with significant price premia in rich countries, but not in poorer markets.”3
We do not suggest that patents can never have a significant effect on prices or access. However, it is clear from the evidence of the scale of access problems where there are no patents that common allegations that affordability problems are caused by patents may be overstated. This is why we believe that if the Panel focuses on patents, it will not achieve meaningful results.
There is no doubt that access has improved since the TRIPs Agreement. That does not mean per se that TRIPs has improved access any more than it is true to say that because patents can give pricing power (which can of course be limited by price controls), TRIPs is a significant barrier to access.
However, the Panel might wish to consider some recent evidence that the existence of patents may be an enabler and facilitator of access in that earlier and broader access exists where there are patents in developing countries.
For example, Berndt and Cockburn concluded: “For drugs, the cost of low prices is delayed access to the benefits of innovation. Our analysis of when new drugs become commercially available in India shows that launch lags are substantial. These long delays reflect domestic policy choices that focus on driving down prices of already available drugs through generic competition at the expense of providing incentives to incur the up-front costs of launching new drugs.... Launch lags could be reduced by implementing policies that encourage innovator companies to bring new products to the Indian market.” 4 Similarly Kyle and Qian concluded that “patents have important consequences for access to new drugs: in the absence of a patent, launch is unlikely. That is, even when no patent barrier exists, generic entry may not occur. Conditional on launch, patented drugs have higher prices but higher sales as well. The price premium associated with patents is smaller in poorer countries. Price discrimination across countries has increased for drugs patented post-TRIPS and prices are negatively related to the burden of disease, suggesting that countervailing policies to offset expected price increases may have had the intended effects.”
Ensuring IP does not become a barrier
In most therapy areas treatment options include both patented and off-patent medicines, providing both prescriber and patient choice. For off-patent medicines a well-regulated generics market can help address affordability and access issues.
The Panel should consider measures to ensure that the structure of markets (including generics markets) and distribution channels are efficient. In many cases, prices to the public payer or patient are significantly inflated by tariffs, taxes and mark ups in the distribution chain.
The R&D based industry is adopting flexible models of differential or tiered pricing so that the best prices are offered to the poorest countries. The Panel should consider how best to encourage such practices, seeking to achieve an appropriate balance between sustaining the revenues needed for future innovation and maximising access.
GSK has offered tiered pricing on vaccines for over 30 years and preferential pricing for ARVs to tackle HIV/AIDS for 15 years. We are extending this across our prescription medicines portfolio. Our flexible tiered pricing approach for vaccines – and now increasingly for more prescription medicines too – is based on countries’ ability to pay. And we have frozen our prices for GAVI graduating countries for 10 years so that they pay the same discounted price for GSK vaccines for a decade from end of GAVI support. 6
To maximise patient benefits and sustain our business in Least Developed Countries (LDCs), we cap the prices of our patented products to no more than 25% of the price in the developed world.
Where few generic options exist in a particular therapy area, GSK has adopted a voluntary licensing approach. Other companies have done the same or given patent waivers which achieve similar results.
These approaches enable generics manufacturers to produce and sell generic versions of patented products. However, they are not always suitable and will only have an impact when certain conditions apply. These include:
- A therapy area where there are limited numbers of suitable alternative products available e.g. HIV in its early days
- External funding in place to purchase licensed products and make it attractive for generic companies e.g. Global Fund diseases, but not many others
- Sufficient in-country political will to make the therapy area a public health priority
- A sufficiently efficient and effective health system to absorb more products
- Products that are easy to manufacture and are not complex like vaccines
- The right generic partners are available and willing to supply
One of the few therapy areas that meet all these criteria is HIV/AIDS and many companies have issued non-exclusive voluntary licences, either bi-laterally or through the Medicines Patent Pool. For example ViiV Healthcare, the HIV joint venture created by GSK, Pfizer and Shionogi, grants royalty free voluntary licenses on all of their current medicines (including those in their pipeline, once licensed) for public sector and donor agency programmes in all Low Income Countries, all Least Developed Countries and all of Sub-Saharan Africa. ViiV Healthcare has given 16 voluntary licences for their ARVs to generic manufacturers. These companies are based in a broad range of different locations. ViiV does not charge royalties in respect of these countries. Some Middle Income Countries are also covered by ViiV’s licences on which royalties may apply. In total 138 countries are covered.
Both preferential pricing and, when the conditions are right, voluntary licensing are proven successes. However both can be undermined by “exporting” the low prices intended for poorer markets to wealthier ones. This can occur through international reference pricing and measures which promote parallel trade (parallel trade has a further adverse effect as it takes the lower priced products away from the poorest patients in the poorest countries for whom the low prices were intended). Governments should not implement policies which undermine these methods of promoting access.
The Panel should not just focus on patented medicines
We have already argued that in order for the Panel to make a meaningful contribution to improving access in developing countries and innovation it needs to take a holistic approach to analysing the real problems. This should address not only issues relating to healthcare infrastructure but also other health-related technologies such as vaccines and diagnostics as well as issues in other area of technology such as nutrition and sanitation.
To the extent that attention is paid to medicines, it should not just focus on patented medicines. As we have demonstrated, patents are rarely a significant barrier. Hundreds of millions of people do not have access to the generic medicines which comprise the vast majority of the Essential Medicines List.7 These medicines are simply not affordable despite their low prices.
As well as considering issues relating to patented medicines, we urge the Panel to consider also how to address the issue of lack of access to generic medicines. As a practical matter, measures addressing access to generic medicines may make a more significant contribution to public health than measures addressing patented medicines.
1 For example the AU Abuja Declaration commitment of 15% of annual budget on health
2 Mackey T & Liang B (2012), “Patent and Exclusivity Status of Essential Medicines for Non-Communicable Disease”, PLoS ONE, 7(11): e51022
3 “Patents and the Availability of Medicines in Developing Countries”; Presentation at WIPO SCP 23; 2 December 2016, available at http://www.wipo.int/edocs/mdocs/scp/en/scp_23/scp_23_seminar_on_p_h_kyle.pdf. See also Mark Duggan, Craig Garthwaite, and Aparajita Goyal, “The Market Impacts of Pharmaceutical Product Patents in Developing Countries: Evidence from India,” American Economic Review 2016, 106(1): 99–135 and the references below.
4 Ernst R. Berndt and Iain M. Cockburn, “The Hidden Cost Of Low Prices: Limited Access To New Drugs In India,” 2014 (http://content.healthaffairs.org/content/33/9/1567.full.pdf+html)
5 Kyle & Qian, “Intellectual Property Rights
7 The World Medicines Situation 2011: Medicines Prices, Availability and Affordability; Cameron et al (http://apps.who.int/medicinedocs/documents/s18065en/s18065en.pdf )