PATIENTS & PATENTS: The Role of University Technology Transfer in Improving Global Health

By Matthew Price & David Scales

Global health problems too often seem remote, especially those that predominantly affect poor people in poor countries. Indeed, the pressures of medical school make it easy to forget that policies made in wealthy countries can have a profound effect on public health problems around the globe. But some of these policies hit close to home, particularly when it comes to questions of access to essential medicines. Suppose, for example, that policies at your medical school or university impact whether or not children in Nepal receive their daily dose of highly-active antiretroviral therapy (HAART). Many medicines used to treat diseases disproportionately afflicting the poor originate from research at academic institutions. Universities determine policies for handling new technologies and medicines that come from their laboratories, and their decisions affect the accessibility of those medicines - especially in countries where poverty is widespread.

Relatively small changes in academic policies may have drastic downstream effects on access to essential medicines in Low and Middle Income (LMI) countries. Students, faculty, staff, and administrators therefore have a unique opportunity and obligation to encourage university patent and licensing policies that increase access to health care in LMI countries and foster academic research on diseases associated with poverty. One such policy developed by the organization Universities Allied for Essential Medicines (UAEM) is the Equitable Access License (EAL), which offers provisions in university contracts with pharmaceutical or biotechnology firms that will drastically improve access to medicines with minimal financial costs.

"... the EAL helps set a precedent for access-oriented drug development ... it will help erode the prohibitively high prices that are a barrier to accessing essential medicines in poor countries. As future doctors, we have a need to understand that writing a prescription is only one step in ensuring our patients have access to the medicines they need."

From Patent to Medicine

When researchers discover a novel compound or innovation, their research institution will often patent it. A patent functionally serves as a government promise to protect the invention from competition for 20 years. It grants exclusive legal rights to make or sell the patent or technologies that come from the patent. This is designed to encourage people to invent, and it gives them enough time to profit from their invention. Economists often tout the patent system as a driver of innovation and technological development.

This system can become problematic, however, when it involves products that people need in order to live. Patented medical technologies in particular are expensive for two main reasons. First, the research and development (R&D) costs for these products are high. For example, in the US, a new pharmaceutical drug must go through three rounds of expensive and time-consuming clinical trials. Second, since the patent owner has a monopoly on its product, it can set product prices arbitrarily. Monopoly prices for patented medical technologies are often far too expensive for people who live in developing countries, although they are frequently the people who need the technologies most ¹.

For consumers in LMI countries, it is true that patents are not the only barriers to accessing essential medicines. Other issues include lack of infrastructure (from clean water to transportation), lack of political will, and insufficient funding of treatment programs. Nevertheless, implementing creative solutions to the patent problem is instrumental in ensuring that essential medicines are accessible. Most poor people do not have medical insurance and therefore are unable to afford medicines. The governments of LMI countries, which often have economies a fraction f the size of drug companies' annual profits, are also often unable to pay for these drugs.

The Role of Universities

Universities play a large role in basic science research, and they often conduct this research purely for the public good as part of their mission as non-profit institutions. However, profit is becoming an increasingly prominent motive. Universities are filing more patents than ever before: according to the Association of University Technology Transfer Managers, 198 institutions filed 3,680 patent applications in 2004 and executed close to 4,800 new licenses or options, an increase of 8.8 percent from the year before ². Universities have profited handsomely from pharmaceutical inventions such as Xalatan, a glaucoma drug invented at Columbia University, and HIV antiretroviral drugs including Stavudine (Yale University), Abacavir (University of Minnesota), Lamivudine (Emory University), and Enfuvirtide (Duke University).

Since universities do not develop or manufacture drugs, they must license their patents out to biotechnology or pharmaceutical companies. A license is essentially a contract between the owner of the patent and a party that wants to exploit it. This contract is flexible. Universities can license exclusive rights to make, sell, import, export, or develop a drug in any country where its technology is patented. In exchange for these rights, they receive a share of the profits from products that use their innovation and possibly an up-front payment as well. As in any contract, universities can also insert restrictions in the license that revoke the original rights if the licensee fails to abide by the terms of the contract.

As patent holders, universities can exercise control over how a drug is priced in developing countries. Yale and Bristol Meyers Squib reduced the price of Stavudine (d4T) in South Africa by more than 95 percent by agreeing not to enforce the patent there. But the d4T story is one of a retroactive reaction to a bad situation and of only one drug in a triple cocktail. It has taken years for prices on other AIDS drugs to come down ³. Millions have died in the meantime, and more will follow unless a proactive approach is taken.

The Equitable Access License (EAL)

The best way to proactively reduce drug prices in LMI countries is through competition. UAEM's approach to the patent problem, the EAL, promotes generic competition in LMI countries to keep drug prices at reasonable levels. The EAL is designed to be ncorporated into the licenses that universities use when negotiating with biotechnology or pharmaceutical companies. In the event that a drug or technology is deemed too expensive in a developing country and certain conditions are met, the license maintains protection of the licensee's lucrative markets in developed countries while lifting patent, regulatory, and production barriers in LMI countries. This form of patent licensing is called 'open' licensing. In contrast to 'exclusive' licensing, open licensing means that the patents required to make a product are open to anyone to use in LMI countries. A simple letter of ntification to the university is the only requirement for generic drug makers to be able to produce that drug. The EAL is designed so that generic pharmaceutical companies who want to produce the technology in an LMI country will not be sued for doing so as long as the conditions that trigger the license are met ⁴.

Second, regulatory barriers are lifted because the open licensing structure also applies to regulatory data held by the university or licensee. Regulatory data is information such as clinical trial data that is used to seek drug approval from a regulatory body such as the Food and Drug Administration (FDA). This form of data protection serves as a second line of patent protection. Unless a generic ompany has access to the clinical data, it is forced to go through the multi-year and extremely expensive drug safety and efficacy testing process all over again. The EAL avoids this redundancy by granting an open license to such data, so that the medical regulatory agency in a developing country can use clinical data from the US or Europe. For example, a Malawian official would not have to require that a Malawian company prove that betablockers help treat heart disease. Instead, the company would only have to prove that its drug is of good quality and the same chemical structure as a US or European beta- blocker.

Third, the EAL lifts production barriers by allowing producers in any country to manufacture the product for the sole purpose of exporting to a poor country. In a nutshell, this means that access to medicines in developing countries is not dependent on the presence of a pharmaceutical industry in the target country. Many countries in dire need of medicines and where drugs are not patented still lack the infrastructure to produce their own drugs. Once the license is invoked, a generic company in North America or Europe would be allowed to produce and export the product to poor countries as long as it is not sold within non-LMI countries. Essentially, the EAL circumvents international trade laws that tried to offer the same remedy but failed in practice ⁵.

The Pros and Cons

The EAL allows generic producers to compete with the licensee in LMI markets in a manner that is relatively free of bureaucratic hurdles and administrative costs. A generic producer would only need to write a letter to the university and the licensee notifying them that the EAL is being invoked. It is subsequently granted permission to make, sell, export, or import the product from the date the letter was sent until the relevant patents expire. Notice that the university and the licensee do not have to do anything. They are not required to formally consent. There is no requirement to monitor access in other countries, nor must they talk to the third party invoking the license.

Unfortunately, it is rare that a new drug or technology is based on a single patent. While developing a university's drug, a company may find a cheaper manufacturing method or a better formulation (i.e., liquid form for children). These marginal improvements also can be patented. The EAL anticipates this scenario by stipulating that the licensee provide the university with a limited license (a 'grant back') to all licensee improvements, defined as technologies relating to the manufacture, use, or sale of an end-product.

Often, the first criticism of the EAL is that it erodes profits and funds for R&D, thereby undermining innovation in new technologies. R&D is indeed expensive, and a profit incentive is necessary to convince companies that a large investment now will pay off years down the road. However, the assumption that increasing access to developing country markets equates to a loss of enough potential income so as to squelch innovation is a proven fallacy. Pharmaceutical sales in developing countries represent only a tiny fraction of the total ⁶. For example, a former Eli Lilly CEO said that losing the Sub-Saharan market altogether would cost "about three days' fluctuation in exchange rates" at most ⁷. In reality, critics of open licensing are less worried about the money they will lose in Africa and more worried about the possibility of illegal importation back into their more lucrative, developed world market. It turns out, fortunately, that new regulatory barriers and customs regulations have minimized this threat, and so the idea is being used more as a political excuse than as a practical concern ⁸.

Furthermore, the EAL's royalty scheme ensures that innovation is not to be stymied by a lack of cash flow and that research on neglected diseases is encouraged via the creation of a small but significant market in developing countries. It requires generic companies triggering the license to pay a share of their revenues back to the licensee that paid for R&D (called 'remuneration'). The royalty rate is on a sliding scale - the wealthier the target country, the higher the royalty ⁹. As an added bonus, the EAL is written so that royalties generated from the open license are divided evenly between the university and the licensee. If either party were so inclined, they could decide to place the royalties into a fund for research on neglected diseases. As a final safeguard, the EAL serves as an agreement not to sue among the university, the licensee, and any potential third-party generic producer in order to prevent pharmaceuticals from litigating generic companies out of existence.

Although not all technologies that improve people's lives originated in universities, many life-saving drugs for HIV and other diseases that disproportionately affect poor people in developing countries are developed in US academic laboratories. As a model document for discussions with university administrations, the EAL helps set a precedent for access-oriented drug development. At the very least, it will help erode the prohibitively high prices that are a barrier to accessing essential medicines in poor countries. As future doctors, there is a great need for us to understand that writing a prescription is only one step in ensuring our patients have access to the medicines they need.

MATTHEW PRICE is in his senior year as an undergraduate Biology major at The College of William and Mary in Williamsburg, VA. He can be reached at mrpric@wm.edu.

DAVID SCALES, a fourth-year MD-PhD student in the Sociology department at Yale University, plans to focus on promoting access to health care and medications in the Middle East for his dissertation. He can be reached at david.scales@yale.edu.

Both Matt and David are members of Universities Allied for Essential Medicines.

Footnotes:

1. See http://www.accessmed-msf.org for more details.

2. AUTM Licensing Survey, 2004. Summary and press release available online at http://www.autm.net/surveys/

3. Recent MSF press releases: here & here.

4. For an explanation on why we chose open licensing as opposed to seeking price restrictions, please see the 'Explanation of Model Licensing Provisions for an Equitable Access License', available online here.

5. Namely, the paragraph 6 negotiations and the August 30th agreement of the World Trade Organization talks that sought to modify the TRIPS agreement to allow producers in so-called developed nations to export to nations in the global south. So far there have not been significant improvements in global access as a result of these measures.

6. Kapczynski, Amy, E. Tyler Crone, and Michael Merson. "Global Health and University Patents". Science, September 16, 2003.

7. Gellman, Barton, "A Turning Point that Left Millions Behind: Drug Discounts Benefit Few While Protecting Pharmaceutical Companies' Profits", The Washington Post. 2000.

8. Outterson, Kevin. "Pharmaceutical Arbitrage: Balancing Access an innovation in International Prescription Drug Markets", Yale Journal of Health Policy, Law & Ethics 5 (193): 2004

9. Love, Jamie. "Remuneration Guidelines for Non-Voluntary use of a Patent on Medical Technologies", World Health Organization, Health Economics and Drugs TCM Series No. 18: 2005

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Act now!

UAEM is an international student-run organization with chapters at universities across the US and Canada. We are working to get universities to adopt the EAL and other open licensing practices to ensure access to essential medicines in poor countries. You can contact Matt or David to find your local UAEM chapter or for help starting a new one at your university. It's easy, and if you read this paper you are half way there.

Visit the Universities Allied for Essential Medicines website and read up on the issue.

Sign up for our low-traffic listserve here.

Next, hold a meeting at your school to discuss what you and your classmates can do to affect licensing policy.