보건의료연합과 정보공유연대(IPLeft)가 WHO에 보낸 의견서입니다.
Submission by KFHR and IPLeft for WHO Public Hearing on PHI
November 15, 2006
IPRs Systme, Questionable Incentives to Medical Development and Innovation
When medicines are developed and distributed primarily based on the market needs not on the health needs, the medicines are no longer public goods: they are just commodity traded and sold in the market. We believe that the global strategy and plan of actions, which will be discussed in the proposed intergovernmental working group, should be focused on recovering and preserving the nature of public goods of medicines.
Intellectual property rights (IPRs) systems that were globalized by trade-related aspect of intellectual property (TRIPS) agreement and forced to be much higher protection regimes by US-driven FTAs are one of the key factors to turn the public goods into commodities. Further, as put by the Report of the Commission on Intellectual Property Rights, Innovation and Public Health, there is no evidence that the implementation of the TRIPS agreement in developing countries will significantly boost R&D in pharmaceuticals.
Rather, the incentive mechanism of IPRs to promote the medical development and innovation is questionable in our experiences. In Korea, product patent on pharmaceuticals were introduced in 1987 by the threat of trade retaliation from the United States. What the product patent system promotes is the sharp increase of patent applications of foreign pharmaceutical companies and drug expenditures. From 1983 to 1999, among 8,477 drug patent applications, 1,698 (about 80%) applications were filed by foreign pharmaceutical companies. This tendency continues even now. The increase of foreign patent applications was prominent from 1987 to 1990 just after the introduction of product patent system.
The ratio of drug expenditure in total treatment cost of the Korean National Health Insurance system increased 23.5% in 2001 to 29.2% in 2005. The total drug expenditures have increased by 14% every year since 2001. This is much higher than OECD average of 6.1%.
The number of local pharmaceutical manufacturers in Korea was 725 firms for 2004, and Korea is ranked in the world’s top 15 pharmaceutical markets. Recently, Korean pharmaceutical industry association announced that they opposed the stronger protection of IPRs on medicines demanded by the US in the FTA negotiation.
These facts clearly tell that the incentive system based on IPRs fails to promote the local development and innovation even in a country having some level of domestic market and R&D capacity, and simply leads to the increase of pharmaceutical prices.
Independent Review of Patent Validity
The premises that most patents are issued through perfect examination processes and well-defined legal rights are on incorrect assumption. Vast majority of patents are never litigated, and roughly half of those patents that are fully litigated are found to be invalid. Actually in the US, patent infringement lawsuits under the Hatch-Waxman Act, generic applicants prevailed in 73% of the cases. Of the decisions favoring the generic applicant, roughly half of drug patents of brand-name companies were decided to be invalid (See Federal Trade Commission, Generic Drug Entry Prior to Patent Expiration, 2002). In Korea, 48% of drug patents issued from 1980 to 2005 through the examination in the Patent Office were found to be invalid in the first stage of invalidation trial.
Some scholars call this unreliability of the validity of issued patents “Patents as Lottery Tickets” (See Mark A Lemley & Carl Shapiro, Probabilistic Patents, Journal of Economic Perspective, July 2004). According to them, “most patents represent highly uncertain or probabilistic property rights” and “patents are a mixture of a property right and a lottery. When a patent holder asserts its patent against an alleged infringer, the patent holder is rolling the dice. If the patent is found valid, the patent will indeed give its owner the right to prevent the infringer, and others, from practicing the patented invention. However, if the patent is found invalid, the property right will have evaporated entirely.”
In any actions and strategies to enhance innovation, research and development to address diseases disproportionately affect developing countries, it is necessary to prevent the patent holders from “rolling the dice”. For doing so, we may consider establishing a review center for evaluating the issued patents that are the subject of benefit of WHO’s actions. If we view that the examination of national patent office is preliminary filtering of problematic patents, the evaluation of the review center may be the secondary filtering. The review center’s main role may be the evaluation of novelty and inventive step of inventions, independently from the WIPO or national patent offices. The determination of novelty and inventive step are not mere legal issues but they largely depend on the evaluation of invention in terms of technical advancement.
Public Funding on R&D, Manufacturing and Distribution on Medicines
The role of government or intergovernmental organization should be expanded beyond the financing R&D for public or private sectors. For priority setting for innovation in public health needs, supply and distribution of medicines as well as financing R&D are handled by the public.
We think that public support for R&D should be based not only on the budget of the administration, but also should be related to the finance of public health insurance. In many countries that provide public health insurance, major expenses are paid for medicine, and it is rising faster than any other items. For example, in South Korea, 29.2% of the budget of all social health insurance is paid for medicine, and it is rising 14% each year. Some part of the rise may be due to inevitable natural course such as aging of the population, but most of the rise comes from elevation of drug price and the shift of prescription to expensive substitute or composite medicines. If essential medicines are not developed, we would have to pay more to treat diseases by buying more expensive drugs, and the medical cost would rise unnecessarily.
In case of South Korea, public health insurance gives incentive to the doctors who prescribe cheap and essential medicines. The civil societies of South Korea have been requesting to expand the incentives for prescribing essential medicines.
We also suggest that the cost for public R&D to be funded by a certain proportion of the total budget of social health insurance, or a certain proportion of its expenditure on medicine (for example, 1-2%). We also claim that it is essential for the public to pay attention to the process of approval, production, distribution as well, for these are the bases for the stabilization of public R&D. Most of the study of innovative medicines are made by national or non-profit institutes. At present, support from private sector is inevitable, partly because public support is insufficient. However, supports by private sector on small institutes can result in biased outcome of the research. The private corporation can influence the direction of research in various ways. South Korean civil society has asked for the foundation of public enterprise to produce essential medicines and vaccines, and also to organize public distributing centers of these essential medicines and vaccines.
We are also putting our eyes on the relationship between the public and private sectors.
Considering the relation between the two sectors, merely increasing public funding on R&D cannot reach its full effect if it is not supported with public control on production and distribution of medicine.
We conclude that enforcing public interest on the whole system, which includes R&D, production, and distribution of medicine is needed. This will ensure public access to medicine, and this will stabilize the relationship between R&D and public interest. We should look carefully on the R&D of public institutes, which might be influenced by private corporations, and we should study more on how to reform the production and distribution of medicines to ensure the effect of public funding on R&D.