A high-level United Nations (UN) panel has proposed negotiation of "binding research and development (R&D) convention", according to which World Trade Organization (WTO) governments would contribute a set amount of national GDP to funding drug development.
Implications | A UN panel on access to medicines has recommended major changes to the way in which R&D for neglected disease areas are funded and priced. The proposed measures could significantly reduce intellectual property protection for pharmaceutical companies. Recommendations for a greater government funding role could struggle to mobilise R&D for investment in affordable life-saving drugs and stifle innovation. |
Outlook | A number of major international pharmaceutical companies, led by GlaxoSmithKline (GSK, UK), have expressed scepticism regarding the UN proposals to move from a market-based approach to drug R&D investment to a system that de-links R&D costs and drug prices in poorer countries. |
The United Nations (UN) High Level Panel on Innovation and Access to Medicines published a major report on 14 September that proposes the creation of innovative financial mechanisms to "de-link" pharmaceutical research and development (R&D) costs from end-user drug prices, mainly in less economically developed countries. The report, which has taken almost a year to produce, is available to view in full here. The 16-member panel proposed a shift from market-based approaches to recouping R&D costs. These are rarely effective for "health conditions which cannot deliver higher returns" – most notably antibiotics – according to the UN; instead, the authors of the report suggest alternative mechanisms for rewarding pharmaceutical companies that invest in public health R&D.
In addition to the controversial proposals to de-link R&D costs from end-user prices, the UN panel advocates that World Trade Organization (WTO) governments take steps to improve transparency. Among the new measures advanced are proposals that, if implemented, would require pharmaceutical companies to disclose R&D, manufacturing, marketing, and distribution costs; this recommendation could complicate pharmaceutical companies' use of their high R&D costs to justify higher pharmaceutical prices. In addition, other recommendations argue that firms should be obliged to reveal public funding (including tax credits, subsidies, or grants), if any, that are received as part of R&D investment programmes. The report further recommends that some countries consider compulsory licensing legislation for essential medicines where there are "legitimate public health needs", although it stops short of stating that countries have the right to use compulsory licences.
At present, less-developed and some middle-income countries generally operate on the basis of voluntary licensing arrangements, by which pharmaceutical companies allow designated generic manufacturers to provide cheaper access to high-cost drugs without infringing intellectual property (IP) rights. In theory, countries can unilaterally issue compulsory licences allowing certain generic manufacturers to copy a branded medicine, with or without the originator's permission; in reality this is rarely the case, owing to what the panel describes as "threats of retaliation if governments use or show their intent to use" the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). To counter this, the report recommends "bold punitive actions against governments making such threats".
The proposal to de-link R&D costs from end-user prices has been negatively received by the research-based pharmaceutical industry. A statement by the Pharmaceutical Research and Manufactures of America (PhRMA) organisation sharply criticised the report, saying that "its recommendation can [not] be a sound basis for further consideration or action by the UN system". The prospects are therefore not strong for the successful negotiation of a "binding R&D convention"; this would certainly be opposed by pharmaceutical firms and a number of Western governments. In a statement, GlaxoSmithKline (GSK, UK) notes that the proposals "will likely not be appropriate or useful for many therapies", and could harm innovation.
An additional aspect of the report that is of concern to the pharmaceutical industry is the recommendation that WTO governments require pharmaceutical companies to provide data on completed and discontinued trials through a public register. The report states that this should be done "regardless of whether their results are positive, negative, neutral or inconclusive".
Outlook and implications
The panel recommended as "imperative" that governments should increase public investment in pharmaceutical R&D, particularly in infectious-disease areas such as Ebola and Zika: "Raising current levels of investment in health technology innovation" is viewed by the report as essential to achieving a balance of "fair rewards" for innovators and "fair and affordable" medicine prices. Discussions will now take place at a senior government level on how to implement the report's recommendations. This would require UN secretary-general Ban Ki-moon to initiate a process with governments to establish an R&D convention involving the pharmaceutical sector. A timeline set by the report calls for the UN General Assembly to hold a special session prior to 2018 on innovation and access to medicine strategies; this would be aimed at committing governments to a legally binding and enforceable convention on co-ordinating R&D funding goals. However, the implementation of the report's recommendation would be difficult and lengthy, and the potential expansion of compulsory licences is certain to be challenged by a number of governments, including the United States. Nonetheless, it should be of concern to the pharmaceutical industry that the recommendations are already sufficient to encourage greater use by developing countries of compulsory licences. The extensive changes to the compulsory licensing system that are envisaged by the report would undoubtedly weaken IP rights and harm the sector's commercial interests.