Patent buy-outs for global disease innovations for low- and middle-income countries.

I. INTRODUCTION The World Health Organization's CHOICE program analyzes the cost effectiveness of various health interventions related to the Millennium Development Goals.1 The program identifies the best strategies for improving health in low-income countries, using a standard set of methodological assumptions.2 These studies evaluate interventions in many areas, including child health3 and HIV/AIDS.4 For some of these treatments, drug costs are a significant variable: if the drug price doubles, the intervention becomes less cost effective. But if the drug price is reduced by 90%, then more therapies become affordable.5 Drug prices are uniquely susceptible to radical price reductions through generic competition. Patented pharmaceuticals may be priced at more than 30 times the marginal cost of production;6 the excess is the patent rent collected by the drug company while the patent and exclusive marketing periods remain.7 Patent rents are significant. AIDS drugs which sell for US$10,000 per person per year in the US are sold generically for less than US$200.8 If patented drugs could be sold at the marginal cost of production, cost effective treatments would become even more attractive, and other interventions would become affordable. This Article proposes marginal cost (generic) pricing9 for most essential medicines used in the developing world. Global collection of patent rents must be relaxed in order to achieve this objective. Some damage to the profits of pharmaceutical companies would ordinarily be expected, but a properly designed buy-out mechanism can ensure adequate incentives for pharmaceutical innovation. Two case studies are examined to illustrate the proposal: the recently-developed Human Papillomavirus (HPV) vaccines for cervical cancer and second-line antiretroviral (ARV) treatments for AIDS. Global pharmaceutical markets and global disease burdens are mismatched, making this proposal uniquely attractive. Some 80% to 90% of the global sales of patented pharmaceuticals occur in the 30 wealthy countries which are members of the Organization for Economic Cooperation and Development (OECD), roughly similar to the World Bank's definition of 29 high-income countries.10 Pharmaceutical markets for patented products largely follow the money. But the vast majority of patients needing treatment for global chronic and infectious diseases reside in non-OECD (middle- and low-income) countries. These countries include more than 84% of the world's people, and they are disproportionately sick.11 The global burden of disease falls most heavily where the market is least attractive. This mismatch between global pharmaceutical markets and global disease burdens leads to an interesting opportunity. Patented pharmaceuticals could be offered to more than 84% of the world's population at generic prices. (Only high-income country patients would continue to bear pharmaceutical patent rents). The gain in health from increasingly affordable pharmaceuticals would be considerable. The primary disadvantage of this plan would be a quite small reduction in global RD but even this small deficit could be restored to the companies through a carefully designed patent buy-out mechanism. The World Health Organization recently agreed to appoint an intergovernmental working group to address issues of public health and innovation.12 This article illustrates some of the concepts which could be useful in that process. II. GLOBAL DISEASES: BEYOND NEGLECTED DISEASES Much attention has been focused over the past decade upon 'neglected' or 'tropical' diseases, conditions largely overlooked by global pharmaceutical research companies.13 Examples include onchocerciasis (river blindness),14 leishmaniasis (kala-azar), Chagas disease, and African sleeping sickness.15 In the past few years, donors have created some initiatives to direct R&D towards neglected diseases. …