path: root/transcripts/open-science-summit-2010/innovation-paradigm-qa.mdwn

My question was about the open source ness or "open scienceness" of the prize
fund model and your thoughts and considderationss when yyou're considering
multiple IP involved in drug development. Let's say there's a proprietary
piece of .. for your drug dev model, and an open source patent, or an open
access piece of information, there are complexities when you're trying to
license things in open source, it depends on your licensing structure. Do you
have any considerastions about that?

I can try, so it's clear that in the current system, the open soruce
innovators are in a sense disadvantaged because they are not going to get
paid, their contribution is captured and so, it's clearly, the open source
dividend that Jamie is being takling about, is for. We haven't tried to
implement any of that, and the goal of just keeping the health impact proposal
as streamlined as possible, just for rewarding firms for bringing products
through market approval and making sure they get sold and distributed. We'd be
in the same place as we are now in the open soruce stuff, however the open
source knowledge would be abused where you end up with extremely high prices,
thanks to the open source contribution that would be developed.

Historically, there's been a logn tension between the grant and prize system
and the patent monopoly in different parts of history. And yuo see that in the
current prize proposals, the French in the 19th century used a lot of prizes,
and that was typical of European implementation of prize systems in the 19th
century. The prize was in addition to the patent monopoly, it wasn't really a
replacement for the patent monopoly. In the British and Dutch debate, and even
in the US., could you replace the monopoly with prize money? Would you
voluntarily choose one or the other, or eliminaet one in favor of the other,
and you see this in several proposals- some of them are voluntary mechanisms,
where yuo have to give up your IP in order to qualify for the prize money, and
the X Prize foundation enver really interferes with the IP in their particular
participants, as an example. One of the things that come up with open source
is that, prizes is bad for openness, because under the current system you have
to file for a patent, and there's protection. If you get a prize for an
unpatented invention, then you have an incentive in some cases to have a trade
secret and share even less. The open source dividend was an attempt to
incentivize people to be much more open. In the US proposal for the Medical
Innovation Prize Fund, you get patents on the inventions, but you wouldn't be
able to enforce the patent as a monopoly but you would get it for the reward
fund. If the reward was $4B, what's- who's going to get it? Something like a
patent would be used to identify the proper people who would get the reward in
the first place, and you have to license teh IP to develop the product to win
the prize. The expectation would be that it would be a claim against the prize
fund as opposed to a legal monopoly. One expectation is that if you raise the
importance of the prize system as oppossed to monopoly, then patent reform
would be easier to implement. The patent system determines how many billions
or something you're going to get, well, with the prize fund the idea would be
that there are certain reforms that would be implemented in the patent system-
that would be easier since you'er shifting the reward system.

My question was originally more focused on the technicalities on the mingling
of the licenses in the dev programs. Like an open source patent license, for
the prize fund license, you have to license in other proprietary IP, and
sometimes the open source could potentially infect and affect the incentive
model that exists for the proprietary licenses. You could sort of.. copyleft
strategy in the patent area, you could have different areas; most proposals
right now, they are multi-lateral proposals for neglected diseases, where you
have to make a voluntary decision to license a patent in order to participate
in the prize fund. In a couple of proposals, the government would just
mandatee that there's a shift. IPR will not go away as an issue that people
have to deal with as something they have to manage. It would be fair to say
also that htere's enormous complexity in each of these circumstances, rights
are geographically split, there are thousands of different pieces of
innovation going into a particular durg, and in Canada there are something
like a thousand like, related to lipitor, ... so it's really complicated and
every case would be different, and there would be no single rule to deal with
everything, it would have to be dealt with on a case-by-case basis.

Mike Gretes. I like people interested in drug development for neglected
diseases, and we are impatient for this. I wonder if, this is a difficult
question, if you could commetn on how ready we are to implement these, and
what time frame we're looking at, and an easier question, not only the
preparedness of this, but drug development is 10+ years, it seems to be not
just having a high dollar pay off, but an insurance to the drug developers
that the money will be there, and the credibility will be fully funded,
especially with the HIV global fund hasn't really had a .. hasn't really had a
track record for being fully funded, can you comment on this? We're thinking
of a timeline of trying to run a number of pilot projects under the next few
years, for rewards dependent on health impact. The key stumbling block on this
and de-linkage is that you have to demonstrate that you can make the rewards
depend on something other than what people are going to pay, so we think that
this needs to be, the first step, and in order to really build on the
political and .. towards.. the interest in these kinds of proposal, and that's
going to take at least a couple of yeaars to demonstrate credibility.
Feasibility studies. Maybe we can expect another couple of years towards.. the
timeline in terms of whhen this kind of thing wwould bee credible oover a long
ttime per it's whhy it's useful to havee a voluntaryyy fund, wherre if thhe
fund iss not fuunded,, it's vvolunttary, you cann just ggo aand selll the
product withhout thhe fund,, and you can just sell the pproduct at high
ppricess like uusual.. Frrom our pointt of viiew, one set oof oppportunities
for impplemenntation of de--linkage conncepts iis the areas oof markeet
faillures, like neeglected disseasess, liiike the Chagdsaaaaas proposal, and
several coountries in Latin America, Doctors without Borders, and large public
heatlh groups; it's a quarter billion dollar proposal. Theree's one prize that
is kind of wwacky and alreeeady implemented, the priiiior review.....
development iin.. you haave a reeeward which iiis an acceleration of your
approval of another good drug. And that's mostly has a value of a couple
hundred million dollars, and it was implemented last year by the US Congress,
just a few weeks ago or last week. So, uh, uh, that thing is actually - raised
people's interest, because it has created an incentive to create drugs for
neglected diseases not related to the price of the product. Unless you get
licenses of the newer products, for generic production, so there's some
countries have put a forward, we're very active in this, that you should take
10% of the Pfifer and global fund for contributions- put the prize payments
only to the people who license their patents to the pool. Gilliaed, largest
seller of AIDS drugs, and Johnson&Johnson which has a good portfolio, they
both endorse this paradigm shift, and that has created a lot of interest in
the idea, and the context of.. anothejr thing that has areas of opportunity is
antibiotics where Europe has put this de-linkage concept in the policy paper,
and where the antibiotic.. commercial system.. and uh, there's I think a
movement in developing countiries in implementing a fraction of the reward
system, .. ebcause they are cut out of the cancer market because they just
don't have them oney and the monopoly on intellectual property, so those
countries will be interested.

A question from backpanel: how do these proposal differ from .. for
beurocreatucic ..... The health impact fund has no pickings by government. The
other proposals have a bit more government about them because they force the
products to be in a certain therapeutic class. The health impact fund is a
non-it's essentially, the idea is to have no government control over which
products get registered, only on the products that are registered and based on
a fairly straightforward model on measuring the health impact. I think the
pharmaceutical market, it's a very feasible place to implement the de-linkage
strategy, because the payments are made by consumer themselves.. very few
people pay out of pocket, they rely on third party payers like insurance
companies and governments. You already have third parties evaluating the
reimbursement rates for products. If yuo are going to pay $100k reimbursement
for receiptin, or $20k for the HIV treatment, it's not the patients that are
driving that market, it's the insurance companies and government. I would say
that the government role for prize programs is different than grant programs,
where you sort of have the established cast of characters- peer review,
people, the French had a strong academy and they didn't like the prize system,
and the prize system is kind of an unconventional approach, and the Longitude
Prize in the UK, it was a watchmaker that was not a part of Oxford, it was not
a greatly learned physicist that won the prize. The prize approach is kind of
driven by performance not pedigree, it's something that is kind of enabling
more independent entrepreneurial activity. These.. there is a role for the
government, but it's the same role you have, if the government is going to
fund the AIDS treatment in the US, it's a government run program, for people
who buy the drugs. Has a cure.. Chagdas.. because of governments putting up
the money. The idea is to make it as competitive and entrepreneurial as
possible.

My name is Ron Bailey, Reason Magazine. Interested in.. As I understand with
drug development, the first one, the second one comes along, and immediately,
now you have lots of these diseases, so competition as a way to lower prices.
You're talking about a competition in.. if you look at the patent system.. has
a mroe dramatic rseult. The price of, you could routinely require the patented
product of the generic suppliers, so you might have a slow entry and a very
costly entry, for.. you get a bunch of quicker substantial price drop. The
issue is what should the reward be for teh first, second, third mover? There
are benefits of follow-on products, and you don't want to elliminate the
follow-on products. You are over-rewarding the follow-on products and under-
rewarding the first products. We're spending a half-trillion dollars a year on
that monopoly. We had 9 approvals.. that's a lot of approval for a little
small amount of products. There is another problem that we're not getting much
investment based on patents into new important drugs, that's one of the most
important tropical diseases.

Hi, thanks for the great discussion, .. a voluntary mechanism, it seems- is it
just going to get sort of .. that don't have a market? How does one deal with
the idea, for some rich or poor disease, the makers would just take their
chances with the regular patent monopoly, and then just for neglected
diseases, is it really going to lower prices in the long term? We think that
the health impact fund would basically attract the products that have the most
health impact, but relatively low profitability under the ordinary patent
system. That's what it's designed to do- a complement to what we already have.
That means initially the most attractive products are those that are not
protected by patents or are poorly protected by patents. And, so that's the
direction of going first, and if it's successful in doing that, then it will
have a eral impact on the world and it needs to expand, it needs to have more
money, and it needs to focus on more diseases. On the other hand, it's just a
relatively small amount of money that we think we can start with- $6B/year.
That's not that big in the wrold of pharmaceuticals globally, but if it works
well, then it cuold expand and address more diseases over time. $6B is pretty
big relative to certain things. The criticism from our corners of the health
impact fund is that it doesn't require an open license to get the money, so in
the proposal that we're working with that people are favoring, you have to
give up the monopoly to get the prize money. In the health impact fund, you
keep the monopoly and get the prize money. What it's really about is
marginalizing generic drug companies.. ther's .. there's been a lot of
acquisitions and major.. companies.. in India and Brazil, there's been a ..
from India, a lot of new IPR agreements, making it hard for developming
countries... under the voluntary mechanisms .. you would have to give up the
monopoly so that you could have generic suppliers. BEcause of economies of
scale, the generic suppliers would have some market for the molecules. The
health impact fund has been, a lot of people complain, it's like an anti-
competitive strategy to marganilize the companies.. by taking the publi
health.. for a subsidy for countries to inconviently compete in those markets
(what??).

So let me just correct that. Actually, we actually have a view that that is
necessarily; we think there are three different ways that you can deal with,
following product approval. One approach is to require open license, another
is, and you just say, whoever wants to produce the product gets to produce and
sell it. Another is to provide tendering, where you have the product
manufactured by anyone who could produce it at the lowest cost, and the
innovator would still retian the marketing rights at the tender price. If he
wanted to control the distribution, but couldn't raise it above the price of
teh tender. A third approach is to allow the innovator to manufacture the
product, and have the price regulated according to the cost of manufacture.
These three strategies would apply in different cases. If you have a biologic
drug, which is complicated to manufacture, if you want competition to drive
the price down you'er going to end up with high prices, you will end up paying
the rewards, plus the money on it, in other cases on it, a molecule- you might
want a tender processes where the company is required to sell it at the tender
of the cost of the product. I am not sure what to say to Jamie, we had a
discussion paper on the web, we've stated publicly, it's on our website, I've
stopped discussed this, I don't appreciate having the same thing said over and
over- we think there are different ways of doing this, and we haven't decided
which way is the best, and it would have to be dealt with on a case-by-case
basis. We're not against competition, we think the real innovation here is
actually rewarding based on health impacting while requiring low prices, and
low prices can be achieved in different ways.

A lot of the tension- both Ed and Thomas were agreeing with otherp ublic
health groups that there should be an open license. But then this version came
out when the company would retain the monopoly, he did this because he thought
this was necessary to get big drug companies to support the program. That's
out of context. .... . we have not been taken over by the Drug Companies.. I
kind of resent it. ... What I was going to say.. I am perfectly willing to
listen to what yuo have to say.. if you don't thinkt hat the future of
competition and low cost manufacturing of drugs in developing country, you'er
just not paying attention. There have been people engaging this on a day-to-
day basis. There's no argument for any product, inclujding those that are
expensive to manufacture, and some of the biologics.. all the underlying IP..
even if ou .. you can pick multiple suppliers. . it's unambiguously, you're
better off in picking that.. that's teh direction that we're trying to move
things in. It's competition at the manufacturing area. They want to maintain a
monopoly on the distribution. There are so many cases where they buy from
suppliers but they hae enough control of the market, where they have, who they
can sell to, has such taken place in the market for some of the anti-flu
drugs. Anyway, it is a difference, there are some important differences, where
the competition for J___ products, whether you think that Health Impact Fund
is helpful or harmful .. if you're interested in what our view was, you should
just look at our website. It's not a decision, we're not after all to decide
how the health Impact Fund is going to end up. So there are different ways of
thinkign about this, it's a complicated decision when you get into voluntary
prizes, like the terms of those who are going to enter into the prize system.
I want to emphasize like we're pro-monopoly, we're not particularly, we don't
get funding from drug companies, we're not doing anything just to please them,
we want a productive and effective way to proceed. I don't think we have
disagreement except that, it seems like there's tension.