public-private management of intellectual property for...

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Public-Private Management

of Intellectual Property for

Public Health Outcomes in

the Developing World

The Lessons of Access Conditions in

Research and Development Agreements

OPERATIONAL ISSUES OF HEALTHPUBLIC-PRIVATE PARTNERSHIPS

ALLEVIATING THE HEALTH CONSEQUENCES OF POVERTY BY ENHANCING PUBLIC-PRIVATE COLLABORATION

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Public-Private Management of Intellectual

Property for Public Health Outcomes in the

Developing World: The Lessons of Access

Conditions in Research and Development

Agreements

Antony Taubman

About the Author: Antony Taubman is currently Head, Traditional Knowledge (Global Intellectual

Property Issues Division), World Intellectual Property Organization (WIPO), Geneva, Switzerland. Since

2001 Taubman has been Senior Lecturer, Australian Centre for Intellectual Property and Agriculture,

Faculty of Law, Australian National University. He was formerly Director, International Intellectual Property

Section, Australian Department of Foreign Affairs and Trade. It should be noted that Taubman undertook

this project in a personal capacity and that this paper is based on his private research (and that of IPPPH),

and does not reflect or represent any official views associated with the author's current or previous

positions, and in particular does not represent the views of WIPO, its Member States or its Secretariat.

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Public-Private Management of Intellectual Property for Public Health Outcomes inthe Developing World: The Lessons of Access Conditions in Research andDevelopment Agreements

by Antony Taubman

© Initiative on Public-Private Partnerships for Health, Global Forum for Health ResearchPublished by The Initiative on Public-Private Partnerships for Health,Global Forum for Health Research, June 2004ISBN 2-940286-19-1

The reproduction of this document is regulated in accordance with the provisions of Protocol 2 of theUniversal Copyright Convention. All rights are reserved by the Initiative on Public-Private Partnershipsfor Health, Global Forum for Health Research. The document may be freely reviewed and abstracted,with the usual acknowledgement of source, but not for sale or for use in conjunction with commercialpurposes. Requests for permission to reproduce or translate the report, in part or in full, should beaddressed to the Initiative on Public-Private Partnerships for Health where information on any transla-tions or reprints is centralized (see address below).

The named author alone is responsible for the views expressed in this publication.

Some of the information contained in the paper may be based on interviews, studies, research, literaturereview, professional advice and/or opinion; some information is supplied by third party sources. Theauthor and IPPPH have used their best efforts to accurately interpret and report this information and toallow contributors to review/correct/add when possible but cannot guarantee that the original informa-tion as supplied by others is correct or complete, or that it was accurately portrayed. The author andIPPPH make no representation regarding the completeness, accuracy, up-to-dateness, or adequacy of theinformation or materials it contains.

Additional copies of this publication are available (at no charge) from:

The Initiative on Public-Private

Partnerships for Health

ICC (Block G, 3rd Floor)

Route de Pré-Bois 20

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1215 Geneva 15

Switzerland

E-mail: [email protected]

Website: www.ippph.org

IPPPH SECRETARIAT

Roy Widdus, Project Manager

Pamela Atiase, Administrative Assistant

Karin Holm, Senior Programme Officer

Contents

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Preface v

Executive Summary: Harnessing Private Interest for Public Welfare vi

1. Introduction: The Challenge of Neglected Diseases 1

2. Defining the Need and Meeting the Challenge 3

3. The Policy Framework: Partnerships for Public Goods 9

4. Public-Private Partnerships in Research and Development 12

4.1 Structuring Research and Development Agreements

to Optimise Effective Access 12

4.2 Review of Access Conditions and PPP Agreements 13

4.2.1 Setting the context for access conditions:

general PPP agreement provisions 15

Purpose of agreement 15

Specific conditions on interpretation 15

General undertakings 16

Key definitions 16

4.2.2 Provisions governing IPRs and access conditions 16

Obligations concerning background and prior IP rights 16

Obligations concerning new IP rights: disclosure 17

Ownership of IP 17

Access to IP – new IP or background IP 18

4.2.3 Other intellectual property licensing issues 18

Licensing test data for regulatory approval 18

Trademark rights 19

4.2.4 Access conditions through marketing and distribution

arrangements 19

Distribution channels 19

Pricing structures 19

Factors in setting a reasonable price 20

4.2.5 Intellectual property licenses as a guarantee of access 21

4.2.6 Technical assistance and transfer of know-how 21

4.2.7 Reporting and monitoring provisions 22

4.2.8 Other forms of access to technology: non-financial incentives 22

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5. Pratical Lessons: What Models, What Choices for Optimal Access? 23

5.1 Setting the Basic Objective and Structure of the Partnership 23

5.2 Setting Guarantees of Access 24

5.3 Incentives and Technology Access Guarantees 25

5.4 Getting the Most from Intellectual Property in PPP Agreements 25

5.5 Overall Factors Influencing Access Conditions 26

6. Conclusions 28

6.1 Towards Practical Guidelines for PPPs 28

6.2 Concluding Observations 29

Glossary 31

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An array of not-for-profit ventures has been created in recent years to develop products to combatdiseases that predominantly affect populations in developing countries. Such ventures collaborate closelywith profit-oriented pharmaceutical companies, but need to develop strategies leveraging their owninvestments to achieve public health goals – access to the products that emerge from these collaborationsat acceptable prices, for poorer populations.

The current topic of intellectual property management has surfaced repeatedly as a topic of vital interestto the PPPs involved in developing new tools of intervention for neglected diseases. Hence, theInitiative on Public-Private Partnerships for Health (IPPPH) has endeavored to help PPPs navigate theserelatively unchartered territories. IPPPH surveyed the product development PPPs for specific examplesof how they have structured clauses relative to intellectual property and product ‘access’ within R&Dagreements with commercial companies. Richard Wilder, Partner, Sidley Austin Brown & Wood LLP, inWashington, D.C. and Melinda Moree, Director, Malaria Vaccine Initiative, PATH, in Seattle helped usdevelop our approach and contributed valuable early guidance on this topic.

Then IPPPH was fortunate enough to be referred to Antony Taubman who undertook to complete thisinitial monograph on the management of IP to benefit the health of poor populations.

As experience accumulates, the Initiative on Public-Private Partnerships for Health will be gatheringadditional knowledge on the topics of intellectual property management and negotiating ‘deals’ withcommercial companies, as part of our ongoing efforts to assist those engaged in product development tocombat disease associated with poverty. Hence, periodic revisions of this monograph are anticipated.Further information can be obtained by emailing [email protected] or visiting our website atwww.ippph.org.

Roy Widdus, Ph.D.Project ManagerInitiative on Public-Private Partnerships for Health (IPPPH)

Karin Holm, MBAManaging Editor and Senior Program Officer, IPPPH

Preface

PUBLIC-PRIVATE MANAGEMENT OF INTELLECTUAL PROPERTY FOR PUBLIC HEALTH OUTCOMES IN THE DEVELOPING WORLD v

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INITIATIVE ON PUBLIC-PRIVATE PARTNERSHIPS FOR HEALTH vi

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This study considers specific practical options formanaging intellectual property (IP) to promote

the creation, development and effectivedissemination of medical research outcomes forneglected diseases or diseases of poverty.1 In contrastto the diseases prevalent in industrialized countries,established drug development processes have givenscant attention to a number of widespread infectiousdiseases that are suffered by the poor andpredominantly afflict the developing world. Theresearch and development effort falls well short ofthe level of need proportionate with the scale of thisdisease burden. This ‘fatal imbalance’2 can beattributed to many causes, and has led to calls forinternational policy initiatives to refocus researchand drug development.3 There are three chiefchallenges to the creation and delivery of newpharmaceuticals for neglected diseases:

• the identification of promising leads and thecreation of new compounds as candidate drugsand vaccines, an essentially scientific activityrequiring the application of basic research capacityto neglected diseases;

• the transformation of promising compoundsinto new medicines, a complex process whichtypically requires extensive clinical testing,regulatory approval, and access to associatedtechnologies, manufacturing capacity anddelivery platforms;

• health infrastructure, distribution chain and costissues which can determine how many patientsgain access to new medicines and how effectivelythey are delivered and administered within thecontext of overall health care.

Analysis of the problem of neglected diseases hashighlighted impediments or shortcomings at eachof these stages, but particularly emphasis has beenlaid on the need to improve the drug developmentpipeline, since there is evidence of promising newcompounds remaining undeveloped due to the lackof incentives to take such compounds through thedevelopment process.4 Policy settings are also seenas an obstacle to translating medical knowledgeinto actual tangible benefits, where the basic scienceis well known and current technology offerssolutions in principle.5 There are diverse possiblestructures for filling this drug development gap,which draw on a range of inputs and are adaptedto the practical needs in each case. These responsestypically use a mix of ‘push’ mechanisms topromote research and development, such as bydirect funding or tax incentives, and ‘pull’measures, which enhance the value to the producerof bringing new drugs to the market. While variousinitiatives and policy responses differ considerably,for convenience of discussion, these approachescan be classed into four general categories, alonga spectrum of varying engagement of publicinvestment and private interest:

Executive Summary: Harnessing PrivateInterest for Public Welfare

1 D.R. Gwatkin and M. Guillot, ‘The Burden of Disease among the Global Poor,’ World Bank, Washington, 2000.2 Fatal Imbalance: The Crisis in Research and Development for Drugs for Neglected Diseases,’ MSF Access to Essential

Medicines Campaign and the Drugs for Neglected Diseases Working Group, 30 November, 2001.3 For example, Carlos Morel, ‘Neglected diseases: under-funded research and inadequate health interventions,’ EMBO

Reports, Vol 4, 2003, at p. S35.4 ‘Numerous promising drug and vaccine leads are sitting on the shelf. It is time for pharmaceutical science to deliver on its

tremendous promise for the developing world,’ Dr. Victoria Hale, at www.oneworldhealth.org. 5 This point is made by Alimuddin Zumla, ‘Reflection & Reaction: Drugs for Neglected Diseases,’ The Lancet Infectious

Diseases, Vol 2 (July 2002), p. 393.

6 For example, the Drugs for Neglected Diseases Initiative (DNDi) aims to ‘move away from the traditional Public PrivatePartnership structure’ and ‘to take drug development out of the marketplace by encouraging the public sector to take moreresponsibility for health,’ ‘Best Science for the Most Neglected,’ at www.dndi.org. A purely public sector approach hasparticularly been associated with vaccine development (e.g. the first AIDS vaccine was made at U.S. NIAID's VaccineResearch Center, news release, Oct. 9, 2001, http://www.niaid.nih.gov/. Other examples include the experience of Cuba(e.g development of a vaccine against meningitis B - http://www.ibike.org/cuba/library/CU%20vaccine%20meningitis.rtf)and Brazil (e.g. FarMaguinhos, the Brazilian government's drugs producer, is involved in the development of new productshttp://www.fiocruz.br/ingles/historia/farmanguinhos.htm).

7 E.g. the ‘nonprofit model for drug development’ implemented by the Institute for OneWorld Health(www.oneworldhealth.org).

8 For example, the U.S. federal government offers economic assistance to small pharmaceutical companies in the pre-approvalperiod of drug development for the conduct of clinical trials as well as economic incentives post-approval to reward innovationin drug development http://www.fda.gov/cder/about/smallbiz/Econonic.htm.

9 Adetokunbo Lucas, ‘Public-Private Partnerships: Illustrative examples,’ 2000, at www.who.int/tdr10 A comprehensive study of PPPs is provided in Hannah Kettler and Adrian Towse, ‘Public Private Partnerships for Research

and Development: Medicines and Vaccines for Diseases of Poverty,’ Office of Health Economics, London, 2002.11 ‘Monitoring Financial Flows for Health Research 2001,’ www.globalforumhealth.org12 ‘While supporting basic and drug-lead discovery research, the public sector has rarely developed its own drug development

expertise and capacity. It is the pharmaceutical industry that leads product development, from pre-clinical research throughregulatory approval,’ ‘Fatal Imbalance, The Crisis in Research and Development for Drugs for Neglected Diseases,’ MSFand DND Working Group, 2001, p.20.

• an essentially public approach, marshalling publicresources and building capacity to create moreeffective public-sector drug development vehicles; 6

• a philanthropic or not-for-profit approach,drawing on private funds (such as charitablefoundations) and donated private research anddevelopment resources; 7

• an essentially commercial approach, aiming tocreate stronger incentives for private investmentin drug research and development (R&D) andfor investment in regulatory approval anddistribution of needed treatments, such as orphandiseases schemes – these may include ‘push’incentives such as cost reduction, and pullincentives that enhance the operation of markets; 8

• a hybrid public-private approach that blendspublic-sector resources and policy directions withprivate sector expertise and investment – thesemay operate with an amalgam of commercial andnon-commercial mechanisms, for instanceallowing profits in wealthy markets to cross-subsidize at-cost or charitable distribution inpriority areas of public health need. 9 This studyconcentrates on this last approach, and inparticular on public-private partnership (PPP)agreements for the development anddissemination of new treatments for neglecteddiseases. 10

Both public and private inputs have in practice beenvital in achieving public health outcomes: oneestimate indicates that of the more than US$70 bn

invested in global health R&D in 1998, 50% of thefunds came from public sources, and 50% fromprivate sources (84% of which was provided by thepharmaceutical industry, the remainder from privatenot-for profit funding). 11 The private sector role hasbeen important when research moves beyond basicscience to the clinical trials and other developmentsteps required to prove the efficacy and safety of newproducts and to bring them to fruition as readilyavailable treatments. The scientific and technicalskills that are the traditional strengths of the researchcommunity need to be supplemented by cross-disciplinary expertise in product development,regulatory processes, production and distribution. 12

Both sets of skills are vital for the pharmaceuticaldevelopment process, whether it is public-funded orbased in the private-sector.

Hence even publicly-funded research programs haveentailed some form of engagement of private sectorentities at some stage as the initial researchbreakthrough is taken from the laboratory to thedispensary, to be available to the public as a proven,tested, stable, mass produced and efficaciouspharmaceutical. In this process, public and privateinputs may be required, both to marshal thenecessary resources and development skills, and tosecure access to associated technologies and knowhow. So the immediate and pressing concerns aboutmajor public health problems tap into a broader,long-running public policy debate: how best topromote innovative research and development inthe private sector, and to focus it on areas of need,while still ensuring effective public availability ofnew technologies for the overall welfare of society?

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How to encourage private activity that promotesthe broader public interest? It is perhaps inevitable,then, that the debate turns to some extent on therole and effect of patents in the health domain.Patents are a long-established policy mechanismintended to promote innovative private sector activity(research and investment in development of newtechnologies) for the overall public good, but howto optimize the public interest, especially publichealth outcomes, within the patent frameworkremains a contested issue.

PPP agreements created to address neglected needsfor medical research and development constitutean important, focussed practical mechanism forharnessing private interests to achieve specific publichealth outcomes. These partnerships typically aimto achieve two distinct outcomes – first, creatinga new technology (typically a new pharmaceuticaltreatment or vaccine), and second, ensuring thatthis technology is practically available as a safe andeffective finished product to as many intendedbeneficiaries as possible – this means some mix of

positive incentives and contractual guarantees thatensure the product will be distributed well beyondthe scope that the regular commercial marketwould service. Broadly, these mechanisms aredescribed as access conditions. Access conditionsusually entail strategic use of IP and agreementson IP management to generate the desiredoutcomes.

This study considers how PPP research anddevelopment agreements with access conditionshave been developed, negotiated and implemented,and how they are structuring to ensure the widesteffective access to the finished product. This shouldoffer practical guidance into how to optimizeoutcomes from future PPP initiatives. But it shouldalso provide insights into the broader policy issueof how to define and promote a clearer, moreeffective contribution on the part of private sectorplayers within programs seeking to deliver strongerpublic health outcomes in geographical areas andfor diseases that have been poorly serviced by theconventional drug development processes.

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Neglected diseases are those for which there hasbeen insufficient attention to the research and

development of vaccines and drugs for theirtreatment – typically due to a combination of lackof public funds and an absence of private sectorincentive. These ‘diseases of poverty’13 or‘economically orphan’14 diseases are concentrated inthe developing world: the comparative lack ofresources in developing countries and the strengthof the health market in the industrialised world leadsto a dramatic disparity between the focus of healthresearch and development, and the actual patternof suffering from infectious diseases. While anestimated $70.5bn was spent in 1998 on healthresearch, less than ten percent of this ‘is devoted todiseases or conditions that account for 90% of theglobal disease burden.’15

To bridge this ‘10/90 gap’ is, on one level, ageneral challenge for national and internationalpolicymakers: the World Health Assembly hasrequested a study focusing on ‘the question ofappropriate funding and incentive mechanisms forthe creation of new medicines and other productsagainst diseases that disproportionately affectdeveloping countries.’16 The overall challenge

involves, at core, mobilizing and better focussingthe necessary resources to match more closely theglobal pattern of need: this is an urgent and graveinstance of the general policy question17 of howoptimally to provide for public goods or ‘collectiveconsumption goods.’18 Public health is a pre-eminent public good, and there is accordingly abroader policy debate about public funding policies,research and development priorities, and incentivestructures for private sector involvement, includingthe policy settings that apply to drug regulatoryprocesses, the balance of interests reflected in theIP system, and related mechanisms such as orphandrugs programs.19 Established ‘orphan disease’programs focus on those diseases that are neglecteddue to the low numbers of those afflicted withcertain life-threatening or grave diseases, in contrastto the ‘economically orphan’ nature of neglecteddiseases which are typically suffered by millions inthe developing world.20

But the problem must also be addressed at theimmediate practical level, through practical programs.A number of initiatives have been launched in recentyears to draw together public and private partnersso as to fill specific gaps in research and development

13 Performance and Innovation Unit, Cabinet Office, ‘Tackling the Diseases of Poverty: Meeting the Okinawa MillenniumTargets for HIV/AIDS, Tuberculosis and Malaria,’ London, 2001.

14 Accelerating the fight against AIDS, TB and malaria: an EU perspective, speech by Commissioner Poul Nielson, New York,28 April 2003.

15 ‘What is the 10/90 Gap?’ www.globalforumhealth.org16 Paragraph 2.3, Resolution 56.27 of the World Health Assembly (2003).17 See Francis Sagasti and Keith Bezanson, Financing and Providing Global Public Goods, Ministry of Foreign Affairs,

Stockholm, 2001, and Inge Kaul, Pedro Conceceicao, Katell Le Goulven and Ronald Mendoza, ‘How to Improve theProvision of Public Goods,’ in Providing Global Public Goods, UNDP, New York, 2002.

18 Samuelson, P., ‘The Pure Theory of Public Expenditure,’ Review of Economics and Statistics, 36, 387.19 Specific programs to promote the development of orphan drugs or orphan medicines have been implemented, for example,

in the European Union, Japan, Australia and the United States. EU Regulation 141/2000 defines an ‘orphan medicine’as one ‘that without incentives it is unlikely that the marketing of the medicinal product … would generate sufficient returnto justify the necessary investment.’ The US Orphan Drug Act refers to drugs to treat rare diseases, which are defined asdiseases or conditions that affect fewer than 200,000 people in the U.S., or ‘for which there is no reasonable expectationthat the cost of developing and making available in the US a drug for such disease or condition will be recovered from salesin the US of such a drug.’ These programs typically provide a mix of push and pull incentives, such as tax credits for researchor clinical trials, limited market exclusivity for an approved new drug, assistance or facilitation of regulatory approval andfee reductions or waivers, and direct funding or grants for drug development.

20 See DND working group http://www.neglecteddiseases.org/1-5.pdf.

1. Introduction: The Challenge ofNeglected Diseases

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INITIATIVE ON PUBLIC-PRIVATE PARTNERSHIPS FOR HEALTH 2

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activity, with the aim of developing and disseminatingtreatments for specific neglected diseases.21 Public-private partnerships (PPPs) for neglected diseaseshave had to find practical responses to someimportant questions: what mechanisms actuallyfunction to ensure that necessary research and drugdevelopment are undertaken when they otherwisewould not be done; and what mechanisms actuallyfunction to ensure that new drugs and vaccines, oncedeveloped, are effectively distributed to as many aspossible of those suffering from neglected diseases?Typically, although not universally, these programsentail some form of involvement of both public(governmental, publicly-funded international andmultilateral agencies) and private actors (includingcommercial enterprises – typically pharmaceuticalcompanies -- as well as privately-funded philanthropicand non-governmental organizations), althoughtheir respective roles and inputs may vary widelybetween programs. One study distinguishes betweenpartnerships that are ‘public sector programmes withprivate sector participation, operating under theauspices of intergovernmental agencies; and not-forprofit public-private partnerships operating under

the national laws of various countries.’22 Some ofthese programs are beginning to bear fruit - in termsof immediate research and development outcomes,but also in terms of practical understanding ofeffective partnership mechanisms: they provideinsights into what structures actually yield results,and what approaches have been less successful.

The fruits of this experience will be invaluable forplanning and implementing new initiatives to dealwith neglected diseases. But understanding thepractical choices made in implementing theseinitiatives may also contribute to the broader policydebate. These initiatives, individually, are case studiesin how to find new ways of harnessing public andprivate interests, and effective mechanisms formanaging resources for the public good – how publicand private investment, intellectual property andknow-how can be harnessed for overall public healthgoals. Surveyed together, these initiatives may helpprovide practical insights for policymakers seekingto set new policy directions to address the publichealth challenges in the developing world.

21 Product-development public-private partnerships (PPPs) considered in this study include the International AIDS VaccinesInitiative, the Institute for OneWorld Health, the Concept Foundation, Consortium for Industrial Collaboration inContraceptive Research (and CONRAD), the Alliance for Microbicide Development, the Medicines for Malaria Venture,Infectious Disease Research Institute, Aeras Global Tuberculosis Vaccine Foundation (formerly the Sequella GlobalTuberculosis Foundation), the UNDP/World Bank/WHO Special Programme for Research and Training in TropicalDiseases (TDR), Drugs for Neglected Diseases Initiative (DNDi), Malaria Vaccine Initiative (at PATH), Global Alliancefor TB Drug Development, Hookworm Vaccine Initiative (at the Albert B. Sabin Vaccine Institute), Foundation forInnovative New Diagnostics (FIND), Concept Foundation, and the Gates Foundation/U. of North Carolina Partnershipfor the Development of New Drugs (GFUNC), as well as provisions from other agreements which, for confidentialityreasons, will not be specifically identified. Other relevant material includes the general funding policies and specific programactivities of government agencies, foundations, multilateral agencies such as WHO and the World Bank, and academicinstitutions, including Special Programme for Research and Training in Tropical Diseases (TDR). See www.ippph.org formore information on public-private partnerships for health.

22 ‘Tackling the diseases of poverty,’ (see note 13 above), p. 60.


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Successfully bringing a new drug or vaccine tothe public requires a diverse blend of inputs

and contributions, in terms of intellectual, materialand financial resources. These include backgroundIP and know-how, provision of research facilitiesand funding, the specific research outcomes andinnovations that form the basis of a new drug,access to platform technologies and manufacturingcapacity, drug development capacities, includingthe capacity to manage clinical trials and regulatoryapproval processes and investment in downstreamdevelopment, and capacity to disseminate drugs tothe public while providing necessary clinical supportand health infrastructure. The market for finisheddrugs is also hybrid and diverse in character, inmany countries combining price subsidies, publicprocurement programs, and various incentivestructures.

Inevitably, how this is achieved in practice variesgreatly between different pharmaceuticaldevelopment activities, and one specific templateis unlikely to apply to each distinct new initiativeto meet a disease need. Drug research anddevelopment have been achieved by a host ofdifferent structures, formal and informalpartnerships, and varying levels of public andprivate sector input. Given the complexity of theresearch and development processes, and the diffusenature of medical knowledge and backgroundtechnology and know-how, it would be difficult toattribute all inputs to any given drug developmentoutcome exclusively to either wholly public orprivate sources. Any particular outcome is likelyto rest at some point along a spectrum betweenthe extremes of purely public and purely privateinputs. Typically, both public and private actorsmake various levels of contribution at each stagein the process of undertaking basic research,proving the safety and efficacy of candidateproducts, and creating the necessary mechanismsfor production and dissemination of thepharmaceutical. The distribution of drugs andvaccines occurs through public procurement and

distribution programs, the private market, andhybrid markets involving various forms of publicintervention.

Broadly, then, the full development of anypharmaceutical from a research insight through toa widely distributed treatment inevitably involvespublic and private interaction, and varying degreesof public funds and private investment, of publicsector research programs and private research anddevelopment, and scientific, technology managementand product development skills. The lack of researchand development activity for neglected diseases istherefore generally attributed to twin causes, oneconcerning private sector initiatives and priorities(the absence of a sufficiently attractive market indeveloping countries) and the other the allocationof public resources (lack of direct public fundingand failure to develop and disseminate the fruits ofpublic research). Publicly funded research programsrarely have the stand-alone capacity to take apromising candidate product through the entiredrug development process, and accessing allnecessary background technologies and industrialcapacities. Hence a comprehensive approach tofulfilling unmet needs involves addressing shortfallsin both public resources and private incentives. Aspart of the overall drug development process, privatesector players need a secure basis and rationale toinvest the capital and specialist know-how requiredand to bear a share of the risks in the later stages ofdrug development, including clinical trials andregulatory approval, and ramping up for production.

Resolving the paradox: securing the public

interest from private rights

It is increasingly difficult to divide these diverseinputs neatly into public and private components,and it is not always clear what the full contributionof public and private players has been for apharmaceutical product. The situation is somewhatclearer when there is a specific productdevelopment partnership, defined and structuredby a formal agreement that defines the relationship

2. Defining the Need and Meeting the Challenge


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23 ‘Tackling the diseases of poverty,’ (see note 13 above), Annexes, p. 28.24 ‘While supporting basic and drug-lead discovery research, the public sector has rarely developed its own drug development

expertise and capacity. It is the pharmaceutical industry that leads product development, from pre-clinical research throughregulatory approval,’ ‘Fatal Imbalance, The Crisis in Research and Development for Drugs for Neglected Diseases,’ MSFand DND Working Group, 2001, p.20.

between the different players, including rights andresponsibilities concerning the development anddissemination of new technologies. Suchpartnerships routinely require strategic use of IPrights, especially patents, and include provisionson how IP rights should be owned, managed, andexercised so as to achieve the objectives of thepartnership. Hence patents and other IP tools areincreasingly used, even when the initial researchand discovery processes have a strong publicly-funded component.

This can lead to concerns that public policyinterests need to be safeguarded when such researchis developed further and commercialized, and inparticular to ensure new technologies are madeavailable on reasonable terms, including throughthe exercise of IP rights covering the technology.One study, noting that IP issues are crucial in PPParrangements, comments that ‘depending on thebalance of funds and risk between the public andprivate partners,’ the incentives for private sectorinvestment may be weakened, but that ‘publicfunds should be used to ensure patentarrangements mean prices to the end consumer areaffordable.’23 Further, to the extent that publicinvestments are made in early research anddevelopment, there may be concerns that the publicshould own or control the technologies produced,or should ensure that all research outputs are placedsquarely in the public domain. Yet it remains thecase that private sector entities have played a directrole in developing most new drugs, and arenormally responsible for taking a candidate drugfrom the early stages through the clinical trial andregulatory approval processes to yield a finished,approved product. This role is increasinglyimportant in the complex stages of drugdevelopment beyond the initial discovery of acandidate drug. It is often the private sector playerswho can best marshal the necessary productdevelopment expertise,24 and who bear thecommercial risk of investing capital and otherresources in this process. This can mean that thepath chosen for drug development and deliveryentails the private sector player holding andexercising IP rights over the new technology –

while this may be the most effective choice toachieve the desired outcomes, it can touch onconcerns about the apparent privatisation of publicsector research and the imposition of constraintson public access to new technologies. This paperdiscusses the kind of public interest mechanismsfor IP management, such as access conditions,conditional licensing obligations, and segmentedand favourable marketing structures, that canalleviate concerns about commercial control.

Managing intellectual property for the public

good

These concerns create the need to assess carefullythe role of IP systems in the complex environmentof public health policy. Patents in thepharmaceutical sector have been a particular focusof concern. Yet the patent system is not intendedto set private rights at odds with the public interest,nor to create an intolerable burden for thecommunity. To the contrary, the patent is apurpose-built vehicle for transferring technologyinto the public domain, not for withholding itsbenefits, preserving private interest while harnessingit for public welfare. The patent system has beenestablished and crafted over time as a partial solutionto fundamental issue at the core of the neglecteddisease debate: how to stimulate beneficialinnovation by private players while ensuring thepublic gets tangible benefits from this innovation?If the patent system is intended as a solution to thisdilemma, it is on the face of it a paradoxical, evencontradictory one: the use of exclusive private rightsover new technologies to promote public welfare.In principle, the patent system was not establishedwith the objective of privileging private interestsover the public interest, but because of the essentialjudgement that in the absence of the system, publicwelfare would suffer. The system evolved as a meansof transferring practical knowledge about newtechnologies into the public domain, promotingthe benefits of new technology, and recognizinglegitimate private interests while still harnessingthem for public welfare. However, these privaterights are bounded to some extent (most obviouslyin the limited duration of patents) to safeguardpublic welfare. The patent system has other


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remedies and interacts with other areas of regulation(such as the rules for testing and approving newpharmaceuticals), to provide other guarantees ofthe public interest.

Properly managed, therefore, patents should be usedto extract practical public benefits out of publichealth research (whether it be public or private),through defining the relationship between publicand private players, and tapping into the necessaryprivate capital and private sector expertise requiredto achieve concrete outcomes. For instance, one

funding program for research and training inneglected tropical diseases stipulates that acquiringand exercising IP rights ‘is often necessary tofacilitate the development in the public interest of[research] results into a useful health-relatedproduct.’25 In some cases, acquiring and exercisingIP rights may be the most effective way of ensuringthat the public does get access to a pharmaceuticaleven if it is based on research initially funded by thepublic or by philanthropic agencies – for example,where the absence of IP rights would mean a privatesector player would have no rationale for investing

Basics of the patent system:

The following essential features of a typical patent system are relevant to this study:• A patent is intended to be available for only those technological advances that are genuinely new (or

‘novel’), involve an inventive step (or are ‘not obvious’), and are useful (or are ‘capable of industrialapplication’) – this puts patents in the domain of practically applicable technology rather than purelyscientific insights.

• The patent is granted only in exchange for a full public description of how actually to carry out theclaimed invention – so if a patent concerns a new pharmaceutical, it contain enough practicalinformation so that anyone familiar with the general field is able to replicate and produce an effectivecopy of the pharmaceutical. If a patent fails to meet this standard, it can be refused or cancelled.The reader of a patent is however presumed to have the general background and technical knowledgeappropriate to the field of technology it addresses.

• A patent does not give its owner a positive right to distribute or sell a new product, and especiallydoes not create an entitlement to put a new pharmaceutical on the market. When a patent applicationis filed for a prospective new pharmaceutical, it is normally very early in the development phase.Much more still needs to be done to demonstrate the safety, efficacy and viability of a newpharmaceutical. A new drug or vaccine would normally have to be separately approved for use bya health authority. This approval process can be lengthy and complex, and typically involves producingtest data through clinical trials. Separate legal systems affect the protection and use of such test data.

• A patent holder receives a 20-year exclusive right to produce, make use of, exercise, and sell theproduct or process that constitutes the invention. This runs from the time a patent application isfirst filed. Since the initial invention often long precedes the regulatory approval and entry intomarket of a new pharmaceutical, the actual effective period of exclusivity for a new drug or vaccinecan be less than this in practice, in some cases only several years.

• The rights granted under a patent can be licensed – the patent owner formally agrees with a thirdparty to allow certain uses of the patented invention. In practice, the licensed uses might be limitedaccording to purpose, field of use, territorial coverage and other conditions. A license may beconditional, for example being triggered if the patent owner fails to meet certain agreed conditions.Licensing is often covered by other legal considerations – e.g. patent laws or competition (anti-trust)laws may require that licenses not be excessively restrictive.

• In many countries, there are exceptions to patent rights that allow third parties to use the inventionwithout the consent of the patent owner – for example, to conduct research or to prepare for regulatoryapproval of a pharmaceutical.

23 UNDP/World Bank/WHO Special Programme for Research and Training in Tropical Diseases (TDR).


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• In addition, public authorities have a vital role in ensuring that a patent is exploited in a way that isconsistent with the public interest: firstly by encouraging the patent holder to undertake voluntaryexercise of the patent right in a way that benefits the public, and secondly by providing for correctiveaction if this doesn’t eventuate. Legal remedies have been developed to allow third parties and stateauthorities to take action if patent rights are abused, if the obligation to work the patent is notadequately carried out, or if there is overwhelming public need.

• Patents are territorial in effect – in other words, distinct and independent patents are separatelygranted for different jurisdictions (for the most part each country has a different patent system, butthere are several regional systems that provide a regional patent with effect throughout the region).This means that the exclusive rights under a patent granted under the laws of one country have noeffect elsewhere. It often happens that an invention is covered by a patent in one or several countries,but this doesn’t prevent others from freely using the invention in any other country where there isno patent in force – most inventions are protected by patents in just a minority of the countries inthe world. The transparency of the patent system means that anyone skilled in the field worldwidecan tap into the information needed to carry out the invention. There are of course many othersubstantive factors – lack of background know-how, economic and infrastructure factors, investmentand capacity needs – that can in practice impede actually putting this knowledge into effect.

• Territoriality also means that patents on the same invention for different countries can be separatelyowned and licensed in each different country.

in the process of downstream development, clinicaltrials and regulatory approval, and the developmentof manufacturing capacity. At the same time,funding and public institutions use agreements onthe dispensation of IP rights to ensure monitoring,input and control over the application andexploitation of core technologies byresearch/industry partners, structuring a packageof access conditions with necessary incentives as thebasis of the partnership. A new, hybrid conceptionof IP management is therefore being increasinglyused that spans the conceptual divide between publicand private. For the philanthropic funding partner,public sector agency or intergovernmentalorganization, IP helps define and structure thetechnology development and distributionrelationships so as to guarantee public healthoutcomes; for the private sector partner, agreementover access, ownership and exploitation of IPprovides the needed clarity, predictability andfreedom to operate that enables private sectorresources to be invested in the drug developmentprocess and, as needed, in the distribution of thenew product.

This study reviews the practical mechanisms thathave been used to structure public-private alliancesto create and make available new treatments forneglected diseases. It looks in particular at how

partnership agreements define the distinctexpectations on private, non-profit, and publicpartners within an alliance, and therefore seek toguarantee specific public health outcomes resultingfrom the alliance, and considers how theseexpectations and guarantees are expressed througha public-private form of IP management.Examining how ownership of IP rights isdetermined, and how those rights are required tobe exercised in PPP agreements, may help illustratethe potential role of IP rights in ensuring that thenecessary investments are made, while safeguardingnecessary public access to new products developedin part through public or philanthropic funding orother public-sector inputs such as background IP.It highlights a need to clarify what is meant by‘access’ as a goal for public-oriented programs andpublic-private partnerships – for instance, whetherthe objective for public funded health programsshould be full public ownership (or public domainstatus) of all essential technologies – in which case‘access’ may mean the lack of legal impedimentsto using a new technology – or whether theobjective should be the actual, practical availabilityof a finished product and its active distribution tothe public (such as through the kind of accessconditions included in PPP agreements to defineand to guarantee the necessary level of availabilityof the drug or vaccine).


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Policy tools to optimize public-private

interaction: policy overview of the patent

system

Achieving public health outcomes potentiallyrequires the use of a wide array of policymechanisms, ranging over public-funded drugproduction or distribution programs, pharmaceuticalsubsidy schemes, higher education and researchpolicy, and industry development programs. Theoptions include direct public funding of new researchand development and other non-patent incentivemechanisms, such as orphan drug schemes and testdata exclusivity schemes. This study focuses inparticular on public-private interaction, so the policytools most immediately involved are those whichseek to establish an optimal balance between publicand private interests, for overall public welfare. This,in particular, is the central objective of the IP system,and patent laws in particular.

There is an extensive critical literature about theimpact of the patent system on the public interest,which is at its most acute when public health is atstake. On the one hand, there is an accepted needto make use of private sector capacities and resourcesto yield the public interest outcomes that arise fromthe creation and dissemination of new technologies.On the other hand, there is concern that publicwelfare should not be subordinated to the publicinterest. Addressing these concerns involves, atcore, a practical resolution of a policy tension thatdates back to the pre-industrial age, when the firstlegal codes were drawn up that still underpin today’spatent laws: how to stimulate beneficial innovationby private players while ensuring the public getstangible benefits from this innovation.

The patent system should therefore function as apositive linkage between the private and publicdomains, between the generation of basic researchand the implementation of useful technologicalsolutions. The patent, in principle, is not only aprivate right, nor just an incentive to developinnovations: each patent right can be construedas a public-private deal between the patent ownerand the State. In essence, the government grantsa limited-term patent right to the creator of a trulynew, inventive and useful technological advance,which gives its owner the entitlement to excludeothers from use of the new invention. Thisentitlement runs in principle for at least twentyyears from time of file application (in practice, many

patents lapse well before that time). The actualperiod of commercial exploitation of this exclusiveright is usually considerably shorter than the actualpatent term: for instance, because of the long leadtime for development, testing, and regulatoryapproval of a new drug, the actual period ofexclusive access to the market is generallyconsiderably less than the full twenty year term.During the term of the patent, the patent ownerhas the scope to invest in the new technology,prove its efficacy, safety and viability, pass throughany regulatory approval process (especiallysignificant for new pharmaceuticals), deliver it tothe market, and secure profits by licensing anddirectly marketing its technology so as to offset theinvestment in research and development. Oncethe patent term expires, the technology falls intothe public domain for anyone to use. In exchangefor this exclusive right, the applicant for the patentright has to put on the public record how to carryout the invention – in the case of a patent on a newpharmaceutical product, this amounts to publishingall the information that a generic competitor withgeneral technical skills would need to be able toput the claimed invention into effect, in otherwords to be able to produce the newpharmaceutical so as to achieve its claimed benefits.Failure fully to carry out this disclosure obligationmeans that a patent can be refused or held invalid.Further, in many countries’ laws, the owner of thepatent right can be held to the obligation to makethe technology available to the public, expressedin various conditions such as ‘working the patent,’‘meeting the reasonable expectations of the public,’‘adequately meeting demand for the invention onreasonable commercial terms,’ or ‘not unreasonablydenying’ opportunities to license the invention.

So a patent does not just give its owner the rightto restrict others’ use of the invention: it can imposeobligations on its owner to ensure the invention isput into effect, or worked, to a reasonable degree.The patent system was conceived as a conduit todeliver technology from private hands to the public,first in terms of knowledge about the technology,second in terms of using the technology for publicbenefit, and third (when a patent expires) leavingit free for all to use unconditionally. A patent,therefore, is an undertaking to the public as well asa private entitlement – each patent is, in principle,a public-private partnership in itself. This is incontrast to trade secrets and know-how, which canindeed remain locked up indefinitely.


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In practice, patents can be used to define andstructure technology partnerships, reaching acrossthe public and private divide through a diverse rangeof licensing and technology access arrangements.Hence patent ownership should not be seen inabsolute terms – in the kind of technologypartnerships that this study considers, patentownership is often counterbalanced by undertakingsto grant licenses not merely over the technologycovered by the patent, but also over other necessarytechnology and know-how, as well as otherresources, as a means of ensuring optimal availabilityof new technologies for public benefit. From aregulatory point of view, also, the patent right is notabsolute: governments often reserve the right touse patented technology even without theauthorization of the patent holder, subject toimportant safeguards to protect the patent holder’sinterests. This prerogative is in practice rarelyinvoked, but can be an important factor in theframework for licensing negotiations.

Other policy tools relevant to the present study aretest data protection, and limited market exclusivityschemes such as those provided under ‘orphan drugs’programs. Regulatory approval of newpharmaceuticals typically involves clinical trials andthe generation of test data as to the safety and efficacyof a candidate drug, quite apart from the investmentin the initial research that leads to the identificationof a potential new treatment. The production of thesetest data is therefore linked to government regulatoryrequirements, yet normally involves private investmenton a significant scale. To the extent that the publicrelies on private investors to generate these essentialdata, policymakers have introduced incentives for thisproductive investment: test data protection typicallyentails giving limited forms of exclusivity over the useof clinical test data, so that an investor has incentiveto undertake this important element of the drugdevelopment pipeline. As this study will illustrate,technology partnerships such as PPPs can be used toleverage access to such test data that third parties mayneed for regulatory approval in neglected markets.


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This section briefly reviews the general policyframework, to set in context the specific practical

choices that are surveyed in this study. The provisionof health care, including the creation and supply ofnew drugs and vaccines to serve unmet needs, is afundamental public good. Globally, the provisionof this public good to developing countries, and inparticular the poor in those developing countries, isan urgent policy challenge. Finding effective meansfor improving the response to neglected diseases isa particularly demanding issue in the provision ofglobal public goods. There is an active internationalpolicy debate concerning the options for securingthe necessary resources for the provision of globalpublic goods, including through public-privatepartnerships, and appropriate structures for thefinancing of global public goods.26 The provision ofpublic health typically involves a combination ofpublic and private contributions: this entails acomplex interaction of public funding and publicinfrastructure development, the operation of thecommercial market (including the market forinnovative and established technologies), targetedfunding from public, private and philanthropicsources, and specific incentive mechanisms toencourage private actors to invest financial and otherresources in priority areas dictated by public policyobjectives.

The dynamic interaction between public interestsand private players is an inevitable and essentialelement of the provision of public health. Thisapplies in particular to the provision of drugs andvaccines. Contemporary policy debate and analysis,while wide-ranging and diffuse, does have as acommon element an acceptance that public interestand resources need to interact more productivelyand harmoniously with private interests andresources. How to structure this interaction, andhow to find the most effective way of harnessing the

particular assets, know-how and delivery capacity ofprivate sector players, is a key policy challenge bothat the broadest policy level – a striking instance ofthis is the WTO negotiations about the appropriatebalance of interests in relation to pharmaceuticalpatents, culminating in the Doha Declaration onthe TRIPS Agreement and Public Health27 andsubsequent work on its implementation – and at thepractical level of managing specific projects orprograms, for instance in creating practical andeffective structures for defining the relationshipbetween public and private players in drug andvaccine development and distribution.

Three general responses to the challenge of neglecteddiseases can be discerned: an essentially commercialor private sector approach, relying on privateenterprise and market-based initiatives, which wouldbe enhanced by creating stronger incentives forprivate investment in drug research and development(R&D) to enhance supply, and strengthening themarket for neglected diseases to enhance demand;an essentially public approach, marshalling publicresources and building capacity to create moreeffective public-sector drug development vehicles;and a hybrid public-private approach that blendspublic-sector resources and policy directions withprivate sector expertise and investment. In fact,these categories are not absolute and exhaustive;considering the wide range of inputs and investmentsthat are necessary and the overall cost and complexityof drug development, actual drug programs are likelyto have this hybrid quality, regardless of whetherthey are nominally situated in the public or privatesectors.

At the most general level, public health and inparticular the provision of drugs and vaccines entailssome form of public-private partnering. Achievingbetter public health outcomes therefore entails

3. The Policy Framework: Partnerships For Public Goods

26 Francis Sagasti and Keith Bezanson, Financing and Providing Global Public Goods, Ministry of Foreign Affairs, Stockholm,2001.

27 WTO document WT/MIN(01)/DEC/2 of 20 November 2001, available at http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm


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understanding how this partnering can be optimised.This conception of optimal partnering can beconsidered at the broad policy level and at theimmediate project level. The two levels interact –the approach taken to balancing public and privateinterests in a national IP system can be a major factorin encouraging productive partnerships at the projectlevel, and in promoting their viability. The nationalpolicy and legal framework is an important factor indetermining outcomes, as is the choice of partners,and the mix of expertise, capacities and resourcesthat partners bring to a program. This studyconsiders the project level, where a defined publichealth objective is established (such as thedevelopment and effective distribution of a vaccinefor a disease that particularly afflicts developingcountries), and a research and development programis undertaken to serve that objective. The studyconsiders available options for structuringpartnerships and the factors that increase the practicallikelihood of attaining the desired public healthobjective.

Partnership proposals and established partnershipscan both founder on IP issues. Differingperspectives by partners on IP management havebeen identified as a ‘significant impediment topartnership-building:’ for instance, in relation tomedical research charities and universities, one reportnotes that some charities ‘tend to under-estimatethe investment uncertainties and risks that thecommercialisation process entails. This means thatthey can seek a higher financial return than theircommitment of risk capital warrants. In contrast,some charities have raised concerns that universitiesinsist on ownership of IP but pay insufficientattention to ensuring that adequate technologytransfer takes place.’28 Optimal partnering alsodepends in part on the formal legal agreements thatgive expression to the structure of the collaborationand the specific roles and obligations of the partners.More importantly, achievement of programobjectives require a common understanding ofshared values and objectives, recognition of andrespect for distinct interests and operationalconstraints, and the establishment of realisticexpectations of the two partners. The immediateinterests and overall goals of partners may diverge,

as may their cultural values, and lack of confidenceand mutual understanding can itself impede orprevent the attainment of shared objectives and themost fruitful pooling of resources. Ideally, a sharedunderstanding of common interests and differentpriorities should be reached prior to their articulationin a formal legal agreement, but the process ofnegotiating an agreement typically brings theseconcerns to the surface and sets them in concreteterms. Once a successful program is under way, theproject partners may come to see their collaborationas extending beyond the minimal levels establishedby the legal agreement, especially if mutualconfidence and understanding develops in the courseof program implementation. On the other hand,practical experience may also lead to a reassessmentof the assumptions and structures that underpinnedthe partnership, and may lead to insights aboutrights, undertakings, flexibilities and clarifications,as well as the overall mix of incentives and inputs,that could have made the project more successful.

The review of actual agreements may shed light notmerely on the formal aspects of partnerships andhow mutual expectations are defined, but also onhow the differing roles and the different allocationof resources, rights and responsibilities aredetermined, and how management of IP issues canbe structured so as to bridge between the differingperspectives of funding and industry partners and toreinforce shared objectives. In turn, this may uncoverpractical ways of resolving the public policy dilemmaof balancing private sector incentive to generateneeded public health products against the goal ofguaranteed access to those in most need of them.

The notion of a public-private partnership (PPP)has drawn extensive policy attention in recent years,and is increasingly discussed as a practical responseto development needs in many areas29, especially inthe provision of global public goods. Despite thiscurrent focus, the PPP is by no means universallyfavoured, and there have been calls – and specificinitiatives30 – for an approach more clearly centredin the public sector. As we have noted, in practice,no public health program or initiative is likely to fitneatly within either category; and to some extentthe actual provision of public health as a global

28 ‘Managing Intellectual Property: Strategic Decision-Making in Universities,’ Auril/UUK/Patent Office, 2002, p. 92. 29 ‘Building Partnerships: Cooperation between the United Nations system and the private sector,’ United Nations, New

York, 2002.30 Notably the Drugs for Neglected Diseases Initiative (see working paper entitled “DNDi : An Innovative Solution,”

http://www.dndi.org/ Publications).


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public good will inevitably involve both public andprivate inputs, ranging from public funding andbackground research, to private investment and theinfrastructure and management capacity requiredfor effective product development, or the contractingof certain elements of research, development ormanufacture. The complex matrix of financial,technological and logistic inputs for the creation

and development of a new pharmaceutical is difficultto break down into specific private and publiccomponents. However, the emergence of specificinitiatives to develop new drugs or vaccines to treator prevent neglected diseases has crystallizedunderstanding about the significance of therespective role of public and private entities in drugdevelopment.


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This study concentrates on product-developmentPPPs that aim to ensure that those in need in

developing countries can obtain these drugs andvaccines at lowest practicable prices to ensure asustainable supply of the product. This focus is notintended to suggest that PPPs are the sole, or evennecessarily the best, option for addressing theneglected diseases problem. Nonetheless, the PPPsare a precise distillation of the kinds of interactionsbetween public and private interest that operate inthe public health domain more generally. This studyshould therefore illuminate and assist broader policychoices about how to achieve public health outcomesby making use of private sector resources,commercial structures, and market mechanisms.

4.1 Structuring research and development

agreements to optimise effective access

Access to new pharmaceutical treatments forneglected diseases entails two distinct steps,development and distribution:• Creation of research and development outcomes

that would not otherwise have been attained –including the development steps that transforma new scientific insight into a safe, viable, clinicallyproven and approved product.

• Promotion of the widest possible actualavailability of the drug or vaccine once it has beenclinically proven and approved – this includesinfrastructure and distribution factors, and costfactors. Effective availability may also includecompleting any regulatory processes that arenecessary prerequisites for distribution of thedrug or vaccine.

In principle, PPP agreements targeting neglecteddiseases are developed with both of these objectivesin mind – ideally, even a research and developmentagreement concerning fundamental research shouldanticipate the need for effective means to promotethe dissemination of the finished product, eventhough this may not occur for a decade or longer.

The need to ensure widespread effective availabilityto target communities may be manifested in specificaccess conditions within the research anddevelopment agreement, setting the terms of accessto the finished product even before the researchprogram has commenced. But the model that isenvisaged for downstream distribution can alsodetermine some basic choices over such issues as:ownership of IP generated by the funded research,access to background IP (including expertise andknow-how of the private sector player, and specifictechnology such as drug delivery platforms andmanufacturing technologies), provisions governinglicensing of new technologies (such as ensuringfavourable licenses to developing country healthprograms), and undertakings to take steps necessaryfor the availability of pharmaceuticals (for example,the research/industry partner may agree to maketest data available as necessary to enable thedistribution of the covered product by a third party).

Some PPP agreements do not actually provide fornew research, but rather licence private sector playersto use technology users in the dissemination ofexisting technologies as licensees of certain IP:31 theexperience of these partnerships in promotingeffective access to established and proventechnologies for developing countries may beinstructive in considering options even for thoseagreements that seek to produce new technologiesand then ensure their effective distribution. In otherwords, both development and downstreamdistribution issues need to be considered, both asdistinct sets of issues, but also as integrated elementsof an overall longer-term partnership. A researchagreement that allows for vital researchbreakthroughs and early drug development, butthen provides no certainty that the fruits of theresearch will be developed and adequatelydisseminated to the targeted population isundesirable; but so is an agreement that providesfor rigorous access conditions for new treatments

4. Public-Private Partnerships inResearch and Development

31 For instance, the work of the Concept Foundation (http://www.conceptfoundation.org)


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while failing to offer any incentive to engage in theresearch and development required to create andprove the needed treatments.

Hence the overall package for access to newtreatments needs to be planned and implementedas an integrated program. Even so, the conditionsin PPP agreements that affect practical access fallinto two general areas, corresponding to thedevelopment and the downstream or distributionphases:

• Technology development and access obligations:such provisions concern research and creation ofnew technology per se, or the availability ofnecessary technology and associated data – thismay establish obligations on theresearch/industry partner to undertake researchand development, and to make availablebackground IP, know-how and associated data(including technical know-how or skills andresources required for product development,clinical trials and regulatory approval know-how,as well as the data on safety and efficacy producedby clinical trials). Such provisions may amountto a positive undertaking – such as an agreementto undertake research or to provide technology,or an obligation to license or transfer IP rightsin the event the research/industry partner failsto, or has insufficient interest to, develop anddisseminate covered technology in a particularmarket.

• Downstream technology dissemination provisions:provisions which set conditions for how thecovered technology (typically a pharmaceuticalor vaccine) is to be distributed or marked by theresearch/industry partner – these may set a priceor criteria (such as ‘reasonable price’ or ‘publicsector price’) for determining the price fordistribution in a certain market); conditions maystipulate more generally that the pharmaceuticalwill be ‘reasonably available’ or otherwise complywith similar criteria; and conditions may alsoprovide distinct requirements for how thepharmaceutical is to be distributed in distinctmarkets, such as an undertaking to cross-subsidizedeveloping country or public sector distributionon the basis of preferential pricing, and otherconditions defining how access to the coveredpharmaceutical should be granted on the basis ofmarket or non-market mechanisms.

At both of these stages – generation of newtechnology, and dissemination of proven technology

– any program has to deal with a host of externalfactors well beyond the control of either party. Onekey factor is the pattern of ownership and controlover background technologies relevant to the projectobjectives. It may be necessary to survey and assessthe IP landscape, and determine whether there ispre-existing IP that could impede freedom toimplement any technology developed under theproject; alternatively, there could be existing IP heldby third parties that is considered necessary or highlydesirable to achieve the goals of the project.Negotiating access to such technology may be animportant common goal of the PPP partners. Oneconsideration in the choice of industry partner forthe project may indeed be the access which thatpartner can bring to necessary technology, or itsnegotiating strength should third party technologystill be needed. Especially for those projects thatare focussed on the creation of new science and thedevelopment of new technologies, there is atendency for such freedom-to-operate issues to beoverlooked, with the result that impediments arelater encountered to actual development andimplementation of the finished product. This is afurther illustration of the need to consider bothtechnology development and downstreamdissemination issues at the time of the conceptionand initiation of the project.

Other external limiting factors include the healthinfrastructure in target markets, broaderinfrastructure and developmental issues, and thelegal and regulatory environment. These issues arebriefly reviewed below.

4.2 Review of access conditions and PPP

agreements

This review of PPPs does not closely analyseindividual agreements, but reports on general trendsand patterns in the agreements surveyed. The natureof agreements and the role of partners to agreementsvary considerably. For convenience, the discussionwill identify a ‘project partner’ and an‘industry/research partner’ as a way of typifying therespective players within each PPP. The ‘projectpartner’ may be a philanthropic foundation, a non-profit corporation, a government agency, or aninternational organization, with responsibility fordelivering a certain public health outcome: typically,the project partner will be providing financialsupport, but also may be making availablebackground technology and other drug developmentskills and capacity. The desired outcome, the


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pharmaceutical or vaccine the development andavailability of which the agreement is intended topromote, is termed the ‘covered product.’

PPP agreements typically define the conditions underwhich the party must make the covered productavailable. These conditions – commonly referredto as “access conditions” – are agreed to in returnfor value, within the context of the overall structureof the research and development program. Theultimate goal of “access” is for the covered productto be made available at the lowest practicable pricesto ensure a sustainable supply into a given marketand widest access within that market. But how thisobjective is defined in practice varies considerably,the actual approaches including setting specificcriteria for a ‘reasonable price’ or a ‘public sectorprice,’ creating structures that allow sales in richmarkets to cross-subsidise sales in markets of need,and other blends of market and non-marketmechanisms.

The value that passes to the industry/researchpartner in a PPP has an up-front component and aprospective component. The up-front componentcan include valuable contributions brought to thepartnership by the project partner, such as fundingfor research and development, necessary technology(including background IP), or technical andregulatory expertise which the project partner canprovide. The prospective component can includebenefits from marketing new products developedthrough the partnership, and in particular thecommercial benefits that flow from exclusivepositions in the technology developed through thepartnership outside the target market. The projectpartner may also undertake to purchase the finishedproduct at certain levels or in certain quantitiesconsistent with the goals of the partnership.

Access conditions are commonly defined in termsof setting a preferential sales price in developingcountries, or in specific targeted markets. This isgenerally offset by leaving the commercial partiesfree to commercialize the product in more lucrativemarkets without contractual constraints as to pricelevels or other performance guarantees. Accessconditions may also be defined in terms ofperformance standards, such as conditions settingagreed volume and delivery term commitments forthe manufacture and distribution of drugs or

vaccines. Other conditions provide for access to thedeveloped technology in the event that theresearch/industry partner abandons the project orelects not to service a particular market or sector:this can be achieved through an agreement to assignor license IP and to provide know-how andregulatory approval data.

PPP agreements show considerable variation in accessconditions. This variation is partly due to differentstrategic judgements and assessments about the mosteffective incentive structure, and the negotiatingdynamics that yield a particular agreement. It is alsodependent on the nature of the contributionsbrought by the two parties – whether the publicpartner is providing background IP, for example,and whether the funding is sufficient to support astand-alone research program or is simplysupplementing an existing program.32 But it is alsodue to external, more objective factors, includingmarket and infrastructure issues such as:

• the size and characteristics of patient populationfor the target disease,

• the availability of sustainable funding from privateand public sources,

• the cost and cost-effectiveness of given vaccinesand drugs,

• health care delivery systems, including drug orvaccine distribution and delivery plans,

• the economics and structure of the relevantindustry sector,

• the pattern of ownership of and freedom to usenecessary background technology,

• the availability of alternative interventions (e.g.for a new malaria drug there could be competingdrugs, preventives such as potential vaccines,insecticide treated bednets, and new insecticides),and

• broader policy settings and regulatory factors(such as WHO recommendations or ‘essentialdrug’ status, and selection for use by nationalhealth authorities and aid agencies).

The survey of the content of access conditions willaim to identify the influence of such internal andexternal factors on the choices made, with the goalof distilling some general principles and practical

32 For instance, one partnership is based on an agreement to ‘fund a portion of reserach and development related to thedevelopment of a [target compound] over a four-year period.’


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insights on how to optimize access conditions andassociated IP strategies.

4.2.1. Setting the context for access

conditions: general PPP agreement

provisions

A survey of PPP agreements for neglected diseasesshows how technology development anddissemination conditions, and access conditionsbroadly, are deeply embedded within theagreements. It may only be possible to understandhow access conditions actually operate through acomprehensive reading of an overall agreement –for example, an access condition for marketdistribution of a new pharmaceutical may hingeon a ‘reasonable price’ criterion, which draws bothon a distinct definition of ‘reasonable price’ andon provisions concerning covered technologiesand relevant geographical and other sectoraldistinctions, as well as provisions acknowledgingthe legitimate interests of the research/industrypartner. Some agreements do have specific clausessetting out access conditions, but even theseclauses need to be read and understood within thebroader context of the agreement. This is notsurprising: the very purpose of the agreement isto achieve a public health outcome through acertain level of access to hitherto unavailable(indeed non-existent) or practically inaccessibletechnologies, and so the overall effect of accessconditions may only be manifest through anunderstanding of an agreement as a whole.Accordingly, the following discussion considershow conditions setting access to coveredtechnologies in PPP agreements for public healthoutcomes are variously expressed in differentcomponents of the agreements surveyed.

Purpose of agreement

The very purpose of the agreement will helpdetermine the effect of the access conditions itcontains. The agreement’s preamble, or specificundertakings, may establish the goals of thepartnership, either in general terms (promotingaccess to needed drugs or vaccines in the developingworld), or more precisely (identifying exactly thetargeted needs and the specific sections of the publicconcerned). Clarifying a common purpose has thepractical benefit of guiding the definition,management and implementation of the partnership.Yet defining the purpose also frames the context inwhich the agreement is formally interpreted as a legalcontract. It may have bearing, for example, in

interpreting specific undertakings to make drugsavailable at a reasonable price for certain markets,or to licence all technology as may reasonably benecessary. It may guide the interpretation of ‘march-in’ clauses and similar provisions that give thirdparties access to necessary technologies in the eventthat the original private sector party has no interestin developing and marketing a product for a specificsector or need or is insufficiently diligent inaddressing the needs identified in the agreement.

For example, one PPP agreement specifies thepurpose of the partnership and explicitly links thisto the way in which reasonable pricing is determined:“[Industry partner] understands and acknowledgesthat the [project partner] is making the Grant infurtherance of its charitable purposes’ and thereforeagrees that it will make all products developed underthe agreement ‘available for purchase in thedeveloping countries of the world at a reasonableprice.’ Another preamble provides that the projectpartner ‘ negotiates agreements to ensure that thefruits of [its] sponsored development will be readilyavailable and affordable in Developing Countries.’

The stated purpose of the agreement may also be arelevant factor in establishing reasonable pricingarrangements and other performance guarantees –it may have the effect, for example, of clarifyingwhether the pricing mechanism that applies ismarket-based and derived from market conditions,or based on other considerations closer in nature tophilanthropic or non-profit pricing structures. Theoverall purpose of the agreement may, indeed,explicitly clarify that the very aim of the agreementis to give the research/industry partner anunrestricted capacity to exploit the technology inthe open market in developed country markets soas to provide an enhanced incentive to supply thepharmaceutical at marginal cost or other non-profitterms to specified developing country markets.

Specific conditions on interpretation

The way PPP partners specify how certain aspectsof their agreements should be interpreted can havedirect implications for access to pharmaceuticals.For example, agreed rules on interpretation mayrequire that key terms be interpreted in terms of thepublic policy goals of the arrangement. Oneagreement provides that ‘this entire paragraph[concerning a guarantee that developed productsbe available to developing countries at a reasonableprice] shall be interpreted in a manner that furthers


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the [project partner’s] charitable purposes.’ Suchagreed interpretative rules may not merely determinehow certain terms and conditions are interpreted,but may also influence the management of thepartnership so as to reinforce the public health goals.

General undertakings

Another way that is used to align the interpretationand implementation of the agreement, and thus thepractical terms of access, is the identification ofgeneral undertakings. For example, an agreementmay impose a general undertaking on the privatesector player to exercise IP rights and to managetechnologies for the public interest, includingundertaking to license rights to others who may bein a better position to achieve some of the publicinterest goals of the partnership. In anotheragreement, the research/industry partner agrees ‘touse commercially reasonable efforts to develop theproduct candidate.’

Key definitions

Some of the most important aspects of the purposeof the partnership, and indeed specific accessconditions, may be established in the definitionsagreed for key terms. For instance, as examples citedin this study will show, definitions have beenestablished for distinct market sectors (includingdistinct public sector markets), different users ofcovered technology (including public sector, non-profit and government use of the technology),pricing mechanisms (including the definition of areasonable price and a reasonable profit), fields ofuse (for neglected diseases and vulnerablecommunities, as against diseases affecting wealthypopulations) and beneficiary countries; definitionsalso help to establish and define IP ownership andaccess arrangements. Hence the operative effect ofaccess conditions will naturally only be determinedin substance by reference to these key definitions.

4.2.2. Provisions governing IPRs and access

conditions

IPRs have a crucial role in setting access conditions,both in terms of promoting the research anddevelopment of new drugs (including clinical trialsand regulatory approval), and in structuringmanufacturing and distribution arrangements so asto ensure the optimal dissemination of the finishedproduct. By the same token, insufficient attentionto IPRs or poorly structured IPR arrangementscould frustrate the goal of effective access to the new

treatments. Most PPP agreements therefore containdetailed provisions governing the background IPbrought to a partnership by either partner, andgoverning IP rights on new technologies developedunder the program (or through related research).

Obligations concerning background and prior IP

rights

Ensuring future access to drugs developed under theprogram may require agreement on background IPand prior IP. For example, if a key backgroundtechnology is necessary, or desirable, for the successfuldevelopment and marketing of a new productdeveloped under the program, the public sector orproject partner may wish to guarantee future accessto that background technology in the event that athird party has to produce and distribute the newproduct. The background IP respectively broughtto the partnership by the two partners may alsodetermine what access conditions are reasonable, inthe light of the value of their respective contributions.Accordingly, PPP agreements provide for reportingof background IP and for licensing arrangementsconcerning that IP. For instance, under one PPPagreement, “all Collaborators agree to grant a non-exclusive, royalty-free, non-sublicensable, researchuse license to any Background IPR to otherCollaborators to enable the other Collaborators tocarry out tasks under the Research Program that arewithin the Field of Use,” and another provides for a“royalty-free, non-exclusive license and sublicense inthe Developing Countries” covering background IPR“for the sole non-commercial purpose of making [aproduct] readily available and affordable in the PublicSector of the Developing Countries.”

Clarity about the relationship between backgroundIP and the actual covered research program is essential.One agreement distinguishes four distinct categories:‘Basic Technologies, Prior IPR, Background IPR andProgram Inventions.’ In this instance, “BasicTechnologies” are defined as “generally useful inresearch and development both inside and outsidethe Field of Use and do not uniquely and specificallyrelate to the Research Program.” By contrast,background IPR is “essential in the conduct of theResearch Program,” and prior IPR is “useful but notessential in the conduct of the Research Program and… would not preclude nor pose a legal bar to pre-clinical and clinical development and marketing anddistribution of drugs or drug candidates developedin the course of the Research Program.” Distinctobligations are defined for each category of


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technology, so as to focus the grant of licenses on themost effective mix of access to necessary technologies,and incentives on the part of the technology providerto contribute this technology to the partnership.

Obligations concerning new IP rights: disclosure

A crucial element of the overall package of accessconditions concerns the obtaining, ownership,maintenance, exercise of rights and licensing IP rightsgranted in respect of new technologies generatedby the research activities undertaken under theagreements. Agreements may need to imposecertain obligations on the parties undertakingoriginal research to pursue IP rights, or to discloseinventions that may be eligible for IP protection.This is important in determining whether, and how,IP rights may be used to structure arrangements foroptimal distribution of the new technology; it canalso ensure that appropriate licensing provisions areavailable to ensure any necessary third party accessto IP-protected technology developed under theagreement. These mechanisms include:• reporting requirements concerning inventions

that may be eligible for patent protection, orconcerning IP rights applied for or granted;

• obligations on the part of the research/industrypartner to apply for and exercise IP rights so asto further the goals of the agreement;

• undertakings not to pursue IP rights for certaintechnologies or in certain jurisdictions; and

• obligations to consult with the public sector orfinancing partner on key decisions concerningpatent protection for covered technology.

Ownership of IP

Agreements generally specify who should own IPdeveloped as a result of the research and otheractivities undertaken within the framework of theagreement (e.g. regulatory process that generateproprietary data). The basic options are:• the research or research/industry partner owns

the IP – in this instance, the agreement normallyrequires various forms of licenses to be grantedby the IP holder. Any IP ensuing from theactivities is frequently licensed back to the projectpartner or related institute;

• the project partner (such as a funding agency orpublic sector technology manager)owns the IP;and

• the IP is held jointly by the two partners.

The initial focus in partnership negotiations is oftenon the question of IP ownership, and this can havesymbolic importance. Strict research agreements –when a researcher undertakes research as a contractedservice, against a fee – often require the assignmentof IP rights, so that the party financing the researchowns the IP rights on the research outcomes. Fordrug research and development, where research takesplace in a more complex context, project partnerstend to lay greater emphasis on questions of controlof the use of IP rights, access to the technologyprotected by the IP, and clarifying the responsibilitiesfor maintaining and enforcing an IP portfolio.Practical questions concern which partner shouldactually manage IP from the project, and whatmanagement structure is best match of managementcapacities and objectives and needs. For the projectpartner, a choice lies between ownership of IP andcontractual assurances of access, licensing back andother forms of management of IP rights (such as fall-back licensing to third parties in some circumstances)as an alternative to retaining ownership as an end initself. Typically, the party undertaking research isentitled to seek patent or other IP protection fornew technologies developed under the fundedresearch, but is subject to strict requirements fordiligent development and dissemination of thetechnologies, and requirements not to let IP rightslapse without notice to the project partner. Thisentitlement is also generally subject to reporting ordisclosure requirements concerning any inventionsdeveloped in the funded research, and an obligationto license out (or even assign or transfer) the IP inthe event that this is needed to meet the overallprogram objectives, especially when the IP ownerand industry partner fails to meet agreed accessconditions. Similarly, rights in test data and otherdata tends to vest in the industry partner undertakingclinical development, but with guarantees of accessand diligent use of these data.

Another approach is for the project partner to seekownership of relevant IP in the main countries ofoperation – that is to say, the developing countrieswhere the target disease is endemic – while leavingownership in other markets to the industry partner(in which the industry partner may rely on forcommercial incentives to get involved in the project).One initiative adopts as a general policy that it shall‘always get free and unfettered access to the keyresearch outputs, including rights to IP within [its]field of interest,’ and in practice this means aimingto secure IP rights in disease endemic countries, IP


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rights in the field of the target disease, and royaltieson sales in countries where the disease is notendemic. Another approach, reflected in a clinicaldevelopment agreement, is for the industry partnerto own any invention created during the clinicaldevelopment process and to have the entitlementto seek patent protection at its own expense; but ifthe industry partner chooses not to file for patentprotection, the project partner retains the entitlementto secure patent protection in its own name and atits own expense. The industry partner is alsorequired to notify the project partner in the eventthat it chooses to abandon a patent, giving theproject partner the option of ownership of the patentand related IP. As a safeguard to balance theownership of IP by the industry partner, the projectpartner also retains the reserve right to ‘anirrevocable, royalty-free, sublicensable, nonexclusivelicense’ under all relevant IP, to be invoked in theevent that the industry partner does not undertakethe required development and marketing activitiesof the covered product in any country.

A key practical consideration in determiningownership arrangements is the financial and resourcecost of managing a portfolio of intellectual propertytitles. These costs – covering filing and attorneyfees, prosecution of patents through the examinationprocess, grant and maintenance fees, and the costsof monitoring and enforcing compliance - can bevery high, especially if they range over severaljurisdictions. These costs may amount to asignificant diversion of both project finances andcapacity for a project partner. Conferring ownershipof IP titles on the industry partner may lead toeconomies of scale, so that the portfolio managementresources of the industry partner can be applied tothis complex task, and profits made by the industrypartner from exploitation of the patented inventionin other markets and for other applications may alsosupport the portfolio management costs. Even ifconceding ownership of IP to the industry partner,the project partner should be able to secure firmguarantees of access to the necessary technology tofulfil the PPP’s objectives; it may also be able tonegotiate a portion of the royalty stream if thetechnology covered by the agreement is licensed tothird parties. In short, ownership of patents per seshould be distinguished from safeguarding access totechnologies and to ensuring an entitlement toroyalty or other payments from the commercialexploitation of technology beyond the philanthropicgoals of the PPP.

Access to IP – new IP or background IP

In line with these considerations concerningownership, one model for ensuring access to thecovered product is to establish the research/industrypartner as the principal agent in developing,producing and disseminating the relevant technology– with the goal of creating incentives for theresearch/industry partner to exploit technologyunder the coverage of relevant IP rights inaccordance with the objectives of the PPPagreement. This may create an assumption that theresearch/industry partner should be entitled tomanage and exercise IP rights in accordance withthis incentive structure:

• to grant licenses over covered technology,background IP or test data to ensure that thirdparties can provide the covered product tomarkets that the research/industry partner isunable or unwilling to service;

• to provide similar access in the event that theindustry partner fails to meet other performancestandards, such as reasonable or preferentialpricing for certain sectors, or undertakings tomake products available within a prescribed timeframe;

• to grant licenses as necessary to allow publicsector and philanthropic programs to obtain thecovered product from alternative sources(including from alternative manufacturers); and

• to grant licenses to third parties so as to facilitateresearch, clinical trials, regulatory approval orproduct development, such as for new diseaseapplications or additional markets that theindustry partner is not able to service.

4.2.3. Other intellectual property licensing

issues

Licensing test data for regulatory approval

Reasonable access may include agreement on thegeneration and use of clinical trial data – includingdata already in the hands of either party to theagreement, or data that is generated in the courseof the research program. For instance, in agreementswhich are based on differential marketing anddistribution arrangements, a private sector researchermay be required to grant access to clinical trial dataas required to ensure that third parties can obtainregulatory approval in developing countries, whilemaintaining exclusive rights over the data indeveloped country markets.


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The scope of license to clinical trial data that theindustry partner is required to grant can depend onits own diligence in making the drug available inspecific markets. Failure to do so would trigger theneed for third parties to gain access to the test data,for instance when timely steps are not taken toservice lower volume or commercially unattractivemarkets. In other arrangements, licensing of clinicaltrial data may be provided for third parties for usein particular geographical markets or market sectors.For instance, one agreement provides for a ‘know-how licence’ for the industry party to gain access toclinical trial data (as well as trade mark rights andother technical information and know-how). Thisis a semi-exclusive license for private sectordistribution of the covered product, and non-exclusive for public sector distribution of theproduct. This ensures that other industry actorscould also service the public sector needs, whileproviding the industry partner with exclusivity inthe private market. This is another example, butin a different manner, of how IP licensing associatedwith clinical trial data and the regulatory processesis used to promote low-cost access to a targetedmarket, while ensuring that the industry partner canhave reasonable expectations of commercial benefitsin other sectors.

More generally, the investment made by the industrypartner in gaining regulatory approval (in particulartests and clinical trials, and the assembly andpreparation of data in the necessary format) can bemade available through the project partner to otherparties, so as to accelerate and facilitate approval inother markets not directly served by the industrypartner.

Trademark rights

Trademarks play a particularly important role in theidentification and distribution of pharmaceuticalproducts and vaccines. For reasons linked tomarketing, clinical practice, practitioner awarenessand regulatory approval, a PPP agreement may needto provide for access to this form of IP right. Forexample, one agreement provides two alternatives:the industry partner can use the project partner’strademark in the designated territory; or it can useits own mark, but in that event must assign it to theproject partner before sales commence. Suchprovisions may be necessary to ensure that theproject partner is able to continue to benefit fromany market recognition in the trade mark and fromany regulatory approval associated with the mark,

especially when the industry partner ceases to supplythe designated territory or when it becomesnecessary for the sake of the objective of widedistribution for a third party to supply that territoryas well. Another agreement, which licenses existingtechnology for distribution in the developing world,requires the industry partner to use a definedtrademark on ‘all manufactured products, advertisingmedia, promotional brochures, and any othertechnical data transmitted regarding the licensedproduct.’

4.2.4. Access conditions through marketing

and distribution arrangements

Distribution channels

Agreements may define distinct markets for thecovered products, and on this basis set differentialconditions and undertakings for product distribution.For example, an agreement may distinguish betweendeveloped and developing country markets, and mayinclude a specific undertaking for differential ortiered pricing, with the objective that developedcountry markets should cross-subsidize sales at costor at some other minimal level to developingcountries. The markets may also be distinguishedwithin a country, and in several tiers. One agreementidentifies public sector distribution, social marketingand private sector distribution as three distinct modesof distribution; the obligations on theresearch/industry partner, the pricing structure andlicensing arrangements differ considerably, dependingon the mode of distribution. An exclusive licensemay be granted, for instance, solely in respect ofprivate sector distribution, allowing for other non-exclusive licensees to service public sectorprocurement. These other suppliers could thenbenefit from the regulatory approval secured by theoriginal industry partner, thus facilitating andexpediting the sourcing of alternative suppliers forpublic sector needs.

Pricing structures

Where distinct markets are identified or defined,access conditions may set distinct prices for eachmarket. The mechanisms used for setting pricesmay be relative or absolute: relative mechanismsinclude differential pricing levels for developed ordeveloping country markets, or for private, socialmarketing33 and public channels, with the pricingstructure required to favour one market over theother. Absolute mechanisms seek to set a firmbenchmark for pricing, through general criteria


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such as the notion of a reasonable price or a preciseformula – for example, one agreement specifies anddefines a ‘public sector price;’ it also separatelydefines a ‘social marketing price’ by a relativestandard, setting it between the public sector andprivate sector distribution prices.

Other partnerships have explicitly avoided settingprices as a means for ensuring access, because thishad been found in practice to deter investmentresearch and development investment. An advancecommitment to a guaranteed price ceiling on adownstream product at a relatively early stage indrug discovery and development may be difficultfor industry partners. This underscores the difficulttask in drawing up an appropriately balancedpartnership that is sufficiently attractive to industrypartners while giving effective guarantees of effectiveaccess. In the US context, the NIH has reported ashift in practice of away from a ‘reasonable pricing’policy, because this reportedly ‘had the effect ofposing a barrier to expanded research relationships,’as evidenced in the flat growth of CooperativeResearch and Development Agreements (CRADAs),a trend which was reversed when the pricing policywas changed.34

Alternative approaches to setting access conditionsinclude a more general undertaking to ensure accessworldwide and not just established marketeconomies. Access conditions also need to takeaccount of the fact that, in many developingcountries, there is a greater dependence on theprivate market for drug dissemination than is thecase in many industrialized countries, so that closerattention to the private market price is needed, andthere is little prospect of offsetting the cost of publicsector distribution against returns from the privatemarket, In some cases, including some developingcountry environments, private distribution throughformal and informal markets, such as street vendors,peddlers or drug shops, may be the most effectiveor even the only viable means of dissemination tothose in most need of the new medicine.

Factors in setting a reasonable price

Where agreements seek to set a ‘reasonable price,’this is done either by a formula based on the cost ofactual production, or by reference to more general

factors in the context of the policy objectives of theagreement. The formulas include:

• a public sector price defined as ‘the Company’smanufacturing costs plus a mark-up of [a certainpercentage to be agreed]’ - this formula was fordistribution of established technologies for whichthe private sector player is not required to incurresearch or development costs;

• social marketing defined as a price higher thanthat for public sector distribution, but lower thanfor private sector distribution;

• factors defining the ‘reasonableness’ of pricingincluding:

— ‘the industry partner’s technology investmentsrelated to the product’

— ‘the industry partner’s worldwide market forthe product’

— ‘the relative market size in developingcountries, or more specific target markets’

The overarching objective of pricing formulae isthat of access and prompt and widespreaddistribution. Accordingly, the pricing may bedefined with reference to an objective, rather thana particular pricing formula, for example a pricedefined ‘so that the Developed Products reach thewidest and most rapid deployment possible.’

The commercial reality of the industry partner isalso acknowledged in pricing formulae, for instanceacknowledging the industry partner’s ‘need for aminimum return on sales.’ One approach todefining a ‘reasonable profit’ shows how theincentive mechanism (with a focus on privatemarket in developed country markets) is balancedagainst access in developing country and publicsector markets: it requires consideration of ‘theneed for the Product to be affordable in theDeveloping Countries and the ability of [theindustry partner] to otherwise generate a profitthrough the sale of Product in markets outside ofthe Public Sector in Developing Countries. [Theindustry partner], its subcontractors, consultants,agents and permitted assignees shall be the exclusivemanufacturer for [the covered technology] and thePublic Sector in the Developing Countries for allProduct.’

33 Social marketing refers to the channels for marketing and distribution of products planned, funded, and/or managed bynon-profit organizations and/or public sector programs to influence the voluntary behavior of target audiences.

34 ‘The NIH Reasonable Pricing Clause Experience: A Plan to Ensure Taxpayers’ Interests are protected,’ NIH, July 2001,at www.nih.gov/news/070101/wyden.htm.


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4.2.5. Intellectual property licenses as a

guarantee of access

A key provision in PPP agreements concerns theguarantees of access to necessary technology in theevent that the industry party elects not to make thecovered product available to the target market inaccordance with the agreed criteria. Such aguarantee is the essence of this kind of partnership.It means that if there is insufficient incentive orcapacity on the part of the chosen industry partnerto achieve the widest availability envisaged, theproject party can take full advantage of the researchand development undertaken by the industry partnerand - with the benefit of the necessary IP - can usealternative avenues for dissemination of the coveredproduct. This kind of contingency access may alsocome into play if the research opens up possibilitiesfor drug development in fields of technology thatlie beyond the core competence and overall prioritiesof the industry partner.

Under one PPP agreement, the industry partneragrees ‘to use commercially reasonable efforts tomanufacture or have the Product manufactured andsupplied in reasonable quantities for sale ordistribution to the Public Sector of such DevelopingCountry and at prices that do not exceed … actualincremental costs of production (consisting ofadditional material costs, labor costs, license fees(including royalties) and other costs which wouldnot have been incurred but for such production andshall exclude all overhead, general, administrativeand similar costs and all previously incurred researchand development or capital expenses) plus areasonable profit to be agreed upon by the Parties.’This has a precise time line: the industry partneragrees to meet this obligation ‘within twelve monthsafter the first commercial sale of a covered productanywhere in the world and ‘no earlier than theconclusion of the Ramp-Up Period after receipt ofregulatory approvals for the sale … in a particularDeveloping Country.’ Should the industry partnerfail to meet this obligation, it loses status as exclusivemanufacturer for the covered product in developingcountries, and is required to disclose on aconfidential basis both background IP and IPdeveloped under the program. The industry partneris also required to assist in the transfer of technologyfor this purpose (see following section).

Such mutual obligations are expressed in direct termsin another research and development agreement, inwhich the research partner ‘agrees to undertake to

develop and commercialize a product,’ but ‘in theevent that [it] does not undertake the developmentand commercialization of a product, it agrees togrant … an exclusive license’ under all relevantpatents and patent applications. Another similararrangement applies when the industry partner failsto comply with an obligation to make productsavailable ‘in the developing countries of the worldat a reasonable price:’ if an arbiter determines thatthis obligation is not met, then the project partnerhas the right to require the industry partner ‘totransfer to a third party … a non-exclusive, non-sublicensable license to produce the developedproducts and make the developed products availablefor purchase in the developing countries of theworld.’

4.2.6. Technical assistance and transfer of

know-how

Effective access to drugs or vaccines in a particularmarket may entail an enhanced technical aspect orcapacity building for the administration anddistribution of the new product. Theresearch/industry partner within a PPP agreementmay have particular expertise and resources thatwould enable the necessary technical support ortraining, so that the covered pharmaceutical is bothphysically available and administered to those inneed of treatment. Several agreements thereforeprovide for all necessary technical assistancerequired to deal with regulatory approval in themarkets covered by the agreement. Equally, theprovision of technical assistance to third partiesconcerning production of the product may be animportant ingredient of a world-wide distributionstrategy. This may apply when the industry partneris unable or unwilling to supply a market as agreedor on the terms agreed, or to assist others to servicemarkets that are not covered by the agreement.Hence one agreement requires the industry partner‘to cooperate … on request in training technicaland supervisory personnel of firms outside of theterritory licensed by [the project partner] toproduce the licensed product.’

Some agreements require technology transfer andthe provision of know-how to deal with thesituation when the industry partner loses its statusas exclusive manufacturer or distributor fordeveloping country markets. A PPP agreementmay stipulate that sufficient transfer of technologyand know-how, potentially in the form of technicalassistance, is required to ensure that a third party


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can meet the needs not effectively serviced by theindustry partner. Accordingly, in establishing theframework for overall IP management in anagreement, ownership of new IP may be lessimportant for the project partner than ensuring areserve capacity to claim access as and when needednot merely to IP on new research outcomes butalso to necessary background IP, know-how andtechnical assistance, as well as regulatory approvals.

4.2.7. Reporting and monitoring provisions

Access conditions may be supported by auditing ormonitoring compliance, or reporting requirements.Agreements have provided for both quality andfinancial auditing. One crucial aspect of effectiveaccess to drugs and vaccines covered by a PPPagreement is compliance with quality standards –once again, ‘access’ has to amount to the actualavailability of safe and effective drugs, not theabsence of legal obstacles. This may be especiallyimportant in destinations where there is limitedeffective government regulation of quality. Henceagreements may implement procedures andobligations for quality auditing. Special financialmonitoring and auditing mechanisms may apply tothose access conditions that stipulate criteria for theprice charged – for instance, one agreement sets theagreed price according to the actual cost ofproduction, and accordingly provides forindependent financial auditing of this cost.

4.2.8. Other forms of access to technology:

non-financial incentives

The clinical development, regulatory andmanufacturing processes all may require effectiveaccess to a matrix of background and associatedtechnologies. PPP initiatives therefore adopt arange of strategies to bring other technologypartners into these processes. This may involve awider approach to defining and implementingtechnology collaboration arrangements that providenon-financial incentives for other industry partnersto supply necessary technology. For example, oneinitiative has adopted the approach of establishingno-cost collaborative agreements that offer, as anincentive, the potential of getting the collaborator’snew technologies into human clinical trials withthe product being developed by the PPP initiative.This way of structuring the partnership involves aclear understanding of common interests and aflexible approach to seizing opportunities forreaping broader benefits from the core activitiesunder the partnership. This kind of partnership –where the project partner and other third partnersthemselves provide technological, productdevelopment and regulatory skills – can evolve intoa kind of public private pooling of technologies,with the structure of the technological partnershipdefined by IP rights and using the IP of the variousplayers, and other technical and financial inputs,to reach a mutually satisfactory bargain over pooledaccess.


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This section draws on the preceding survey to findsome tentative conclusions about the factors that

determine effective access arrangements. Theprincipal constraint in drawing authoritativeconclusions is the very long lead-time that typicallyis associated with PPPs for the development of newpharmaceuticals. Conclusive lessons from practicalexperience will typically not be available for manyyears. Even ten years into certain projects (e.g.IDRI, created in 1993), they are only now enteringinto first clinical trials – with actual evidence of theireffectiveness in providing guarantees of access forthe new medicines still some time off. This long-term perspective also points to the necessity ofstructuring arrangements with the necessary long-term perspective and flexibility – this cuts both ways,in that it is difficult to predict what access conditionswill be appropriate, possibly a decade after theagreement is reached (due to varying market andeconomic conditions, and the nature of thetechnology), yet it is also necessary to provide forfirm and convincing guarantees of access that willbe effective in this long time-frame while beingresponsive to changed circumstances.

So uncertainty inevitably surrounds an agreementover a drug or vaccine in an early stage ofdevelopment – in particular when the basic scienceis uncertain. While PPP agreements are a means offunding public goods, they often operate in a wayakin to venture capital, with the attendant risks andneed for flexibility and a longer-term focus, ratherthan routine funding of utilities or services. Furtheruncertainty arises from the shifting market conditionsfor drugs and vaccines, due to the kind of economicchanges, shifts in the regulatory environment, andimpact of interventions such as public sector andphilanthropic programs that can occur over theinnovation cycle of a new pharmaceutical, which caneasily span more than a decade. A realistic PPParrangement for unproven, genuinely path-breakingtechnology may need to avoid too deterministic anapproach for access conditions, and be responsive toshifts in the economics of the pharmaceutical market.

The potential need for access to third-partytechnologies, such as platform technologies(adjuvants, excipients, drug delivery technologies,etc.), and freedom to operate issues adds a furtherlayer of uncertainty – but it also points to thepotential need to create incentives and IPmanagement structures to bring in such technologies.

5.I. Setting the basic objective and

structure of the partnership

Naturally, the basic objective and structure of thepartnership are the central factors in determiningwhat access arrangements are established. Thesurvey disclosed structures differ in terms of thevarying levels of involvement by the project partner,across the following possibilities:

• Core funding for a distinct new drug programwith the aim of developing a candidatetechnology, but in which the industry/researchpartner is expected to bear some of the risk andto invest in downstream product developmentand marketing.

• Substantial funding and provision of backgroundtechnologies or expertise for a drug developmentprogram, in which the nature of the contributionby the project partner is considered sufficient initself to create an adequate incentive for theindustry partner to bring the candidate productto the market

• Supplementary funding for an existing program,intended essentially to influence favourably theindustry partner’s decision about the commercialviability of the product and to push a candidateproduct over the threshold into the developmentand downstream phases

• Licensing of existing technology to an industrypartner whose essential role is to manufactureand distribute a covered pharmaceutical to adefined market on reasonable terms

• Contracted research in which the research isessentially undertaken on a fee for service

5. Practical Lessons: What Models,What Choices for Optimal Access?


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basis, with the expectation that the technologydeveloped will be transferred to and developedand marketed by the project partner

Not surprisingly, such differences in the overall goalsand structures of partnerships lead to wide diversityin the way access arrangements are defined. Thedifferent levels and forms of contribution (funding,technology, expertise) brought by the two partiesgreatly influence the stringency and precision ofaccess guarantees. Clearly the project partner is inno position to set rigid conditions for access in anarrangement in which it is simply supplementing anexisting program, when the bulk not merely of theinvestment but also the risk is still taken on by theindustry partner. By contrast, an arrangement inwhich the research is wholly funded by the projectpartner may create expectations of much strongeraccess conditions – although this will be temperedby the need for a realistic structure that a competentand circumspect industry partner will be preparedvoluntarily to sign up to.

Another factor influencing access arrangements isthe definition of the respective roles of the twoparties in terms of technology management. Is theproject partner essentially providing financialresources and an overall objective (includingpromoting particular technologies and research anddevelopment directions), leaving the R&D to theindustry/research partner, or is it itself a technologymanager, with an active role in maintaining an IPportfolio, in gaining regulatory approval and inshepherding the new product onto the market? Theproject partner’s perceived role will influence coreissues such as ownership of IP rights – both becausethis affects the incentives for the industry partner toinvest in product development, trial and approval,and because it determines the administrative viabilityof the development process. Typically, the PPP existsprecisely to draw on an industry partner’s depth ofexpertise in technology management and in productdevelopment, and this is a key factor in determiningownership of IP rights. Ownership of the IPresulting from the funded research is typically notseen as an end in itself, and the approach is ratherto establish agreements that provide for the licensingto the project partner and designated third partiesin the event that, and to the extent that, access totechnology is needed – this may include fundedtechnology, background technology and associatedknow-how, as well as access to clinical trial data.

5.2. Setting guarantees of access

The fundamental choice in establishing guaranteesof access in a PPP agreement is whether or not accessis defined with reference to a certain pricingstandard. The choices that have been implementedinclude a specific formula for setting prices inparticular markets, a pricing standard defining certaingeneral criteria, and no price requirements at all(with access defined in other ways, or thecompetitiveness of the market in question assumedto ensure that access will be adequate or reasonable).Access agreements without a pricing standard mayyet create a firm obligation to make the producteffectively available in target markets, with othermeasures of performance and the rights reserved toaccess necessary IP in case those performancestandards are not met. The choice of pricingstructure or other criteria for adequate access needsto balance the necessary incentives for drugdevelopment and dissemination with accessguarantees – in practice, the agreement needs to bestructured in a way that can attract the commitmentof a business partner with the necessary resourcesand capacities. A ‘reasonable pricing’ policy, whilepossibly attractive in principle from a public sectorperspective, has in some cases led to a failure toattract the necessary private sector cooperation,especially where the private sector is still expectedto carry a substantial amount of the risk anduncertainty associated with drug development.35

This has been the experience for productdevelopment agreements aimed at rich markets whenthe research/industry partner is required to bearmuch of the risk. When the target markets are poorcountries, the industry partner is unlikely to take onpricing risks without other compensation, such asexclusive access to more wealthy markets. Alongthis line, other agreements have found thismechanism applicable in two scenarios: (i) PPPsaimed at developing country needs, when theindustry partner is able to benefit from the moreprofitable private market in industrialized countries,making price ceilings and reasonable pricingstandards more feasible in developing country orpublic sector markets; and (ii) PPPs in which theindustry partner assumes much less risk, for instancewhen the industry partner is supported to produceand disseminate an already proven and approvedproduct.

35 NIH Report, note 33 above.


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5.3. Incentives and technology access

guarantees

Whatever access arrangements are defined,agreements can reinforce access guarantees byallowing a third party to step in with access to allnecessary technology (not merely the technologydeveloped under the program, but all that is necessaryto put the product into the hands of its beneficiaries– including manufacturing know-how and dataneeded for regulatory approval). For example, oneagreement provides that, in the event that theindustry partner does not ‘continue development of[a viable candidate vaccine]’ nor ‘initiative marketingactivity’ in any country, then the industry partner isobliged to grant back a licence under

• ‘all intellectual property covering any and allinventions conceived or reduced to practiceduring the Clinical Development Program,including without limitation patent applications,patents and know-how’ and

• ‘all intellectual property reasonably necessary forthe development, manufacture., sale andmarketing of the [covered product]’ including‘copyright, rights in data and know-how’

However, this licence is restricted both by the chainof events that trigger it, and by its purpose –restricted to permit the project partner and itssublicensees ‘only to develop, manufacture, sell andmarket’ the product to the extent that the industrypartner has elected not to undertake these activities.

Such licensing arrangements have the advantages of:(i) overcoming the shortcomings of project partnernot holding the title in IP; (ii) removing from theproject partner the costs and liabilities of maintainingan IP portfolio; and (iii) ensuring access to otherrelated IP in a more general sense, in particular theIP (which may not be generated directly by thefunded research activities) which is necessary todevelop the technology as a viable product and tomeet the requirements of the regulatory approvalprocess. This experience illustrates that the core issueis not the ownership of IP as such, but how asuccessful partnership involves a blend of access totechnology and incentive to the industry partner todevelop and market the new product, underpinnedby guarantees – guarantees of availability of thecovered product, and guarantees that when theindustry partner is unable or unwilling to deliversome of the projected outcomes, other industrypartners can be brought in and given access to anyneeded IP, know how and regulatory approval.

One important incentive structure in PPPagreements is to define a clear field of use that isdirectly relevant to achieving the project objectives,and to concentrate on securing highly favourableaccess conditions within that specific field, whileacknowledging the industry partner’s entitlementto seek alternative uses in other fields. Focussingon the specific field of use can create additionalbenefits, for instance in enabling the collaboratingindustry partner to take advantage of clinical trialsundertaken under the aegis of the project whichwould generate data about the industry partner’stechnologies that can be used to secure regulatoryapproval in other markets and for other applications.Accordingly, PPPs can in effect create favourableaccess arrangements not only by cross-subsidizingbetween wealthy markets and neglected targetgroups, but also by cross-subsidizing between thePPP’s priority field of use and other potentialapplications of the technology and test data thatcould be of interest to the industry partner. Acompound that is effective in treating a neglecteddisease could possibly also have therapeutic effectagainst other diseases that predominate in richcountry markets – such as cardiovascular problems,cancer, male-pattern baldness – so that investmentin exploiting the compound for these applicationscould subsidize its development and disseminationfor the neglected disease.

5.4. Getting the most from intellectual

property in PPP agreements

It is difficult to isolate the operation of the patentsystem from broader range of infrastructure issuesthat influence the process of developing and effectivelydisseminating new pharmaceuticals. Even the morespecific issue of pricing and access to existingpharmaceuticals depends to some extent on the degreeof industrial development and in particular theinterplay between the research and genericpharmaceutical sectors; this becomes even moreimportant when considering the creation of newproducts altogether. The cost, and the technical,logistical and regulatory complexity of bringing a newpharmaceutical to the market has required large-scaleinvestment on the part of private companies, and theapplication of a range of technical, medical andmanagerial skills.

There are differing, and disputed, estimates of theexact scale of investment required, the degree of riskassumed by the various players, the level of publicfunding for basic research and the dependence on


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private sector mechanisms in developing drugsbeyond the discovery phase. Yet it is manifest thatgovernments have, in practice, relied to aconsiderable extent on private investment to bringnew technologies to the public as effectivepharmaceuticals, especially in bridging the gapbetween basic research and drug development.Other models for pharmaceutical development areof course available, such as direct public funding ofnew research and development and other non-patentincentive mechanisms, such as R&D tax breaks,orphan drug schemes and test data exclusivityschemes.

Yet whatever the legal framework, some form ofpartnership with the private sector has typicallyproven to be essential to bring the newpharmaceutical in a usable, safe, and approved formto the dispensary from even the public-fundedlaboratory bench. Partnerships routinely requirestrategic use of IP rights, especially patents. Properlymanaged, the patent system can be one way forextracting practical public benefit out of publicresearch, while tapping into private capital andprivate sector expertise to achieve practical outcomes.

In practice, the role of IP rights in PPP agreementsis essentially twofold: helping to structure and definethe nature of the technology partnership, and howrights over technology are shared and exercised; andproviding incentives for investment in drugdevelopment and regulatory approval, particularly ina private market context. Hence, on the first point,structured ownership and licensing of IP rights allowfor distinct markets to be distinguished –geographically distinguished between countries inwhich patients have high purchasing power andcountries in which patients have insufficient resources;and distinguished by sector, so that distinct marketscan be identified and discretely serviced according towhether they are public sector, fair marketing orprivate sector markets. Effective management of IPrights allows the PPP to offset the cost of favourableaccess conditions in some markets, while ensuring anexclusive position in high purchasing power marketsto parties – in particular for-profit companies – topromote investment in the development and approvalof the target product.

By securing broad rights for technologies developedunder the covered research, a PPP may itself developlicensable or marketable IP with applications outsideof its target field of use – it may, for instance, develop

its own platform technologies. Such rights mayeither generate additional revenue to the PPP foruse in the same or different projects, or provideleverage for negotiating access to other neededtechnologies. Such revenue may also be shared withother parties, thus offering an additional inducementto participate in a given project and to supportfavourable “access conditions” for developingcountries. IP rights can therefore be usedstrategically to both bring about access conditions,and to define their operation. The judicious useand management of IP rights is therefore central tothe effective implementation of access conditions.This is not because IP rights serve as a panacea fordealing with the neglected disease problem. Rather,it is because IP can serve as one practical tool fordealing with the failure of incentive mechanisms,even in the absence of an effective private market inthe targeted populations.

5.5. Overall factors influencing access

conditions

As a distillation of the foregoing discussion, thissection considers the factors that influence the basicstructure of access conditions, and the arrangementsfor ownership and access to IP associated with PPPinitiatives on neglected diseases. These factors canbe classed as those which are internal to thepartnership, and external factors relating to thepattern of the disease burden, the market structuresand public sector programs which initiatives needto work within, and other commercial and policyconstraints. Among the factors that are integral tothe relationship between the industry and projectpartners are:

• The scale of the technological investment madeby the industry partner, and the amount ofnecessary background technology the industry,as well as the scale of investment by the industrypartner in clinical trials and the development andpackaging of test data;

• The significance of the funding and technologicalcontribution brought to the project by theproject partner, for instance whether it is a self-standing commitment to fund the necessaryresearch or whether it is simply supplementingor complementing an existing program;

• The continuing research and commercial interestsof the industry partner, such as whether it has adistinct commercial interest in the furtherdevelopment and application of the technologiesdeveloped under the project, so that potential


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commercial benefits may be broader than thatfrom the specific product covered by theagreement; and conversely, the degree to whichthe investment of capital and resources in thecovered project diverts resources and createsopportunity costs for the industry partner;

• The extent to which the industry partner focuseson the corporate social responsibility aspects ofinvolvement in public-private partnerships toalleviate health inequities, which could mean thatit sees investment in such project as beingbeneficial to its public image and enhancing long-term shareholder values;

• The stage of development of the targeted productunder the agreement (which may range from theidentification of candidate compounds tobringing an already proven product to market);

• The degree to which the distribution mechanismis intended by the partners to rely on thepurchasing power of philanthropic or publicsector funding, and the degree to which it relieson the operation of an open market.

External factors that may affect how the partnershipis structured include:

• The nature of the market for the projectedproduct – for example, the market for diagnosticstends to be low-value and high-volume, so thatcompetitive pressures may already ensurereasonable pricing; by contrast, a newpharmaceutical may not be substitutable, andwhere the lack of competition creates pricingpressures that exacerbate developing countries’limited purchasing capacity ;

• The structure and geographical spread of themarket – including such factors as whether thereis a distinct public sector market or large-scalephilanthropic distribution program for theproduct in the relevant country, or whether thebulk of consumption by those in need is essentiallyself-financed on the open market (includinginformal or unregulated distribution networks);

• The pattern of prevalence of the targeted disease– does it span rich and poor markets alike, sothat discriminatory pricing for wealthyconsumers can effectively cross-subsidiseconsumption in poor markets or in public sectorprocurement programs aimed at the disease; oris there simply a lack of an overall sustainablemarket, so that the prospect of a ‘reasonableprofit’ or overall margin from production anddistribution is very low; similarly, arrangementshave differed between countries in which adisease is endemic or not;

• The technological matrix in which the productdevelopment is operating, for example the needfor the industry partner separately to gain accessto platform technologies such as adjuvants,excipients or drug delivery technologies, and theavailability of alternative technologies, or theneed to create inducements for third parties toprovide access to their background or platformtechnologies for successful development;

• The legal and regulatory environment, includinggovernment policies and applicable lawsconcerning the investment of public funds inmedical research, and the requirements in alltarget countries for regulatory approval of newpharmaceuticals; in turn, this determines thedegree of risk and investment the industrypartner may be required to undertake, and thepotential need for third parties to gain access totest data for regulatory approval; and

• The structure of the industry and the range ofdrug development and manufacturingenterprises who may provide alternativeavenues to achieve the goals of the project –on the one hand, this determines the degree towhich the partnership may need to createactive positive for an industry partner to investresources in the project, and on the other, thisinfluences the credibility and effectiveness ofnegative incentives for failure to meetperformance criteria.


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6.1 Towards practical guidelines for PPPs

The following tentative conclusions can be drawnfrom this review of practical experience with PPPs

for product development and dissemination:

• The delivery of new health products inevitablyentails some degree of interaction between publicand private players – the public or not-for-profitcontribution ranging from financial backing toan active role in research and management oftechnology, and the private sector input may rangefrom providing goods and services (includingcontracted research and manufacturing services)to playing the central role in researching,developing and bringing to the market a newpharmaceutical product.

• The PPP is a focussed and distilled form of thiskind of public-private interaction, with lessonsmore broadly for public interest management ofIP rights. It illustrates a hybrid form of IPmanagement that bridges across the value systemsand priorities of public and private players. Inpractice, the necessary access to new technologiesmay not be achieved by minimising IP rights oravoiding any legal restrictions to new technology,but by strategic, public-interest management ofIP firstly to bring about the development oftechnologies that would not otherwise exist, andsecondly to build an optimal pathway to ensurethe new technology is actually put within reachof all who need it and to ensure that it is not justaccessible in a legal sense.

• On the other hand, if the IP component of aPPP is ill understood and poorly managed, or ifIP rights are either pursued or avoided as an endin itself, then differences over IP issues can thwartthe negotiation of a workable agreement, andcan accentuate rather than bridge across theinevitable differences in priorities, incentives,values and constraints that partners bring to aproject.

• There is no single template for PPPs that willapply in all cases – each case should be considered

uniquely and planned strategically in its ownterms, given the diversity of inputs (financial,technological, product development know-how)that are brought by both project and industrypartners, and the differing external factors(including the epidemiological pattern of thetarget disease, the regulatory environment, andthe health infrastructure needed to deliver andadminister the product).

• Even the agreement that is struck to structureone partnership will need to be flexible andadaptable, since the partnership is operating inan area of uncertainty, risk and unexpecteddevelopments over a long timeline, and needs tobe receptive to additional partners should theybecome necessary.

• This need for flexibility and a strategic perspectiveflows through to access conditions – both accessconditions expressed in terms of price standardsfor defined markets, and access conditionsexpressed in terms of march-in rights and otherconditional guarantees of access to new IP,background IP, product development know-howand regulatory test data.

• IP arrangements – such as ownership structures,portfolio management protocols, filing strategies- should not be determined a priori, butdeveloped according to the overall objectives ofoptimal access to the new product in the targetpopulations

• This means that ownership of IP should not bean end in itself, but that the overall dispensationof IP should be structured so as to best serve thePPP’s objectives – this probably means that aproject partner need not pursue ownership(indeed, the project partner may wish to avoid theliabilities and administrative and commercialburdens of maintaining an international IPportfolio), but should be confident of having areserve capacity to access IP as and when required.Conceding on IP ownership may in fact have theeffect of enabling the project partner to negotiate

6. Conclusions


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access on necessary IP and know-how that reachesbeyond the IP generated by the funded project,thus providing stronger guarantees and betterserving the interests of the project partner thansimple ownership of project IP.

• It is essential to consider development anddissemination as a whole, rather than as twodistinct steps – some conception of the ultimatevehicle for distributing the finished product willneed to be built into the partnership from anearly stage, although the risk and uncertainty ofthe process should also be taken account of.

• The efficacy of defined price ceilings (fordeveloping country or public sector marketsectors) may depend on the scope of theuncontrolled market that the industry partner isfree to exploit for the covered product, and onthe degree of risk (which ranges from very littleto very high) the industry partner is asked to bear;

• The dispensation of IP ownership, control andaccess can be used to structure hybridmechanisms that combine public interestguarantees with targeted and appropriate privatesector incentives; these include:

— Defining and enforcing discrete territorialmarkets (separating industrialized marketsfrom developing countries, or focussing ontarget markets), allowing investment inresearch and development and the earningsfrom market prices in one region to cross-subsidize product availability in target regions;

— Establishing distinct structures for publicsector, social marketing and regular privatemarket, for example with more open licensingarrangements for public sector, philanthropicor developing country markets, balanced byexclusivity over more lucrative markets;

— Carving out rights for within and outside thefield of use, allowing the use of the coveredproducts if applicable to treat other healthconditions which could cross-subsidizeproduct availability for the neglected disease;

— Setting up royalty rights on future sales tobenefit the parties needing greater incentivesto release IP rights or licensing in a givenmarket;

— Structuring alternative access pathways in casean industry partner is unable or unwilling todeliver the projected outcomes, or fails to meetperformance standards, by ensuring reserve or

contingency access not merely to IP overfunded research, but also necessary backgroundIP, product development know-how,regulatory approval data, and training andtechnical capacity, so that third parties can stepin as required and supply the neglected sectors– such arrangements can give considerablebenefits to the project partner by giving accessto technologies and other IP that is valuablefor project objectives, but has not directlyresulted from the funded research.

The structuring of the IP arrangements essentiallypivots on the necessary trade-off between creatingincentives for an industry partner (which will need areasonable rationale to enter into what is a voluntarypartnership) and guarantees of access for the projectpartner. Concessions to the industry partner in termsof freedom to make use of market opportunities havein practice been offset by guarantees of access thatcan go beyond even the IP on the funded research,and reach into, firstly, governing how, when and onwhat terms (e.g. price) the product is made availableto certain target groups, and secondly, guaranteeingaccess to background technologies, regulatoryapproval processes and technological and productdevelopment know-how that extend well beyond aninterest in project IP per se. This arrangement hasto be accepted as a genuine trade-off, however, andthis does involve accepting the entitlement to seekbenefits from the open market in non-target countries.It is instructive that price-limiting guarantees (suchas reasonable pricing standards) have been lesssuccessful for product development agreements thatare focussed on developed country markets – becausethere is no such trade-off to provide a balancedincentive structure (with the result that voluntaryagreements are simply not concluded subject to thoseterms), whereas this kind of arrangement has beenaccepted more readily where such constraints areconfined to certain target markets (developingcountries, public sector programs, the philanthropicsector, etc) and do not restrain legitimate commercialbenefits from other markets.

6.2 Concluding observations

There is an urgent need to find practicalmechanisms that deliver effective and affordablenew treatments for the diseases of the poor . Thischallenge needs to be tackled at two levels – it isa pressing policy issue and an immediate practicalneed. The kind of practical approaches surveyedin this study may help in the creation of new


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practical tools for specific public-private initiatives,but it also may shed light on the broader policydebate. Central to resolving the practical andpolicy issues is the need to develop andunderstand new, hybrid forms of managementof IP that give funding agencies, governmentauthorities and philanthropic initiatives a degreeof bargaining power, control, freedom to operate,and the capacity to attract and negotiate accessto the panoply of technologies needed to deliveraffordably a new drug that is safe and effective;and that give private sector players the legal clarityand workable commercial structures that enablethem to commit the necessary product research,development and manufacturing resources. Thisis not a matter of searching for a template, or fora model text that can be cut and pasted from one

agreement to another. It is a matter ofunderstanding the complex dynamics that shapeand direct successful technology partnering forpublic health outcomes. This, in turn, entailsgrasping how to devise and put into effect theright mix of ownership, access and control of IP.Such public-interest IP management should bebased on a pragmatic conception of how publicinterest guarantees of access, public funded andprivate sector research, necessary privateincentives and safeguards for investment inproduct development, and the deployment ofproduct development know-how can becoherently combined and channelled intodelivering actual public health outcomes for thedeveloping world.


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Glossary

Access conditions Within an agreement for the development and dissemination of a drug orvaccine, mechanisms that ensure that the covered technology is practicallyavailable as a safe and effective finished product to as many intendedbeneficiaries as possible,. The conditions may include a mix of positiveincentives and contractual guarantees that ensure the product will be dis-tributed well beyond the scope that the regular commercial market wouldservice. They may entail strategic use of IP and agreements on IP mana-gement to generate the desired outcomes. Conditions under which theparty must make the covered product available may include price levels,quantities, periods of time, geographic coverage.

Background IP Intellectual property, already in existence, which one of the collaboratingparties brings to a new project. Usually, each party retains ownership ofany background IP it brings to a research partnership, but may agree togive a licence to the other party of those rights which are necessary toachieve the purposes of the project. Background IP may be essentialeither in research, or in effectively delivering research outcomes, such asthrough platform technologies (including adjuvants, excipients and drugdelivery technologies).

Clinical trial Experimental research in which preventive, diagnostic, or therapeuticagents, devices, regimes, and procedures are given to human subjectsunder controlled conditions in order to define their safety, efficacy andquality (includes phase I, II, III, and IV studies). The data generated byclinical trials is typically required to be submitted to regulatory authoritiesas part of the drug approval process.

CRADA A Cooperative Research and Development Agreement is a written agree-ment between a private company and a U.S. government agency to worktogether on a project. Created as a result of the Stevenson-WydlerTechnology Innovation Act of 1980, as amended by the FederalTechnology Transfer Act of 1986. A CRADA allows the federal govern-ment and non-federal partners to optimize their resources, share technicalexpertise in a protected environment, share intellectual property emergingfrom the effort, and speed the commercialization of federally developedtechnology.

Field of use A licence may extend to any use or potential application of the licensedrights; or may be limited to cover only certain uses (such as a disease ortreatment category).

Intellectual property (IP) Intangible property that is derived from the intellect and that is recogni-zed and protected under law. IP includes patents, trademarks, geographi-cal indications, service marks, trade names, trade secrets (undisclosedinformation), industrial designs, and copyrights. IP confers limited exclu-sive rights on its owners; these rights are often referred to as ‘intellectual


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property rights.’ IP law also includes more general provisions such assuppression of unfair competition, consumer deception and passing off,and protection of confidentiality.

Invention The specific form of innovation that is recognized and protected by apatent. A patentable invention must be new (novel), non-obvious (inven-tive, or involving an inventive step) and useful (or industrially applicable).There is no specific international definition of invention, but one approachis to consider it as a distinct solution to a technical problem (this couldentail the formulation of an idea or of a problem to be solved, the solutionbeing obvious once the problem is clearly stated; the devising of a solutionto a known problem; or the arrival at an insight into the cause of anobserved phenomenon, the practical use of this phenomenon then beingobvious). Patent laws can exclude certain inventions from patent protec-tion, for instance on moral and public order grounds – a patent on humancloning might be excluded for example. Patent laws have specific catego-ries of exceptions to patentable inventions, for instance methods of medicaltreatment are excluded under many patent laws.

Know-how Technical information, data, or knowledge resulting from experience orskills which are applicable in practice, particularly in terms of manufactu-ring a product.

Licence In the context of IP management, a legally-binding agreement betweenthe owner of a patent or other IP (the licensor) and another party (thelicensee) that gives the other party the right to use (but not own) or theinvention or benefit from rights; this usually involves some compensationfrom the licensee to the licensor; does not include legal title (remainswith licensor). Licenses are typically granted on a territorial basis, and thesame technology can be licensed to different licensees or according to dif-ferent standards and conditions in different countries or regions. World-wide licenses may also be agreed.

License: exclusive A form of licensing intellectual property that gives the licensee exclusiveuse of the covered IP. The parties agree that the licensor cannot grant alicence to any other party (and cannot directly use the covered IP) unlessotherwise agreed, or if the licensee fails to meet certain conditions (suchas ‘best endeavours’ or ‘reasonable pricing’ standards in disseminating thelicensed product).

License: non-exclusive A form of licensing intellectual property which permits the licensor togrant licences to more than one licensee, who may use the covered tech-nology in parallel. The covered intellectual property may be licensed toadditional parties for use in the same field or in fields other than the onesspecified in previously executed license agreements.

Licence: sub-license Depending on the terms of a licence, the licensee may in turn grant licen-ces to third parties to exercise some or all of their rights granted underthe original licence – this is known as sublicensing. Typically, the originallicence will specify if any, all or some of the rights granted under thelicence can be sublicensed, and if so, subject to what conditions (for ins-tance, there may be an obligation to report on or seek agreement for anyproposed sublicense)

March-in rights Rights which permit an entity to grant rights in an R&D project to athird party, usually the PPP, if the private industry collaborator does notcommercialize the invention in a given market or according to an establi-


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shed standard, or if a public entity needs access to the technology toaddress a public health or safety concern.

Neglected disease A disease or condition affecting millions of people (as opposed to anorphan disease) which is not well addressed with effective interventionsmainly due to lack of economic profitability or market, scientific or publicfailure. Includes infectious tropical diseases like malaria, kala azar (leish-maniasis), sleeping sickness (trypanosomiasis) Chagas disease, but alsoTB and HIV/AIDS which are not confined to the tropics. (see: DNDworking group http://www.neglecteddiseases.org/1-5.pdf)

Orphan disease A disease that affects so few people or has such a low incidence and/orprevalence that there are not enough patients to assure a sufficient marketfor its treatments under prevailing economic and commercial settings, sothat the development of a new treatment is not commercially viable.Orphan drug status is usually dependent on the rate of prevalence of thedisease - e.g. less than 200,000 in the U.S. (75 per 100,000), or less than50,000 in Japan (40 per 100,000) – or the impossibility of recoveringcosts of developing the needed product.

Orphan drug program A specific legislative and policy initiative to address the failure of the regu-lar drug development system to deliver new treatments for orphan disea-ses. Signed into U.S. law on January 4, 1983, the intent of the OrphanDrug Act is to stimulate the research, development, and approval of pro-ducts that treat rare diseases. (Source: http://www.fda.gov/cder/hand-book/orphan.htm)

PPP A public-private partnership in the context of this paper can be defined asan innovative arrangement that combines different skills and resourcesfrom institutions in the public and private sectors to address a persistentglobal health problem, where regular drug development processes andincentives fail to operate (see http://www.ippph.org/index.cfm?page=/ippph/about/whatisppp)

Patent A grant by a government to an inventor or his/her successor in title foran invention (e.g. a device, substance, method or process), which is new,inventive and useful, giving the latter the right to exclude others for alimited period of time for making, using, or selling the invention.

Private sector The sector of society or an entity that is funded by private or non-govern-mental sources including both civil society, nongovernmental or non-pro-fit organizations, and commercial enterprises. In the area of health PPPsthe ‘private’ part of PPPs often includes a pharmaceutical industry or bio-tech company partner. Not for profit or philanthropic enterprises maytechnically be private entities while operating with the goal of advancingcertain public interests.

Project IP Intellectual property arising from the R&D project covered by a specificagreement. An agreement will typically define how project IP is to bemanaged, including who is to own and administer project IP, and howand on what terms it is to be licensed. Project IP may be jointly ownedby the parties to the agreement, or assigned to one party in exchange forbetter access conditions or other concessions.

Project partner The party in a PPP which is running the project on behalf of the publicgood – this may be the PPP itself, if it is an independent non-profit


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entity, but could also be a public authority, a private philanthropic foun-dation, or an international organization or program (but in some casesthis could be a public entity such as the Special Programme for Researchand Training in Tropical Diseases (TDR) at WHO. The project partnermay provide funds and other forms of support, overall direction andmanagement, and logistical or knowledge inputs. The project partnermay also retain key entitlements vis-à-vis the industry partner to safeguardthe partnership’s public health objectives.

Public sector The sector of society or an entity that is government-funded or funded bytaxpayers, in contrast to the private or market sector. In the area ofhealth PPPs the ‘public’ part of public-private partnership often includesintergovernmental or multilateral agencies such as the World HealthOrganization, UNAIDS or the World Bank, bilateral international deve-lopment assistance agencies such as the UK Department for InternationalDevelopment or US Agency for International Development, ministries ofhealth in development countries or other governmental agencies.

Research or industry The party to a PPP agreement that provides the outside technical expertise in drug research and development, usually a commercial phar-maceutical or biotech company or an academic or government researchorganization.

Royalty In the context of licensing and managing IP, a share of income, in accor-dance with the terms of a license agreement, paid by a licensee to thelicensor for the right to make, use or sell products or processes coveredby IP owned by the licensor.

Social marketing Application of commercial marketing technologies to the analysis, plan-ning, execution, and evaluation of programs designed to influence thevoluntary behaviour of target audiences in order to improve their personalwelfare and that of their society (Andreasen, 1995).

Test data The information generated through pre-clinical and clinical trials regar-ding the safety and efficacy of a candidate drug.

Reasonable price A standard for pricing of a new drug or vaccine developed throughpublic-private collaboration or partly through public or non-profit resour-ces, with the aim of ensuring favourable access conditions so that the can-didate drug will be affordable by the target populations. May variouslybe defined with reference to the actual cost of production, other referenceproducts, price established in other markets, and conditions in the targetmarket.

partner

The aim of the Initiative on Public-Private Partnerships for Health

is to increase the ef fec tive ness of public-pri vate col lab o ra tion,

particularly by helping those seeking to develop health products,

or to improve access to such products needed to fi ght neglected

dis eas es and other health prob lems in developing coun tries.

Created in 2000 in Geneva, Switzerland, the Initiative on Public-

Pri vate Part ner ships for Health is spon sored by the Bill and

Melinda Gates Foundation, the Rockefeller Foun da tion and the

World Bank. It operates under the aegis of the Global Forum

for Health Re search, an in de pend ent in ter na tion al foun da tion

help ing to correct the 10/90 gap in health research, from which

it also receives sup port (www.globalforumhealth.org).

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