Home > IP Topics Index > Specific Strategies and Mechanisms for Facilitating Access to Innovation > Valuation and Licensing in Global Health > Editor's Summary, Implications and Best Practices

In the U.S. and other developed countries, drug prices are two-tiered. Drugs that are patent-protected are generally 30-80% more expensive than generic versions. The pricing situation in developing countries, however, is more complex. Some developing countries produce generic drugs; others lack this capacity and rely on imports. But all developing countries suffer from a dearth of new medicines. Market-driven investments in health research have for the most part left the developing world far behind. And even when relevant therapies are available, they are too expensive for those who need them.

This inequity reached a crisis point because of the scourge of AIDS. In the mid-1990’s, new patented medicines made it possible to treat HIV infection in the developed world, but in the developing world these treatments were beyond the means of those who desperately needed them. To ensure that its citizens could gain access to medicines that would save their lives, Brazil acted to override international patents and began manufacturing and distributing the new drugs free of charge to its sick. Between 1997 and 2002, the number of deaths from AIDS in Brazil was reduced by half. African countries, however, lacked the capacity to act similarly, and were therefore unable to gain access to these medicines.

From here, this chapter picks up this story in detail in order to make a very big and very important point about university licensing practices. Yale University had granted an exclusive license for an anti-HIV compound to Bristol-Meyers Squib, which also gave the company the right to file for patent protection in foreign countries. Fatefully, among other countries, the company filed in South Africa, Mexico, and Egypt. South Africa (and the rest of Africa) needed this anti-HIV drug—D4T—but it was far too expensive for all but a very few. Pressure was put on Yale University to make this drug available generically in South Africa. Yale resisted, but student activists brought the issue to the attention of the national press, and Bristol-Myers quickly acted to make the drug available at no cost to treat AIDS in South Africa. Every university in America learned how important it was to include fair-access licensing provisions for every license to a drug or vaccine candidate with the remotest potential for treating diseases in the developing world.

The objectives for such fair-access provisions should be to maximize the possibility that the drug will be produced and to structure arrangements for tiered pricing, which will allow the poorest countries access to the drug at the lowest cost. This chapter provides some examples of models for fair-access provisions from the NIH and Boston University. It also provides an overview of licensing practices between universities and eleven drug development public-private partnerships (PPPs) or product-development partnerships (PDPs). The details provided in the chapter will very helpfully illuminate some paths to fair access.

PDPs are the newest players in a renewed effort to produce and distribute new drugs for diseases in developing countries. Funded by such major donors as the Bill and Melinda Gates Foundation and the Rockefeller Foundation, the PDPs have had the financial clout to insist on affordability conditions as part of the transactions they have negotiated. They have also had the following important effects:

• Large companies have been motivated to contribute their drug-discovery skills and resources because they are secure in the knowledge that others would be responsible for funding late-stage clinical development.
• Small companies have secured funding to develop technologies with dual-market uses, with the PDPs securing license rights for developing countries at zero or low royalty rates, and the small company retaining rights for use in developed countries.
• Academic institutions have had a new channel to advance their neglected disease discoveries.
• Developing country pharmaceutical companies have found their production and distribution skills in demand.

The chapter’s overview of licensing and valuation practices between universities and PDPs clearly shows that the right valuation formula is to ask for the licensee(s) in developing countries to take over responsibility for future patent costs but to ask for no upfront fees, no milestone payments, and no running royalties. Any financial return to the university should be derived from opportunities in developed countries. Indeed, if a university’s objective truly is to get drugs that have been discovered at rich universities into developed countries as cheaply as possible by using “other people’s money,” whether governmental or philanthropic, then true leadership demands those same universities are not required to charge a royalty under all circumstances. They aren’t. Universities are under no obligation, under Bayh-Dole or any other law or regulation, to charge a royalty. Indeed, under certain circumstances, asking for a royalty—even a modest one—would be inappropriate and inconsistent with the public mission of the university. It would cost the moral high ground and weaken universities’ ability to lead in this humanitarian endeavor. This chapter insists on a more positive vision and role for universities and global health.

Key Implications and Best Practices

Given that IP management is heavily context specific, these Key Implications and Best Practices are intended as starting points to be adapted to specific needs and circumstances.

For Government Policymakers

• IP systems that are credible, reliable, and capable will be necessary for sustainable access to essential innovations in health and agriculture through tiered licensing agreements with developed countries and private sector organizations.

For Senior Management (university president, R&D manager, etc)

• Equitable access to cutting edge innovations in health and agriculture can be realized through tiered pricing. However, successful licensing and technology transfer will require trust and goodwill. A cornerstone of trust will be demonstrable capacity in, and commitment to, best practices in IP management.

For Scientists

• By building effective R&D collaborations with colleagues in developed country public and private sector institutions, you can contribute significantly towards accelerating access to vital innovations in health and agriculture.

For Technology Transfer Officers

• In addition to building IP capacity in your institution or organization, strive to build solid networks with private sector and developed country institutions and organizations. The combination of capacity and networking will be the foundation for access to innovations, through favorable licensing provisions.