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A world beyond market & state
The results of publicly funded research need to be available for everybody – especially in the case of essential medicines. This basic concept relies on two principles: first, access to medical treatment and a healthy environment are human rights that should be available to everybody; and secondly, research in the field of medicine and environmental science is mainly publicly funded, which means that research should serve public needs and be available to the public. One attractive solution is a licensing model known as “Equitable Licensing,” which aims to ensure access to essential medicines resulting from publicly funded research that are protected by patents. This model can help ensure that the social goals of publicly funded research are met under the conditions of modern, patent-based technology transfer.
Equitable Licensing, sometimes known as humanitarian licensing, was first used 2001 to provide AIDS-stricken patients in South Africa access to essential medicines (Stevens and Effort 2008). The concept empowers research institutions to pro-actively influence medical research and drug development, and thus responds to a major challenge of modern medicine in a globalized world: how to provide research and drugs for diseases that mainly concern people in low income countries (the so-called neglected diseases, e.g., malaria, tuberculosis, sleeping sickness). More significant is the fact that many medicines are available but only at the global market price, which is not affordable for most people; drug makers fear that tiered pricing will result in lower-priced drugs being imported back to high-priced markets, a problem known as “parallel imports.”
The term “Equitable Licensing” was first coined in 2001 by Yale Univers ity. The university had given an exclusive license to the pharmaceutical company Bristol-Myers Squibb (BMS) to use the patent on the HIV-medication d4T (Stavudine). d4T was initially discovered in the 1960s at the Detroit Institute of Cancer Research as a cancer therapy. In the 1980s, Tai-Shun Lin and William Prusoff at Yale University found the substance to be effective in treating HIV patients. Their research was funded by the US National Institutes of Health and BMS; Yale University filed for a patent for d4T in 1986, which was issued in 1990. Yale licensed the patent exclusively to Bristol-Myers Squibb, which finally put its proprietary version of d4T, Zerit®, on the market in 1994. As was common practice at that time, the medicine was marketed at a uniform price worldwide. In 2001, the daily dose per patient was available for nearly 12 euro, or about 4,369 euro per year (Schwabe and Paffrath 2002) – an unaffordable price for patients in Africa.
After the drug was put on the Essential Medicines List by the World Health Organization (WHO), Médecins Sans Frontières (MSF) found the price not sustainable for people with AIDS. In February 2001, MSF asked Yale University to waive the South African patent, but Yale rejected that request, citing the exclusive license to BMS. At this point, a group of Yale students intervened with public protests and William Prusoff wrote an opinion piece in the New York Times.Responding to public pressure, Yale asked BMS to grant “patent relief” and price cuts. BMS eventually agreed, signing an agreement with Aspen Pharmacare, a leading South African generic manufacturer in June 2001, that enabled local production of the AIDS drug. After the Indian drug manufacturer CIPLA introduced a generic version of the drug, the price of d4T dropped by 96 percent within a year. This allowed MSF to scale up HIV treatment programs across Africa.
A very similar agreement was reached for Tenofovir, the active substance of the AIDS drugs Viread® and Truvada®, which had been licensed to the pharmaceutical company Gilead by the Rega Institute for Medical Research at Catholic University Leuven and the Institute of Organic Chemistry and Biochemistry in Prague (Van Overwalle 2009).
This simple model of lowering the price by Equitable Licensing and competition has matured over the past decade with different types of “humanitarian licensing.” One approach creates direct supply obligations for the licensee; another seeks to indirectly lower prices by asking patent holders not to assert patent rights in certain countries, which then enables the local production of cheaper generic drugs. Equitable Licensing has been institutionalized by programs like the “Socially Responsible IP Management Program” at the University of California, Berkeley, and private companies like Boehringer Ingelheim have implemented policies of not asserting patent rights. In 2009, the University of Edinburgh adopted an explicit policy statement that basically follows a “non-assert” approach for Least Developed Countries; the university “expects” its industry partners to “appreciate and cooperate” with this policy.1
An offspring of the Yale student initiative is the foundation of UAEM (Universities Allied for Essential Medicines), which now has various chapters worldwide. The group developed the first standard form of an Equitable License, and instigated the so-called Philadelphia Consensus Statement in 2006 in which university leaders acknowledge their institution’s social responsibility in making essential medicines accessible.2
The term “Equitable Licenses” is broadly synonymous to “Humanitarian Use Licenses,” “Equitable Access,” “Global Access,” and to some extent to “two-tiered pricing.” It differs, however, from other forms of promoting access to medical innovations in five central aspects.
- Equitable Licenses build on contracts such as bilateral and multilateral consortia agreements. Therefore, they are distinct from unilateral governmental intervention such as compulsory licenses.3patent pools4 or information platforms.5
- The term “Equitable License” is confined to the transfer of knowledge from public research institution towards private industry. Thus, purely private agreements between competitors are not included.
- Purely unilateral private actions like the so-called “non-assert pledges” by industry are equally exempt. They are not “Equitable Licensing” as there is no involvement of a public research institution.
- Equitable Licenses have a clearly envisioned group of beneficiaries and so they are not geared to broadly fostering progress in a given sector. This stands in contrast to the new initiatives fostering “green technologies” (Hall and Helmers 2010).6
Equitable Licensing builds on the modern concept of proprietary technology transfer from universities to industry, universally labeled as “post Bayh-Dole.” That term refers to the US Bayh-Dole Act of 1980,7 which was the first of a series of laws enacted by the US Congress to allow university patents on results developed through publicly funded research. Before Bayh-Dole, patents deriving from publicly funded research belonged to the US government. This law laid the foundation for the boom of new startup companies, especially in biotech and information technology fields, by allowing them to exploit cutting-edge academic research. The law helped to reorient the sciences away from basic research and towards applied product development and new organizational forms of research between academia and industry (Cohen et al. 2002). This process has been copied internationally.
The Bayh-Dole philosophy initiated a new understanding of basic research. Earlier, basic research was not seen as having a specific use in mind; since Bayh-Dole, basic research owes a return on investment to the consumer. The law’s central mechanism is the patent mechanism, which enables early investment in new technology to reap later returns through a monopoly price. However, this financing mechanism does not function if consumer demand is not sufficient. In the case of neglected diseases, the pool of patients is either too small or not economically significant.
In these cases, public funding aims at remedying market failures. This is done either by funding research or by setting incentives for investments, e.g., a “priority voucher” for humanitarian uses, as set up by the US Patent and Trademark Office in 2010, or a priority voucher for the development of drugs that are relevant for developing countries, as issued by the US Food and Drug Administration in 2008. Another possibility is setting up state-owned research institutions, such as the new National Center for Advancing Translational Sciences (NCATS) set up under the roof of the US National Institutes of Health in December 2010.
Equitable Licensing complements these state interventions (in particular research funding) because it links publicly funded research to institutional and personal social responsibility, and transmits these responsibilities to an industrial partner who develops a product from early research. In other words, the licensing aims at both market failures that stem from insufficient demand, i.e., impoverished patients and at social obligations that are linked to taxpayer-funded research.
Until recently, the success of university technology transfer offices has been evaluated only in terms of numbers of business spin-offs, the amount of financial revenues from contracts, license fees and equity shares in companies. However, successful integration of Equitable Licensing into a technology transfer office´s portfolio seems to require a “just” remuneration of the time invested in projects with a high social value. Also, the widely used standard contracts require adaptation (Godt 2011). After all, negotiating extensive contracts that exert influence on the utilization of medicines is a time-consuming and ambitious process. On the other hand, research institutions need to understand that Equitable Licensing can enormously boost an institution’s reputation.
This leads to two conclusions: A patent license must not be awarded to a commercial partner just because it is promising the best license fee. Second, the institution needs to be interested in owning and managing the patent for a long time. This requires that both the research institution and its industrial partner recognize their own benefits from Equitable Licensing and develop appropriate new criteria for rewarding this innovative form of technology management. Carol Mimura, technology manager of University of California, Berkeley, advocates noneconomic metrics that are not linked to any financial returns from a license, but rather reputational gains and medical costs saved (Mimura 2010). These social benefits can be quantified by econometric measures used in health economics like DALYs (Disease Adjusted Life Years) and QUALY (Quality Adjusted Life Years).8 Even if these concepts still need refinement by practice and experience, the important lesson is that universities recognize that financial returns are not the only measure of success. The basic principles need to be reflected in corresponding institutional policies to which the employees of the technology transfer office can refer to.
An important element of Equitable Licensing is the unique motivation of scientists. The example of the drug Miltefosin shows that it is the insistence of researchers who might also oppose institutional, economic driven decisions that contributes to breakthroughs in the development of essential drugs (Wagner-Ahlfs et al. 2010). The case study also shows that individual dedication to research is more important than either patent or product development policy. In this constellation, Equitable Licensing can transfer the scientist’s activism for drug utilization into long-term contract commitments.
Equitable licensing is a pragmatic concept in that it builds on both proprietary research and publicly funded research. It accepts the modern reality that public research results are often patented, and does not demand a public research commons. What matters in Equitable Licensing is that medicines are made available to those in need. Since the patented medications are developed only because of public investments, public policy has an obligation to impose certain public responsibilities on the owners of research results. Equitable Licensing does not rely upon only one standard contract to achieve this goal, however. It can be realized with different standards of performance. Universities can select a “Gold,” “Silver” or “Bronze” standard, for example, a modular concept of licensing developed by Christine Godt and Tina Marschall (2010). The publicly available guidelines translate the aimed level into concrete license modules.
Equitable licensing brings three innovations: First, it uses specific contractual commitments to improve the availability of medications developed with public funds. Second, it coordinates the work of many more actors and allows researchers themselves to decide how the fruits of their research will be put on the market, guided by a university’s formal policies. Third, the public interest is not exclusively entrusted to governments (via compulsory licensing, for example); patent owners and nongovernmental organizations can play an active role. In this way, Equitable Licensing provides an important practical measure of shared benefit from publicly funded research.