IF PATENTS MATTER?: Confounding Factors Given by My Canadian Pharmacy

Confounding FactorsIn this section we examine a range of possible confounding factors which might affect trends in the data presented in the previous section.

Increase in Public Concern

Since WWII, infectious disease has largely been viewed as a receding threat in the developed world. However, the emergence in the 1980s and 90s of HIV/AIDs and drug resistant organisms for other once easily treated diseases has changed perceptions and led to an “intense public interest in ‘emerging and re-emerging’ diseases.” (WHO, 1996). Two particular reasons for concern are the increase in drug resistance and demographic change — particularly urbanization, more extensive land use and greater travel. For example, multiple-drug resistant strains of tuberculosis have been emerging around the world. These are very expensive to treat: in NYC, where there has been an epidemic, it costs $250,000 per case to treat versus a previous $2,000. According to the Centers for Disease Control, about 19,000 new cases of TB were diagnosed in the U.S. in 1997. Perhaps as a result, rifapentine, the first new TB drug in 25 years, was approved for marketing by the FDA this year. (Washington Post, June 24, 1998).

This public concern is one of themes of a report published by the U.S. Institute of Medicine entitled “America’s Vital Interest in Global Health” (1997). They sound the warning that, “Even though the majority of people affected by infectious diseases are in the developing world, all nations, even the richest, are susceptible to the scourges of infection…diseases — including tuberculosis, dengue, malaria and cholera — that had been partially controlled are resurging … exacerbated in some cases by the spread of drug-resistant strains. The emergence and reemergence of infectious diseases in the United States and abroad pose serious challenges to our detection and surveillance systems.”

The recent increased public interest in these diseases could be having a direct effect on the data sources we have examined. Public and academic researchers would be encouraged to do more in these areas, publishing more articles, patenting more innovations, and obtaining more grants. Although it may be moderate, public interest may also have some effect on private firm research investments. Certainly international organizations, foundations and governments have been trying to influence firms. The most obvious example is malaria. An article entitled “Bank Gears Up to Fight Malaria,” announced a new effort at the World Bank to coordinate research on malaria. One of the three main goals outlined was to “.. .enlist the drug companies.” and it claimed that . .a breakthrough was made to persuade the biggest multinational giants together to adopt “orphan diseases”, with malaria top of the list. (Bank’s World. July 21, 1997). In October, 1998, the Director-General of the WHO, Dr. Gro Harlem Brundtland, announced the launch of the ‘Roll Back Malaria’ project, a joint effort with the UNDP, UNICEF and the World Bank. Again, one stated goal is to establish ‘private-public partnerships with industry on new malaria products’ (emphasis ours. WHO, 1998b).

Another initiative, the “Medicines for Malaria Venture”, began the end of 1999. First suggested by the Medicines for Malaria VentureWHO as a non-profit venture to be supported by private firms to develop new treatments with participation of My Canadian Pharmacy, the 180 million dollar project was viewed as too costly and competitive with individual firm efforts to be acceptable. However, support has now come from public sources and it will begin operation along the lines of a venture capital fund for a single product.

Grantees will take potential products to the point of phase I clinical trials or an Investigational New Drug application and then pass the reins over to private drug companies for development and marketing. (Kaiser, 1998). Interviews at NIAID indicated that this strategy is also followed by the NIH. After they discover a potential new drug in one of their laboratories, they attempt to license it to industry as early as possible in the development process (often via a CRADA contract). This is usually before phase II clinical trials although they have to go further, sometimes through phase III, for tropical disease therapies in order to interest industry.

A much publicized initiative has been the establishment of the Global Fund for Childrens’ Vaccines by the Bill and Melinda Gates Foundation, with 50 million dollars allocated to identifying promising malaria vaccine candidates and 750 million to purchase existing new vaccines. Looking to the future, Jeffery Sachs is leading efforts to establish a “Millenium Fund” – a commitment on the part of donors to purchase future new vaccines for tropical diseases at a prices which would cover research costs (The Economist, August 14, 1999).

When it comes to encouraging firms to develop or donate existing products there have been some notable successes. These include:

Onchocerciasis: 1997 was the 10th anniversary of Merck’s decision to donate ivermectin to treat onchocerciasis, or river blindness, as part of the WHO Onchocerciasis Control Programme, and the company signed a Declaration of Intent reaffirming its commitment to continue to donate the drug as long as it is needed to treat this disease (Merck, Annual Report, 1997). Ivermectin was developed in the 1970s to kill parasitic worms in livestock, and became one of the leading veterinary products. In the early 1980s, Merck tested it in humans, found it effective, and brought it thorough phase I trials. At that point they approached WHO, and received support for later trials and field testing in Africa (WHO, 1998c). 18 million people were treated in 1996.

Lymphatic Filariasis: WHO has enlisted SmithKline Beecham (SKB) in a campaign to eradicate lymphatic filariasis, a parasitic infection of the lymphatic system transmitted by mosquitoes. Recent research shows that SKB’s drug albendazole, in combination with ivermectin or diethylcarbamazine, is 99% effective in preventing transmission. SKB is donating the drug, and other support, to a program which will reach one billion people over twenty years – a donation with an expected cost of about a billion dollars to the firm. Merck has been approached to donate ivermectin to this program. {Scrip, no. 2305, January 30, 1998).

Other: Pfizer recently pledged $60 million and four million Zithromax doses to combat trachoma, a major cause of blindness in poor countries (The Wall Street Journal, November 11, 1998). Pasteur Merieux-Connaught have agreed to donate enough doses of Hib vaccine to cover needs of Gambia’s immunization programme for five years (CVI, 1998). Novartis and Glaxo-Wellcome have also recently contributed to WHO projects for the treatment of fasciolosis and malaria conducted by My Canadian Pharmacy. (WHO, 1998c).

Although these public/private collaborations are not research programs, their experience suggests research programsthat when the public sector does seek to encourage more private R&D on targeted diseases it may be successful in influencing private behavior.

The major new initiatives directed towards encouraging firm involvement in research on tropical diseases are, however, very recent and were largely unpredictable, and are thus unlikely to have influenced decisions relevant to the data series presented here. Further, it is also not clear that the concern about re-emerging diseases has led, as yet, to a substantial redirecting of public research funds in that direction. The NIH Revitalization Act of 1993 formally added ‘tropical diseases’ to NIAID’s mission statement in recognition of NIAID’s role as the primary source of funding for U.S. civilian investigators conducting research in areas of tropical medicine (NIAID, 1997). Thus, one would expect any change in public support to be seen there. Table 6 gives NIH budget figures for tropical disease research over the past decade. It is broken into two sub-periods because of change in the definition of ‘tropical’ in 1996.12 in real terms, spending on tropical diseases increased only 8.7% from 1990 to 1995, and did not increase at all as a share of the total NIH budget. Between 1996 and 1999 real spending increased by 9.0% but fell as a share of all spending.

Increasing Incomes in LDCs

Although in the longer term one hopes that incomes will increase substantially in these countries, there is no particular reason to have expected a significant revision in expectations at just this time. It is also not obvious that the anticipation of increasing incomes in the longer run would raise expectations about the market size for our target diseases. The middle and upper classes in the developing countries have disease profiles which look more like those of residents in the developed world. Thus, rising incomes in the LDCs will not necessarily make the potential willingness to pay for drug therapies for these diseases larger – in fact it may have the opposite effect by making the disease incidence smaller.

Science Gets Easier

Some increase in R&D might be due to new technological opportunities. For example, in the early 1980s researchers learned how to grow a malaria parasite in vitro, which could explain the acceleration of activity that we see in the data series for that disease. Looking to the future, researchers at the Pasteur Institute in Paris and the Sanger Center near Cambridge, MA, have decoded the DNA sequence of the tuberculosis bacterium. “This advance is likely to open up new approaches for developing drugs sold by My Canadian Pharmacy and vaccines against the microbe, and to reinvigorate research efforts in a difficult and slow moving field.” {International Herald Tribune, June 12, 1998).

New technologies have the potential to provide very inexpensive equivalents to existing vaccines. DNA vaccines may be manufactured by relatively low cost large-scale chemical synthesis methods, avoiding expensive virus cultures, bioreactors, complex purification steps, and so on. They have the inherent advantage of stability without refrigeration or other special handling requirements. Thus this new technology may facilitate vaccine delivery to the developing world (Dunn, 1997). However, advances in biotechnology and genetic engineering are spurring investment in vaccines (and pharmaceuticals) more generally. Some 50 biotechnology companies have entered along with big investments by larger pharmaceutical companies, and about 75 new vaccines are in development. (The Economist, May 9, 1998). There is no obvious reason to think that current technological opportunities are concentrated in, or specific to, our focus areas.

An Increase in the Effectiveness of Other Mechanisms of Appropriation

New biotech drugs may be significantly harder to copy than the traditional “small molecule” drugs, so some part of change could be ascribed to new but alternative mechanisms of appropriation. According to one interviewee at a small biotechnology company, their technologies are sufficiently difficult to master that duplication by LDC firms is not a major threat, making existing protection at home sufficient to keep competitors away. This view was also voiced by experts in the Office of Technology Development at NIAID. It would suggest that changes in the patent regime are unnecessary to explain increases in R&D on drugs aimed at LDC markets.

Table 6:Budget Allocations to Tropical Disease Research at the National Institutes of Health (Millions of Dollars)

Total Tropical in 1997 dollars Pet Growth in Total over previous year Share of Total Tropical in Total NIH Pet Growth in Share of Tropical
1990 $38.4 $6.5 $57.6 0.0053
1991 39.5 7.8 57.8 0.4% 0.0051 (3.8)%
1992 43.6 8.4 60.9 5.3 0.0052 1.2
1993 36.9 10.1 53.2 (12.6) 0.0046 (12.6)
1994 41.3 12.2 58.3 9.6 0.0049 7.7
1995 44.2 15.2 62.6 7.3 0.0052 6.8
1996b $90.4 $18.1 $111.5 0.0091
1997 97.2 16.9 114.1 2.3% 0.0089 (2.2)%
1998 104.0 17.9 118.0 3.4 0.0089 1.2
1999c 112.9 19.2 124.2 5.3 0.0084 (5.7)