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United Nations Conference on Trade and …

United Nations Conference on Trade and development Ad Hoc Expert Group Meeting New Investment Models in Health-related R&D the Case of Antibiotic Resistance Thursday, 5 October 2017 Room XXVII, Palais des Nations Geneva, Switzerland Report 1. Executive Summary In response to its mandate to work on the development implications of intellectual property within the broader context of investment, UNCTAD s Intellectual Property (IP) Unit organized an ad hoc expert group meeting on the topic of New Investment Models in Health-related R&D the Case of Antibiotic Resistance on 5 October 2017 at the Palais des Nations in Geneva. The key outcome of the discussion was that more public and private investment is required to promote research and development (R&D) in the creation of new classes of antibiotic drugs. While a variety of proposals exist on how to delink the costs of R&D from the sales volume and drugs prices, governments have for the time being not committed sufficient amounts of funding to ensure a systemic shift of the R&D system from the volume-oriented business model to effective market entry rewards (MERs).

United Nations Conference on Trade and Development Ad Hoc Expert Group Meeting New Investment Models in Health-related R&D – the Case of Antibiotic Resistance Thursday, 5 October 2017

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1 United Nations Conference on Trade and development Ad Hoc Expert Group Meeting New Investment Models in Health-related R&D the Case of Antibiotic Resistance Thursday, 5 October 2017 Room XXVII, Palais des Nations Geneva, Switzerland Report 1. Executive Summary In response to its mandate to work on the development implications of intellectual property within the broader context of investment, UNCTAD s Intellectual Property (IP) Unit organized an ad hoc expert group meeting on the topic of New Investment Models in Health-related R&D the Case of Antibiotic Resistance on 5 October 2017 at the Palais des Nations in Geneva. The key outcome of the discussion was that more public and private investment is required to promote research and development (R&D) in the creation of new classes of antibiotic drugs. While a variety of proposals exist on how to delink the costs of R&D from the sales volume and drugs prices, governments have for the time being not committed sufficient amounts of funding to ensure a systemic shift of the R&D system from the volume-oriented business model to effective market entry rewards (MERs).

2 Another important outcome related to the insight that due to unattractive market conditions, there is a serious risk of shortages in older, existing antibiotics. Similarly to the situation of new classes of antibiotic drugs, innovative pull mechanisms are needed to incentivize the continued production of existing antibiotics under conditions that avoid overuse and the development of resistance (stewardship). Finally, most of the participating experts agreed that the most promising way to design new investment models would be a flexible, small-step and case-by-case approach, while not losing sight of the larger vision of a global regime. 2 2. The Expert Discussion Opening and introduction The ad hoc expert group meeting operated under Chatham House rules to encourage experts to openly share their views without being quoted. This generated a lively and frank discussion.

3 The meeting was opened by Mr. James Zhan, Director of the Division on Investment and Enterprise, UNCTAD. In his opening remarks, Mr. Zhan stated that the question of incentivizing investment for the development of new classes of antibiotics is not only an urgent problem, considering the projected costs of antibiotic resistance on human health, farming and the global economy, but also an issue that involves multiple challenges from both the supply and demand size. The supply side suffers from a lack of R&D. The main question would be what governments, WHO and UNCTAD can do to develop innovative ways and means for encouraging the development of new products. From the demand side, the question would be how to make new antibiotics affordable and accessible in accordance with Sustainable development Goal 3 (to ensure healthy lives and promote well-being for all at all ages).

4 In this process, UNCTAD could add value from the investment angle. UNCTAD is the de facto secretariat within the United Nations on the international investment regime, which consists of over 3000 bilateral and regional investment treaties. As an intergovernmental agency, UNCTAD can convene member states to informally build consensus and to seek solutions to the problem of investment into new antibiotics and support governments efforts in other fora. The discussion was opened for experts from international organizations, national government health agencies and intellectual property offices, academia, civil society and Geneva-based diplomatic representatives. The expert discussion covered various aspects of antibiotics resistance, including potential models and the means of incentivizing R&D, national level measures to combat antibiotic resistance, and the related question of how to incentivize the continuous availability of existing generic antibiotic treatments.

5 Innovative investment models for the development of new antibiotics At the outset, the participants reviewed the current state of play of existing projects and proposals on innovative investment models for antibiotics. While concrete projects exist that provide push incentives ( up-front funding) to promote pre-clinical research ( the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator, CARB-X) and clinical trials ( the Global Antibiotic Research and development Partnership, GARDP), ideas on how to foster post-registration product surveillance and patient care (stewardship) to avoid overuse of antibiotics are largely untested, in part due to a limited public commitment to provide necessary amounts of funding. Participants highlighted where public funding of R&D in universities can lead to the establishment of university spin-offs that could raise funds from the market.

6 Since the R&D path is not limited to developing a new product under public funding, it is also possible for publicly funded projects to in-license products developed by private firms. A good example of in-licensing is the partnership of GARDP with a private firm for phase III clinical trials and other non-clinical studies for a novel molecule against drug-resistant gonorrhea. From the access side, the arrangement is that, upon marketing approval, GARDP will have a license with sublicensing rights in most low- and middle-income countries and the right to commercialize the product in high-income 3 markets. Participants noted that there is a growing ecosystem of entities engaged in antibiotics R&D, including venture capital, startups, and publicly funded projects. It was also observed that public-private partnerships (PPPs) have become a validated push mechanism. GARDP has developed a network of experts including academics, biologists, chemists, clinicians, and researchers.

7 Other examples were mentioned, such as university spin offs that could trigger the involvement of the private sector. Experts agreed on the important, unprecedented amount of funding that would be needed to design effective post-registration incentives in the form of MERs. It was stated that despite recent achievements, governments have not yet shown firm commitment to longer term funding but prefer short funding cycles. Opinions diverged on the question whether it would be preferable to seek governments commitment to fully fund a new global R&D system, or whether it would make sense to commence with a selected group of committed governments, under a step-by-step approach. By contrast, participants agreed that the current policy debate should not be limited to the untested issue of post-registration incentives, but also consider required improvements in pre-clinical and clinical trials funding.

8 In addition, some expressed the view that post-registration pull incentives ( rewards for successful product development , MERs) would come too late for small and medium-sized enterprises (SMEs) that are engaged in important R&D work. Push incentives such as upfront grants and public-private product development partnerships such as GARDP were referred to as modest, but more concrete projects. GARDP, which recently received significant amounts of public funding to pursue selectively prioritized objectives was expressly characterized as an experiment that could potentially inform broader projects in the future. National level initiatives in advanced countries covering vaccines, diagnostics and therapeutics to combat antibacterial resistance include recommendations for developing new economic models (pull incentives) to support the currently available push incentives. De-linkage is considered as an incentive to separate profitability from volume.

9 The reward can be based on the fixed value of the desired characteristics of the drug. It should enable the product developer to renounce profits based on volume of sales and active marketing of the product. In this regard, some underlined the importance of fully delinking R&D costs from both sales volume and product price, without which in their view it would be difficult to ensure access and enforce good stewardship. A cautionary remark was made by experts on the experience of the Orphan Drug Act, where funding of significant shares of the cost of R&D was shown to have little impact on pricing. Participants recognized that the size of push funding influences the optimal size of the pull incentives, and vice versa. With greater subsidies for clinical trials, MERs can be smaller, and vice versa. While experts considered different types of arrangements with respect to IP rights, including full by-outs by the public sector, joint management or full control by the originator of any IP in new antibiotics, some of them felt that the possibility of losing control over IP rights could be a significant disincentive.

10 In this regard, some experts noted that although the emphasis is to address the lack of incentives and the role of new models of innovation, there is a need to reflect on market based incentives and the challenges of innovation, other than financial issues. They alluded to serious scientific problems concerning antibacterial research, namely, finding subjects for clinical trials, conducting the clinical trials and, once approved, managing the complexity of antibiotics manufacturing while reducing the environmental impact. When it comes to R&D incentives, the industry would require viable incentive models, push models for early stages of development , and market-based models to ensure 4 rewards for success. The industry prefers a menu of options based on the litmus test of fostering innovation. Based on such analysis some participants argued against de-linkage. Other experts underscored that the market size for antibiotics is sufficiently large to incentivize insurances and healthcare providers to contribute to the development of new molecules.


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