The Medicines Patent Pool (MPP) was founded five years ago as a program to improve access to affordable and appropriate human immunodeficiency virus (HIV) medicines in developing countries. During its relatively short existence, the program has negotiated licenses for 12 anti-retroviral (AVR) medications from seven different patent holders, sub-licenced these medications to 15 generic manufacturers, and expanded distribution to 117 countries. According to the MPP, all of this has saved an estimated $119.6 million dollars.
How the MPP Works
The MPP works by first negotiating a licence for a medication from the Intellectual Property (IP) holder. The licence can include a royalty that is to be paid to the IP holder, which to date has been waived for paediatric formulations. These royalties can also be tiered and based on the overall GDP of a country. As such, the MPP can include some middle income countries as well as low income countries, with the ability to have each nation pay based on their ability to afford the medication.
After securing a licence from the IP holder, the MPP sub-licences the IP to generic manufacturers. The entire text of both the licences and the sub-licences are made public on the MPP website. Transparency is a key principle of the MPP: not only does the transparent nature of the program remove secrecy around the royalties paid, it also helps to focus the attention on public health.
Finally, the medication is made available to the purchasers and ultimate users. The actual cost of the medication paid by the purchaser, who may be a government or NGO, is left to market forces. This allows competition between the generic manufacturers, and may potentially lower the ultimate cost of the product.
The MPP can eliminate many steps in traditional voluntary licencing as the IP holder need only licence to one entity: the MPP. This may allow the IP holder to participate in access initiatives more cost-effectively, including opening up markets that otherwise would not be profitable without the transactional savings provided by the MPP.
Additionally, compulsory licencing typically removes the IP holders' rights to negotiate on royalty rates or specific terms they find essential, such as which countries may manufacture the generic medications. Participation in the MPP may reduce the likelihood of nations whose laws permit compulsory licensing utilising that option.
Generic manufacturers may benefit from this scheme too as they also need to negotiate with only one group: the MPP. Without this patent pool, generic manufactures would need to procure licences from potentially multiple companies in order to manufacture fixed-dose combinations (FDC). FDCs can be vital to ensuring compliance with drug regimes. Without a single source for licencing patents, the complexity of producing FDC's would likely increase, along with the likelihood of failure.
Transparency also benefits the generic manufacturers as it means each generic manufacturer pays the same amount for the licence. This prevents some manufacturers from entering less favourable contracts.
Competition between generic versions of the same product is permitted under this scheme as the MPP only sets the price for the licence to the IP holder, not the ultimate cost of the medication. Therefore, although the generic manufacturers set their own prices, they have to compete with other generic manufacturers in the same marketplace, which can result in competition-induced cost savings to the purchaser.
Transparency also benefits the purchaser and ultimate user as the public is aware of the royalty paid for the medication. This, for example, allows large purchasers to better negotiate with generic manufacturers, and prevents the generic manufacturer from easily inflating the price of a medication.
Flexibility as to where the generic drug can be manufactured may also be increased. This benefits the purchaser and ultimate user as it allows countries without the infrastructure to produce these medications to still have access to the final products.
There may also be an incentive to study new paediatric formulations. Not only have these not required royalties to be paid to the IP holders under MPP sub-licences, some licences allow manufacturers to research new paediatric formulations. Therefore, the MPP may increase the number of companies working on paediatric formulations, potentially increasing the likelihood of improvements in this area.
The MPP, like any system, has faced criticism. Negative press for the IP holder can occur, which may deter involvement in the MPP. For instance, in July 2011, Gilead licenced the IP for tenofovir disoproxil fumarate (TDF), emtricitabine (FTC), cobicistat (COBI), and elvitegravir (EVG) to the MPP. However, Gilead was criticised for not doing more with one group starting a petition against the company. In comparison, had Gilead privately negotiated the licences with the countries directly, the agreements would not have been available for public scrutiny.
There is also criticism that not all countries are covered by the negotiated licences. More specifically, licences such as MSD's raltegravir (Ral) licence precludes the distribution of the medication to places like Argentina, Ecuador, and Uruguay. However, these countries had no patent protection for the drug as of late 2015, and therefore would not need to be listed as a territory within the licence in order to manufacture or make available the medication.
A similar situation occurred with Gilead in 2011, when it was criticised for not licencing TDF to nine countries. However, only two of these nine countries had any patent protection on the individual drug, meaning that seven countries required no licence from Gilead to make, use, or sell TDF. The criticisms may or may not be valid, but do not negate the cost savings and the increased access that the licences may provide in the terrorities under license.
MPP's future expansion
According to the MPP website, the MPP plans to continue expanding and this includes securing licences to more HIV medications. As of December 2015, there were at least 14 HIV medications listed on the US National Institute of Health website, not including derivatives such as extended-release versions of the drugs. Of these 14 medications, the MPP has licenced the IP associated with 79% of these medications for paediatric formulations, and 57% for adults. This means that the MPP still has medications for which it needs to secure licences.
One method to further incentivise licencing IP to the MPP is through tax incentives, such as tax deductions. Tax deductions cannot be offered by the MPP because they do not collect tax: the deductions would need to be offered by countries. The countries offering a tax deduction could extend beyond those benefiting from the licences to include any country where the licensor pays taxes. For instance, a tax deduction can be claimed under certain circumstances in the United States for donating a patent. If this type of deduction were expanded to include the revenue difference by voluntarily licencing to the MPP, more IP holders might be persuaded to participate.
The MPP has grown since 2010, and is still growing. The MPP has secured 60% of its adult ARV medication licences and 69% of their paediatric ARV medication licences since 2013, the approximate current halfway point of the program. This growth goes beyond just new medications, with supply of medications to additional countries being added to existing licences as well. However, this expansion may not continue without incentives for IP holders. Tax incentives could incentivise an IP holder for licencing their patents to the MPP at either significantly reduced rates or for free. It may be beneficial for industrialised nations to work with the MPP to bring affordable treatment to low- and middle-income countries. HIV is a world-wide problem, so it only makes sense that the solution spans the globe too.
Previously published in Pharmafile - March 2016
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