The Global Fund has been backing away from efforts to promote generic competition

Reprinted from original source, Global Fund Observer, Issue 284 6 April 2016:

The Global Fund has been backing away from efforts to promote generic competition 

Fund’s strategy has come under growing scrutiny

by Nathalie Abejero With progressively stricter patent protections, the costs for new treatments continue to rise. It is a global problem that affects countries across income levels, but is particularly challenging for poor and transitioning economies.

Until recently, The Global Fund has advocated for the affordability, availability, and financing of medicines and other health commodities, taking the time-tested position of promoting generic competition as the most effective means for bringing down the price of medicines.

According to The Global Fund’s 2012 Guide to Policies on Procurement and Supply Management of Health Products, the Fund has long supported efforts to “address barriers and practices that prevent access to affordable medicines by promoting generic competition in order to help reduce costs,” including “the use of TRIPS flexibilities [see below] to ensure the lowest possible prices for quality medical products, and allows for grant monies to be used for securing the necessary expertise.”

But lately the Fund has increasingly taken a very conservative approach or even remained silent when its political weight could have been used to promote the pro-generic policies that many countries rely on to ensure access to quality medicines.

As a result, the Global Fund’s strategy regarding intellectual property (IP) has come under growing scrutiny from rights advocates and health and development partners, including Médecins Sans Frontières (MSF), UNITAID, and Health GAP. They have called on the Global Fund to use its influence to promote the use of generic competition, and to supplement those efforts by leveraging its purchasing power to lower the price of medicines.

This campaign to protect affordable access to medicines is intensifying as the Trans-Pacific Partnership (TPP) – a landmark agreement that will create the world’s largest free trade zone and affect 40% of the world’s economy – undergoes the final legislative processes for ratification.

Besides increasing costs as a direct result of stricter patent protections, trade pacts have generally favored IP rights holders to the disadvantage of competition and consumers. But the TPP goes further than previous pacts in that it threatens future access to affordable medicines. The TPP creates additional forms of monopoly protections – i.e. over and above minimum protections that already been agreed globally.

For example, the TPP expands provisions for monopoly drug patents and grants additional enforcement powers to foreign pharmaceutical corporations to directly challenge domestic public health policies. Activists argue that these longer, broader, and stronger patent protections will result in higher drug costs and longer times to bring generic drugs to market, thus pricing vital drugs out of the reach of millions of people. If ratified, they say, unprecedented monopolies on medicines will undermine the flexibilities negotiated under TRIPS that safeguard a country’s access to affordable drugs.

TRIPS (Trade-Related Aspects of Intellectual Property Rights) is one of the annexes to the agreement establishing the World Trade Organization (WTO), the international body overseeing the global trading system, in 1994. For member countries of the WTO, TRIPS introduced protections for intellectual property (IP) rights.

In response to concerns raised about the damaging impact of IP regimes on public health and development, particularly for developing nations, the DOHA declaration was issued by the WTO in 2001. DOHA stated that IP provisions in trade agreements should not infringe on the human rights obligations of governments. It affirmed the right of WTO members to make full use of TRIPS flexibilities (e.g. compulsory licensing, parallel importing, voluntary licensing, exceptions, and exemptions) to protect public health and ensure access to medicines for the poorest.

Procurements of health commodities constitute 40-50% of The Global Fund’s annual grant disbursements, making the Fund uniquely positioned to influence the price of key medicines – particularly given the Fund’s expressed desire to maximize value for money. But instead, the Fund appears to be backing away from public health friendly, pro-competition policies that it has actively promoted in the past.

An immediate case in point is its silence during global IP debates, and specifically during recent negotiations in which least developed countries (LDCs) requested extensions from the WTO in implementing stricter IP rules. In the end, the WTO granted their request although it limited the extension to 2033 with the possibility of additional extensions.

Another example is the Market Shaping Strategy, which The Global Fund Board recently adopted. The policy attempts to expand the Fund’s role in shaping market dynamics to increase access to health products (see GFO article). Critics charged that an initial draft of the strategy circulated by the Secretariat for comment was too weak on IP barriers and generic competition issues. Members of the NGO and communities delegations of the Board provided hundreds of pages of input to the Secretariat to try to strengthen the language. But the revised text presented to the Board still fell short even though last-minute lobbying at the Board meeting where the strategy was adopted resulted in some improvements to the language.

Although The Global Fund professes to support efforts to address IP barriers to affordable medicines, it has failed to develop strategies for overcoming IP barriers in implementing countries. Moreover, according to activists, the Fund has taken the position that such matters are outside the scope of its Market Shaping Strategy.

Many actors are involved in the fight for more affordable medicines, including development initiatives such as UNITAID and the Medicines Patent Pool, which provide substantial investments to ensure affordable access to medicines. MSF contends that the existing tools and levers to overcome IP barriers can be significantly leveraged with the Global Fund’s market and political power – if only that power were forthcoming.

Another issue raised by MSF is the Global Fund’s approach to centralize key activities, such as bulk procurement and the e-marketplace. Strategies that centralize these activities seek to drive innovation and reduce costs, among other benefits, but they also build near-monopsony power for the Global Fund potentially at the expense of building country capacity to address IP barriers in order to protect their public health interests. MSF says that negotiations to lower the price of medicines lack transparency and oversight mechanisms, reducing country ownership in the process.

“Grant funds can be used to support IP/TRIPS-related work, so countries can put activities related to this in their proposals,” said Brook Baker of Health Gap. “But the availability of GF support for this IP work is not explicit. There should be clarity on this for recipient countries, both in advocacy and in TA. This is a particular concern for countries transitioning from Global Fund support, where it should leave behind a set of policies and practices for effective procurement that will have an impact not just for commodities related to HIV, TB and malaria.”

“All avenues for securing affordable access to medicines should be explored,” asserts Rohit Malpani, Director of Policy & Analysis with MSF. “The Global Fund through its sheer weight can employ a variety of means to enable recipient and graduating countries to protect their public health priorities. That means explicit support for the use, or threat of use, of TRIPS flexibilities in addition to leveraging its procurement options.”

“Further,” he adds, “The Global Fund should encourage wide review of these procurement options to inform its support to specific countries. It should conduct and publish clear analyses on the impact of free trade agreements or other trade policies on generic competition for health commodities.”

Another recommendations put forth by MSF and Health Gap is that The Global Fund should hire an in-house IP specialist as part of its market analysis work. In addition, they said, the Fund should also align with and build on the work of UNITAID and the Medicines Patent Pool on overcoming IP barriers by, for example, negotiating voluntary licenses for key commodities and expanding access to generics to low- and middle-income countries.

There is another problem, according to Brook Baker. “Commercial interests wield substantial influence on Global Fund procurement and pricing strategies,” he said. “It’s the elephant in the room.” The U.S. is the Global Fund’s largest donor, and it has an enormous pharmaceutical lobby that backed the TPP and its pro-industry IP provisions. The Global Fund’s second largest donor is the U.K., also with its own powerful pharmaceutical industry pushing for longer monopolies on brand name drugs, making it harder for generic companies to enter the market.