Securing access to medicines and other health technologies in developing countries continues to be among the major challenges for global health. The challenge lies in ensuring that existing health products are delivered at affordable prices and that innovations and discoveries meet the health needs of developing countries. This policy problem calls for both global and national policy instruments. When in 2001 the Commission on Macroeconomics and Health categorized diseases as type I, II and III based on the extent to which they affected countries at different economic levels, it was alienating for many public health professionals. (1) However, it represented a reality. The classification captured the idea that the existing system provided inadequate incentives for the development of health technologies designed to address diseases that primarily affect developing countries (type II and III diseases).
An underproduction of public goods accounts for the underlying market failure. The knowledge generated by research is truly a public good only if it is made available for anyone to use without restriction. However, such a public good will be underprovided, according to economic theory, since the benefit to society from producing the good will outweigh the returns to the producers of the good. Hence, less knowledge will be generated than is socially desirable. As Nobel Prize winner Joe Stiglitz once noted, "The central public policy implication of public goods is that the state must play some role in the provision of such goods; otherwise they will be undersupplied." He described two strategies that could be adopted: (1) to increase the appropriability/excludability of the returns through intellectual property protection, or (2) to increase direct government support for research and development (R&D). (2) If the public good has global applications, as is the case for most research, a further problem lies in generating collective action by states to avoid free riding.
Intellectual property rights address this problem by allowing producers to capture some of the social benefit through measures such as patents and a time-limited monopoly period. These measures create incentives for private companies to invest in R&D and develop new technologies while also making profits by charging high prices, reflecting R&D costs, during the monopoly period. This model has hitherto worked reasonably well for type I diseases in high-income countries, which have willingly paid prices high enough to incentivize companies to invest in R&D. In poorer countries the system fails to provide adequate incentives because their purchasing power is so small that they are unable to pay the high prices incorporating the R&D costs.
This systemic failure triggered a process in the World Health Organization (WHO) that has now lasted for nearly 10 years. The Commission on Intellectual Property Rights, Innovation and Public Health was established in 2003 after a World Health Assembly (WHA) resolution and issued a report with 60 recommendations in 2006. (3) Subsequent intergovernmental negotiations, the Intergovernmental Working Group on Public Health, Innovation and Intellectual Property (IGWG) process, concluded with a Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property that was endorsed by the WHA in 2008. (4) However, one important outstanding issue was how to incentivize, finance and coordinate R&D. This was deferred to the Expert Working Group on Research and Development: Coordination and Financing, which presented its report in 2010. (5) Member States of WHO then requested through the WHA that this work be continued through a Consultative Expert Working Group on Research and Development: Financing and Coordination (CEWG). In April 2012 the 20-member CEWG group, representing all WHO regions, published an analysis of "current financing and coordination of research and development, as well as proposals for new and innovative sources of financing to stimulate research and development related to Type II and Type III diseases and the specific research and development needs of developing countries in relation to Type I diseases". …