Patent Buy-Outs for Global Disease Innovations for Low-and Middle-Income Countries

Abstract

The World Health Organization’s CHOICE program analyzes the cost effectiveness of various health interventions related to the Millennium Development Goals. The program identifies the best strategies for improving health in low-income countries, using a standard set of methodological assumptions. These studies evaluate interventions in many areas, including child health and HIV/AIDS.For some of these treatments, drug costs are a significant variable: if the drug price doubles, the intervention becomes less cost effective. But if the drug price is reduced by 90%, then more therapies become affordable.Drug prices are uniquely susceptible to radical price reductions through generic competition. Patented pharmaceuticals may be priced at more than 30 times the marginal cost of production; the excess is thepatent rentcollected by the drug company while the patent and exclusive marketing periods remain. Patent rents are significant. AIDS drugs which sell for US$10,000 per person per year in the US are sold generically for less than US$200. If patented drugs could be sold at the marginal cost of production, cost effective treatments would become even more attractive, and other interventions would become affordable.