Democracy, Profits and
Poverty
Biotechnology and Health
Richard T. Mahoney, PhD
Research Professor
School of Life Sciences
Arizona State University
A New World Order
The Washington Consensus
 The fall of the Soviet Union, and
the discrediting of dictatorship,
socialism, and planned
economies
 The ascension of democracy,
capitalism, market economies.
The private sector
 Driver: maximization of return on
investment (ROI)
 Philosophical basis: maximization of ROI
is an effective means to improve the
commonweal.
 Means: Sell highly profitable products to
those who can afford to pay.
The public sector
 Driver: maximization of the quality of the
human condition for all – health,
education, nutrition, arts, etc.
 Philosophical basis: maximization for all
is based on the value of equity
 Means: accord highest priority to
provision of goods and services to those
– the poor – least able to obtain them on
their own.
The New World Order
It doesn’t work for the poor and the
sick.
Continuing Problems
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>57 million deaths per annum
>17 million deaths from infectious diseases
> 8 million deaths among children
~1 million deaths from hepatitis B
No vaccines for HIV, malaria, TB, dengue.
No or partially effective drugs for HIV, malaria,
etc.
 From 1975 to 1997 only 13 of >1700 new
drugs were for tropical diseases
Two continuing inequities in health
 Availability: In R&D, products needed
predominantly by the poor have received
much less attention than products needed
by the rich. Malaria, HIV, TB, diarrhea.
 Affordability: Most new products have
been sold at prices beyond what the poor or
their representatives can afford to pay with
currently available resources.
If you are poor and
If you live in a poor country
 There is no magic in the market….
Six determinants of
biotechnology innovation
1.
2.
3.
4.
5.
6.
Support for R&D
Ability to manufacture new biotech products
The creation of domestic markets
The development of export markets
Creation of systems to protect IP
Creation of systems for drug and vaccine
regulation
Some key questions
 Who develops modern health products?
 Who makes modern health products?
 What is new about markets for health
products?
 How are modern health products
checked to be safe and effective?
 How do you make a profit on a modern
health product?
An Incomplete
System
Public Sector
Private Sector
Public Sector
The Regulatory Framework
BTI
Science
Candidates
IP gen.
Large Pharma
IPgen. &
assembly
Wealthy
Users
Regulatory process
IP creation
R&D
R&D
x
Poor
Users
New Developers I
 Developed countries new research
initiatives
 International Vaccine Institute, Seoul (shigella,
typhoid fever, cholera)
 Program for Appropriate Technology in Health,
Seattle (malaria, meningitis, rotavirus, Japanese
encephalitis)
 International AIDS Vaccine Initiative, New York
 Global Alliance for TB Drug Development, New
York
New Developers and
New Makers
 Developing country new initiatives in
biotechnology (2/5 world’s population)
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Brazil
China
India
Korea
Singapore
New Buyers
 Global Fund for Children’s Vaccines
 Global Fund to Fight AIDS, TB, and
Malaria
New Regulatory Systems
In democratic societies, individuals
have established a right to receive
safe and effective pharmaceuticals.
To address this right, governments
have established national
regulatory frameworks. These
frameworks affect all aspects of
product R&D, manufacture, and
distribution.
New IP Systems
TRIPS (Agreement on Trade Related
Aspects of Intellectual Property)
 A global system to make IP protection
uniform, i.e. similar to the US system.
 Developing countries must conform by
end of this year.
 But, do these help the poor? Yes and
No.
Important data

$100 million – the estimated cost of a single
Phase 3 trial to assess the risk of
intussusception in infants administered a new
rotavirus vaccine

$800 million – the estimated full cost to
develop a new drug in the United States
The Value of IP
In our current system, IP benefits:
 The private sector: By protecting
large capital investments to achieve
return on investment, and
 The public sector: By helping to
mobilize the funds necessary to
develop safe and effective products
How do developing
countries play a greater
role in biotechnology?
Determinants of biotechnology development
Manufacture
Domestic
Market
Export Market
R&D
IP System
Drug Regulatory
System
Stage 1 –
Establishing
the base
Importation of
finished goods
or assembly of
finished
products
Small domestic
market
Very little
except as toll
manufacturer.
Very little
Very limited
Very limited
Stage 2 –
Learning
Production on
license or by
copy
Growing
domestic market
of increasing
interest to
foreign
companies.
Import
substitution.
Growing.
Companies
learning how to
establish export
markets.
R&D to
understand
technology
either to produce
on license or to
copy.
Initial
development
allowing patents
for local
inventors.
Foreign
inventors not
interested.
Limited services
but without
enforcement
capabilities
Stage 3 –
Entering the
international
scene
Manufacture of
domestically
developed high
technology
products
Rapidly growing
domestic market
of interest to
foreign
companies.
Increasing
exports that are
becoming a
significant
contribution to
GNP
Limited-scale
advanced R&D
effort capable of
creating new
products for
domestic and
export market
Advanced IP
system but not
fully meeting
TRIPS
requirements
because of lack
of enforcement
Advanced
capabilities but
not at highest
level because of
lack of
enforcement
capabilities.
Hepatitis B Vaccine
and Korea
A case study
Hep B and Korea
 Became first international marketers after
US and Europe.
 Developed recombinant DNA vaccines.
 World leaders in addressing the needs of
the poor.
Achieving Success
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Very strong government support for R&D.
Encouragement of biotech industry
Developing domestic and export markets
The ability of Korean companies to navigate a
complex IP environment and the thoughtful
development of IP policies by the government.
 The enhancement of regulatory capabilities in
Korea, and the ability of Korean companies to
address international regulatory issues.
Determinants of biotechnology development
Manufacture
Stage 1 –
Establishing
the base
Stage 2 –
Learning
Stage 3 –
Entering the
international
scene
Govt
encouragement
Domestic
Market
Govt
support for
HBV
immun
Export Market
Public
private
sector
collab.
R&D
Public
private
collab.
IP System
Staged
Drug Regulatory
System
Public
private
collab.
A new world
Joint public private product development
Public Sector
The Regulatory Framework in
both developed and developing
countries
BTI
Science
Candidates
IP gen.
Public Sector
Large Pharma
IPgen. &
assembly
Wealthy
Users
Regulatory process
IP creation
R&D
R&D
Public Sector R&D groups with
good IP management.
Purchase
Funds
Poor
Users
The Major Problems
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Increasing support for R&D
Continuing and expanding Global Funds
Ensuring production capability
Managing IP effectively
Developing appropriate regulatory
standards
Can democratic/capitalistic
systems achieve these goals?
Or do voters in Tempe
care about Temphe?