Policy Tools for Stimulating Innovation and Access to Technologies for Developing Countries

1. Policy Tools for Stimulating Innovation and Access to Technologies for Developing Countries Ann Motl August 1, 2012

2. Need for innovation incentives and cost reducing measures Developing country specific problems + Poverty conditions + Lack of innovation = 10/90 gap “Only 10 percent of global health R&D is devoted to diseases that affect 90 percent of the world’s population”

3. Agenda • Innovation mechanisms • Current policy • Alternative innovation incentives • Patents • Innovation inducement prizes • Advanced market commitments (AMCs) • Alternative cost lowering mechanisms • Differential pricing • Humanitarian licensing • Recommendations

4. Innovation http://ve-forum.org/apps/pub.asp?Q=3422&T=Living%20Lab%20Handbook

5. General Policy Traditional US policy - mix of push and pull mechanisms • Grants • Contracts • Patents • Human or physical infrastructure investments Scope: • Analyze pull, not push, mechanisms • Focus only on US policy solutions • Provide a survey of select pull mechanisms and cost lowering mechanisms

6. Alternatives Humanitarian Licensing Prizes AMCs Patents Tiered Pricing Incentives for Innovation Cost Reducing Measures

7. Patents • Agreement with government- 20 year exclusionary period for providing best mode knowledge • Incentive-exclusionary time period allows inventors to recoup research costs and invest in future R&D • Patents are valuable only if they can be enforced, difficult internationally • Market exclusivity on a product of low return is not very attractive because still no large market

8. Prizes • Long history • Inducement prizes - “designed to encourage scientists and engineers to pursue scientific and technical societal goals not yet reached” • Renewed interest - America COMPETES Reauthorization Act of 2010

9. Prize Benefits

10. Prizes Cons • Secrecy and less collaboration due to competition • Open Source Dividend • Challenging to design and finance • Challenging for sequential inventions • Multi-step prizes • Low or too high reward (Soviet Union)

11. Advanced Market Commitments (AMCs) • Purchasers (government or private foundations) commit to purchasing a specific quantity of a product when it is developed • AMC funders can then make the product available to developing countries at no or low cost

12. Advanced Market Commitments Pros • Funds only pay for desired outcome • Possible lower costs for end users • Public-private partnership opportunity Cons • Inappropriate reward amounts • Skepticism of reward appropriation • Legally binding contracts • Difficulty for sequential inventors

13. Tiered (Differential) Pricing • Companies charge low prices in low income markets and high prices in high income markets ARVs Aravind Eye Care System http://www.npr.org/2011/11/29/142526263/india-eye-care-center-finds-middle-way-to-capitalism http://in2eastafrica.net/uganda-arvs-shortage-soars-as-sh43-9b-lies-idle/

14. Tiered (Differential) Pricing Pros • Increase access to essential technologies through financially affordable measures • Add to companies’ revenue as they are reaching new customers Cons • Parallel importing possibilities • Developed country consumer discontent • Income varies widely in any country • Intra-country differential pricing

15. Humanitarian Licensing • A humanitarian license reservation is a provision in a license where inventors protect in advance the possibility of sharing their proprietary technology with third parties for the benefit of people in need • S.4040, Public Research in the Public Interest Act - mandatory humanitarian licensing • Humanitarian use exemption (HUE) - “would provide an exemption for use of a particular IP product in developing countries while protecting that IP in wealthier countries”

16. Recommendations • Expand use of prizes in a variety of technological industries, especially focused on developing country specific technologies. “We still have much to learn about the strengths and limitations of prizes, but the time to start additional experiments is now.” • Encourage agencies to create prize competitions and provide them with resources. • Promote public-private partnership prize competitions to increase resources and knowledge.

17. Recommendations • Enter into at least one advanced market commitment. • AgResults Initiative from G20 Summit http://www.ilri.org/ilrinews/index.php/archives/4142

18. Recommendations • Differential pricing should be encouraged and expanded to increase access to essential technologies for those in developing countries. a. Maintain and if necessary and add additional safeguards to prevent parallel importing • Be fully transparent

19. Recommendations • Federally mandated humanitarian use exemptions should not be required for technologies, federally funded or otherwise. • Voluntary humanitarian licensing should be encouraged • AUTM’s (Association of University Technology Managers) “9 Points to Consider in Licensing University Technology”

20. Questions? • Thank you- • Melissa Carl • Bill Behn • Noha El‐Ghobasy • Paul Fakes • ASME DC • WISE coordinators • Interviewees • For inquiries, please contact Ann Motl at annmotl@gmail.com