UMass Amherst Economist Finds Medicines Patent Pool has Increased Generic Drug Access in Developing Countries and Upstream Innovation

The Medicines Patent Pool (MPP), the first joint licensing platform for patented drugs and currently a key part of the COVID-19 Technology Access Pool, has led to substantial increases in the generic supply of drugs purchased and positive increases in clinical trials and drug product approvals after a compound enters the pool, University of Massachusetts professor and economist Lucy Xiaolu Wang has found.

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“First used in 1856 to reduce litigations in the sewing machine industry, a typical patent pool involves patent holders sharing rights for joint licensing with members or firms outside of the pool, with licensing rules varying across pools,” Wang writes in the paper, which is the product of research that started in 2016 and was recently published by the Journal of Health Economics. “Although not historically used in the medical sector, the prevalence and lack of cures for many infectious diseases and extensive patents provide a testing ground for the MPP to reduce intellectual property (IP) issues in health.”

The Medicines Patent Pool allows generic firms worldwide to license drug bundles cheaply and conveniently for sales in a set of developing countries. By 2017, the MPP provided eligible licensing for 10 compounds covering four of the six HIV drug classes, and four out of the nine branded HIV drug providers joined the pool. As of now, the MPP has expanded the main focus areas to hepatitis C, tuberculosis, cancer, cardiovascular disease, diabetes and COVID-19.

By constructing a novel dataset on HIV drugs from licensing contracts, public procurement, clinical trials and drug approvals, Wang found that the MPP leads to substantial increases in the generic supply of drugs purchased, particularly in countries with stronger patent protection.

“This paper examines the impact of the MPP on static and dynamic welfare: how the MPP affects generic shares in developing countries and the spillover effect to R&D,” Wang, an assistant professor of resource economics at UMass Amherst, explains in the paper. She found that adding a drug in the MPP for a country is found to increase generic share by about seven percentage points in that country, and that the results are stronger in countries where a drug has been patented and when drug cocktails are de-bundled to the compound level.

Additionally, Wang found that “the pool also weakly increases R&D in follow-on clinical trials and drug product approvals.”

“Branded firms inside the pool reallocate clinical trials to drugs close to the market and new compound development,” she writes. “Firms outside the pool increase trials with pooled compounds and generic firms obtain more drug approvals with pool-associated compounds. Overall, the MPP increases welfare by lowering the costs of licensing and offers new channels of marketing in underdeveloped LMIC [low- and middle-income countries] markets.”

Looking forward, Wang writes that while her latest research centered on the MPP’s initial work on HIV drug cocktails, the general focus on infectious diseases and pool expansion deserves further examination. As of now, she says that the MPP has already facilitated many generic licenses for COVID-19 related treatment and technology transfer.

“As many diseases have originated in LMIC and later become prevalent in the U.S., it is beneficial to develop global institutions for drug diffusion and innovation,” she writes. “Amid the current pandemic and rising anti-microbial resistance, institutions such as the MPP offer new options.”

The complete article, Global Drug Diffusion and Innovation with the Medicines Patent Pool, is available on the website of the Journal of Health Economics and is also issued as a Max Planck Institute discussion paper.