Medicines for the World

While research and development (R&D) of new medical treatments has greatly improved health around the world, there is widespread agreement that poor populations could and should benefit much more. Clearly identified in a report by a WHO Consultative Expert Group (www.who.int/phi/cewg/), the key obstacles are two: pharmaceutical research tends to bypass health problems concentrated among the poor, and newer medicines tend to be sold with very large patent-protected mark-ups that effectively price them beyond the reach of poor patients.

A sophisticated joint solution is the Health Impact Fund (HIF) which would offer to reward the development of any new medicine according to its measured actual health impact on condition that it is sold at no more than the lowest feasible cost of manufacture and distribution

Medicines for the World

 

by  Thomas Pogge*

Director of the Global Justice Program and the Leitner Professor of Philosophy and International Affairs at Yale University

 

While research and development (R&D) of new medical treatments has greatly improved health around the world, there is widespread agreement that poor populations could and should benefit much more. Clearly identified in a report by a WHO Consultative Expert Group (www.who.int/phi/cewg/), the key obstacles are two: pharmaceutical research tends to bypass health problems concentrated among the poor, and newer medicines tend to be sold with very large patent-protected mark-ups that effectively price them beyond the reach of poor patients.

There are obvious solutions to both problems. Public or private donors can fund new R&D into neglected diseases -€” either by awarding grants to promising research outfits (push funding) or by offering prizes for the development of a medicine that meets certain pre-set specifications (pull funding). And pharmaceutical firms can be given special incentives to sell specific products to poor patients at much lower prices. There are also joint solutions that reward innovation in a way that guarantees affordability. An example is an advance market commitment which is an offer to reward development of a new medicine that meets certain pre-set specifications by subsidizing its sale at a low price.

A sophisticated joint solution is the Health Impact Fund (HIF) which would offer to reward the development of any new medicine according to its measured actual health impact on condition that it is sold at no more than the lowest feasible cost of manufacture and distribution. Uniquely, the HIF avoids having to specify the medicine to be developed or even the disease to be targeted, leaving innovators themselves (who are best informed about their own capacities) to work out how their R&D investments can yield the greatest health impact.

The HIF also avoids the problem of wastefully excessive rewards by paying out a fixed stream of rewards to be divided among registered products according to their respective therapeutic benefits.  An overly lucrative reward rate (dollars per unit of health impact) would attract additional product registrations that would reduce this reward rate; and an unattractive reward rate would discourage registrations, thereby raising the reward rate. Each product would share in eight or ten annual HIF pay-outs and then go generic. With total annual pay-outs of $6 billion, about 20-30 products can be expected to be HIF-supported at any given time, with about 2-4 products joining and exiting each year. Most new medicines registered with the HIF would likely be for diseases that disproportionately affect poor people — products whose potential profits from patent-protected mark-ups are limited.

With many governments joining hands, $6 billion per annum is not a lot on money. It is, for example, less than 1 percent of worldwide spending on medicines. Depending on participation, countries might contribute some 0.03 percent of their GNI (Gross National Income), and their inhabitants would in return receive offsetting savings from much lower prices on HIF-supported medicines (affluent countries declining to join the HIF partnership would be excluded from the price ceiling; their inhabitants would continue to pay high patent-protected mark-ups). The HIF would also drastically reduce the burdens of waste now plaguing the pharmaceutical industry: patenting costs, competitive marketing, patent litigation and deadweight losses.

Innovators would pay much more attention, beyond sales, to the actual use of any products they choose to register for HIF rewards. Sales resulting in no therapeutic benefit are worthless to the innovator whose earnings depend on health gain to the patient. Innovators would therefore try to reach the patients who can benefit the most, often selling to poor patients even below the price ceiling (if the expected health impact reward exceeds the loss on the sale). An innovator would also try to ensure that patients are properly instructed in the optimal use of the drug and adhere to the proper regimen. These efforts to optimize a medicine’€™s benefits to its users would benefit poor and rich patients alike. Patients would furthermore benefit from a sharp decline in counterfeiting, which is quite common in many developing countries: little profit can be made from the sale of counterfeit medicines when the genuine article is on sale at a very low price.

The two great obstacles to establishing the HIF are lack of political will in a period of austerity and skepticism about the reliable measurement of a drug’€™s health impact. If the skepticism can be shown to be unwarranted, perhaps the political will can be mobilized. In the next few years, we plan to conduct several pilot projects that would monitor the introduction of a new medical treatment into a country or other jurisdiction. Some such pilots might be purely passive, just measuring the health impact of a product introduction, others might also pay rewards to the relevant innovator or distributing agent, thus also exploring how such an agent may introduce a new product differently if it is rewarded according to health impact rather than through high mark-ups. Even the latter kind of pilot could not show how the HIF would encourage the R&D of new medicines. But it could greatly expand access to an existing new drug; and it would cost money only if and insofar as it actually achieved this objective.

 

*Thomas Pogge is the Director of the Global Justice Program and the Leitner Professor of Philosophy and International Affairs at Yale University. Having received his Ph.D. in philosophy from Harvard, Thomas Pogge has published widely on Kant and in moral and political philosophy, including various books on Rawls and global justice. In addition to his Yale appointment, he is the Research Director of the Centre for the Study of the Mind in Nature at the University of Oslo and a Professorial Research Fellow at the Centre for Applied Philosophy and Public Ethics. Pogge is also editor for social and political philosophy for the Stanford Encyclopedia of Philosophy and a member of the Norwegian Academy of Science. With support from the Australian Research Council, the UK-based BUPA Foundation and the European Commission (7th Framework) he currently heads a team effort towards developing a complement to the pharmaceutical patent regime that would improve access to advanced medicines for the poor worldwide (http://www.healthimpactfund.org) and toward developing better indices of poverty and gender equity.