Proposed health fund could encourage drug development

Millions of people lack access to life-saving medicines because of high prices made possible by patent protection, so a group of economic experts has come up with the idea of a "Health Impact Fund" (HIF) that provides subsidies to drug-makers to produce pharmaceutical products at prices affordable to all.

"The Health Impact Fund will fill the gap in the current systems," Professor Aidan Hollis of the University of Calgary said at a seminar series on "The Health Impact Fund: Enhancing Innovation and Access for Pharmaceuticals" held by United Nation's Macro-economic Policy and Development Division last week.

Hollis is also a vice-president and director of incentives for Global Health, a US-based NGO established to lead the development of the Health Impact Fund. He said the idea has attracted more and more attention over the past five years, to enable new drugs to become available to everyone at lower prices, and also creating a way for important new therapeutic drugs to be developed and to be profitable.

Many pharmaceutical firms have found it difficult to make money in poorer countries because of the low prices required to generate substantial sales in those markets. The current systems of innovation are not fully meeting the needs of patients or even of investors in the pharmaceutical industry. They encourage drug firms to spend too much on developing minor modifications of existing drugs and on competitive marketing and patent litigation, instead of focusing efforts on innovations that will have the largest global health impact.

This is not what patients need, it is not what the research scientists want, and it does not seem to be creating the returns that investors demand. Firms are responding to the incentives they face, and doing the best they can, given those incentives.

Under the present system, firms have incentives to focus on the diseases of people who can pay a lot of money when they get sick, even though those diseases tend to have many available treatments already, and the incremental health gains are typically small.

The Health Impact Fund will eliminate this problem by requiring a uniformly low price worldwide, while offering innovative companies direct payment based on the health impact of their innovations, no matter where the health impact occurs. This approach will make it profitable to develop medicines for neglected diseases, as well as medicines that will have global impact. And these medicines will be sold at low prices all over the world, while still generating a return for shareholders of innovative pharmaceutical companies.

"It would be wonderful to have a commercial incentive to develop new products that could treat neglected diseases such as dengue fever, which the commercial market is quite small for because most of the people who suffer from these diseases are poor," Professor Hollis said. There is no good treatment and vaccine for dengue. In most poor countries, the commercial benefits for drug companies to develop dengue fever vaccine are small.

"The HIF is intended to cover that," he said. "It is a scheme for reorganising the way we pay for pharmaceuticals so they become more widely available. This is not an anti-pharmaceutical company scheme," he added.

The HIF, Professor Hollis said, would be established as an international organisation, and should exist under an organisation such as the Global Fund. The fund will ask governments around the world to provide 0.1 to 0.3 per cent of the gross national income. Then the fund will conditionally distribute this money to pharmaceutical companies who register drug products with the fund and sell them at prices no higher than the average cost of production.

However, as pharmaceutical companies are worried about the patents and licensing of drugs, Professor Hollis said that following the reward period, firms would be obliged to offer global zero-priced licenses on all intellectual property required for manufacture and sale. This 10-year period of reward payments would mimic revenues under a patent.

Professor Hollis said this system does not undermine patent rights. It is simply a different way of being paid.

The fund could also be used to reward unpatentable products obtaining FDA approval. "If they register products with the HIF, they will get a share of money every year for ten years from the fund," Professor Hollis said. "They will not make money from selling their products, but they will make money from the reward," he added. "We have been discussing with pharmacuetical companies at a high level. No company has endorsed the idea so far, but we think it is reasonable," Professor Hollis said.

So far, the Health Impact Fund has been endorsed by the German Social Democrat Party, which will play an active role in the piloting of the fund.

"If the pilot works well and we can demonstrate the HIF credibly and effectively, then we will be able to look for endorsement from pharmaceutical companies," Professor Hollis said.

The Health Impact Fund is a market-based solution. The payments are determined by competition between all registered products for the available rewards. It allows pharmaceutical innovators to concentrate on promoting public health while satisfying shareholders. Patients win through gains in innovation, lower prices for important new drugs, and additional efforts by patentees to achieve actual health impact.

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