By Raquel Thompson
15 June 2009 [MEDIAGLOBAL]: The Health Impact Fund is a new proposal to fundamentally change the way that pharmaceutical innovation is rewarded.
The Fund will pay innovators, namely pharmaceutical companies, a dollar amount based on how great the health impact of their new medicine is. This stands in stark contrast to the current system of reward where innovators earn revenue from patents that allow them to exclusively sell a new medicine, at monopoly prices, over a set period of years.
The proposal is the brainchild of Incentives for Global Health (IGH), a non-profit organization dedicated to developing market-based, systemic solutions to health challenges faced by the world’s poor. Dr. Thomas Pogge, professor at Yale University and president of IGH, shared with MediaGlobal the details of the proposal.
Pogge explained: “If you have a new medicine, you bring it to the Health Impact Fund, you register it, and you get for the next ten years annual rewards that are based on the global health impact of your innovation.” The more people that benefit from the medicine, the more money the innovator receives.
Upon registering, innovators agree “to offer the medicine anywhere in the world at the lowest feasible cost of production and distribution… So in other words, you don’t make any profit on marking up the medicine.” The sole source of revenue derives from the money the Fund allocates based on an assessment of the extent of the medicine’s health impact.
Because the incentive squarely rests on creating medicines that will improve the lives of the most number of people possible, Pogge expects many of the currently neglected diseases to take center stage. “The diseases of the poor, these very large diseases, become lucrative targets of pharmaceutical research. You can make a lot of money by dramatically reducing the global disease burden by tackling a disease like malaria or AIDS or schistosomiasis or any other tropical disease.”
According to the World Health Organization, over one billion people suffer from one or more neglected tropical diseases (NTDs), most which either blind, debilitate, deform, or maim, as well as, anchor those infected in poverty.
Pogge outlined several reasons why the current system has failed to successfully address many of the world’s most prevalent diseases. First, he said, the high prices during the time of patent registration inhibits access. “And by high prices I don’t mean 20 percent more than costs [of production] or 50 percent more than costs, but often 12 or 15 times the cost.”
“Secondly,” he said, “pharmaceutical innovation is focused on the diseases of the rich. You would be a fool to develop a new medicine for schistosomiasis because if you have such a new medicine, you face a Hobson’s choice: either you sell it with the usual ten-fold mark-up, in which case you have no customers, or you sell it so that people who have the disease can actually buy the drug, in which case you make no money.”
“If you look at where pharmaceutical research goes, there’s the famous 10-90 problem. 10 percent of all pharmaceutical research goes for diseases that constitute 90 percent of the global burden of disease. Conversely, 90 percent of all pharmaceutical research goes for diseases that constitute only 10 percent of the global burden of disease,” Pogge added.
“Of 1,556 new drugs that were approved between 1975 and 2004,” he said, “only 18 were for tropical diseases and three for TB. So again, stunning neglect of diseases that do enormous amounts of damage.”
The Health Impact Fund also attempts to resolve the “last mile problem,” which refers to the inability of global drugs to be effective in local settings due to poor health infrastructure.
“Insofar as medicines are not properly prescribed, are not properly taken, and complied with, or do not reach people in poor countries, to that extent, the innovator is not making a profit. So the Health Impact Fund gives innovators very strong incentives to make sure that the medicine is available everywhere, that it is competently prescribed, that it is optimally used because only if these conditions are fulfilled will the medicine have its optimal global impact and the innovator will then be paid more.”
Pogge suspects these incentives will lead innovators to “collaborate with each other, with national health systems, with international agencies, such as UNICEF, and with NGOs to try to improve the health infrastructure in poor countries in order to make their Health Impact Fund-registered medicines more effective.”
Although the Fund clearly presents a new foundation for rewarding innovation, Pogge says that rather than completely replacing the current patent system, the Fund will complement it. “Many pharmaceuticals will continue to be incentivized through patents but there will be a class of very important, high-impact medicines that will be developed for the sake of collecting these health impact rewards.”
This ability to co-exist with the current system is what Pogge believes makes the proposal politically viable. The pharmaceutical industry will be an ally, rather than an obstacle.
Pogge also mentioned that supporting the Fund would assist in rebuilding the image of an industry that has taken a beating over the course of the last few decades.
Funding to pay innovators who register medicines with the Health Impact Fund is expected to come “through a treaty-type system where governments set aside and ensure that these pools [of money] are there for many years to come.” IGH has identified $6 billion as the minimum amount needed each year to make the Fund viable. If successful in its early years, the Fund would then aim to scale up, and potentially attract more medicines from the patent track.
Pogge shared with MediaGlobal where the proposal currently stood. “I have talked to a number of governments and also to a number of pharmaceutical companies and both sides, the governments and the companies, are very cautious. They’re very interested. They’re observing it, they’re looking at it. They like it, needless to say, a lot better than they like more radical proposals, such as the nationalization of the pharmaceutical industry…because this is something that is market-based. This is something that provides real incentives.”
Pogge is currently operating under three grants, which have allowed him to set up teams in seven different countries, including China, India, and the Philippines to continue hammering out the technical details of the proposal.
“I would think that within a year or so,” he explained, “we will have the intellectual side more or less solved…so we can say, ‘look, it could work this way‘… And then it’s really out of my hands. Then, we really need a lot of support from ordinary people, grassroots people, in the rich countries, in the poor countries, to make it happen.”
Though cautiously optimistic, Pogge says he is unequivocally excited about the Health Impact Fund because it “is not a band-aid. It’s a structural reform. It endures.”
