A right time to shift pharma gears

Context: As a workable idea, a Health Impact Fund can become an alternative track for pharmaceutical innovators.

The scale of Pharmaceutical Industry:

• The global market for pharmaceuticals: currently worth Rs 110 lakh crore of which roughly 55% is for brand name and patents.
• Temporary monopoly: provided in the form of patents, entitled under World Trade Organisation enabling them to sell at far above manufacturing costs.
• Disparities: In the US, thousandfold markups over production costs are observed and in India, the profit-maximizing monopoly price of a new medicine is much lower but similarly unaffordable for most citizens.
• Large R&D costs (currently ?14 lakh crore a year): include the cost of clinical trials, the cost of capital for a long development process, and the cost of any research failure.

Concerns of Pharma.

• Narrowed focus of R&D: 

• Innovators neglect: diseases suffered mainly by poor people due to low profits. 

• The WHO listed neglected tropical diseases together afflict over a billion people but attract only 0.35% of the industry’s R&D (of this only 0.12% is devoted to tuberculosis and malaria).

• Profit maximization: due to a large number of affluent patients, prices of advanced medicines tend to be high.
• Poor correlation between rewards and therapeutic value: leads to the development of duplicative drugs and cleverly marketing it to patients not benefiting from it.

• State Risk: Pharma. firms face discouraging business risks from the governments through the use of compulsory licensing divesting them of monopoly rewards.

Solution: Health Impact Fund

• Rewarding health outcomes rather than sales: Any new medicine registers would have to be sold at or below manufacturing cost but would earn annual rewards based on health gains achieved.

• Funding Mechanism: 

• Act as a long term fund: for 10 years registering 10-12 medicines in a year with one entering and one exiting a year.

• Contribution to the fund: ascertained through some kind of international tax, perhaps on greenhouse gas emissions.

• Non contributing countries: would forgo the benefits as price constraints would not apply to them.

• Large health gains: get pharmaceutical firms interested in certain R&D projects that are unprofitable under the current regime. Such projects would predominantly address communicable diseases.

• Creates a rich arsenal: of effective intervention and greater capacities for developing additional targeted responses quickly.

• Encouraged holistic deliberation: over methods of research combining the aspects of both therapy and diagnostics to identify and reach the patients who can benefit. 

• Reduced State Risks: as the states would have no reason to interfere with innovators whose profit lies in providing real and rapid at-cost access to their products.

• Building strong public health strategy: through collaboration with national health systems, International agencies, and NGOs, firms would seek to achieve complete eradication of communicable diseases.

Guiding our pharmaceutical innovators: how can we develop an effective product and then deploy it to help reduce the overall disease burden as effectively as possible?