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152 Pages·2008·3.69 MB·English

The
Health Impact
Fund
Making New Medicines
Accessible for All
The Health Impact Fund
Making New Medicines Accessible for All
A Report of Incentives for Global Health
Aidan Hollis and Thomas Pogge
Lead Authors
Incentives for Global Health
Incentives for Global Health is a nonprofi t organization dedicated to developing market-based, systemic
solutions to global health challenges.
Our main project, the Health Impact Fund, aims to increase access to medicines by creating additional
incentives for innovation in the health sector.
Copyright 2008
All rights reserved
Aidan Hollis and Th omas Pogge
www.incentivesforglobalhealth.org
[email protected]
Th is book should be cited as:
Aidan Hollis and Th omas Pogge, Th e Health Impact Fund: Making New Medicines Accessible for All
(Incentives for Global Health, 2008).
Front cover photo ©iStockphoto.com/Mark Evans
III
Preface
Th is book presents for public consideration a com- In working out the details of the Health Impact
plement to the existing rules governing the develop- Fund, we have learned from many other ideas and
ment and distribution of new medicines. It shows proposals, including those put forward by Michael
that the proposed Health Impact Fund is feasible Abramowicz, Michael Kremer, James Love, Steven
and that it would produce large gains in global public Shavell, and Tanguy van Ypersele. Our ongoing work
health and economic productivity at comparatively has also received crucial support from the Austra-
low cost. We ask readers for help in perfecting this lian Research Council, the BUPA Foundation, the
proposal and for political support. Canadian Social Sciences and Humanities Research
Incentives for Global Health is a nonprofi t organi- Council, the Centre for Applied Philosophy and
zation created by an international and interdisciplin- Public Ethics, and the Centre for the Study of Mind
ary group of scholars and practitioners to promote in Nature.
the Health Impact Fund and other market-based
solutions to public health problems. Th e following Aidan Hollis1 and Th omas Pogge2
team members collaborated with us in writing this Directors, Incentives for Global Health
book: Christian Barry, Laura Biron, Leila Chirayath, www.incentivesforglobalhealth.org
Kieran Donaghue, Mike Ravvin, and Michael Selgel- [email protected]
id. Many others have provided valuable comments
during the writing process: Kalypso Chalkidou, Pat-
rick Childress, Julian Cockbain, Peter Drahos, Da-
vid Feeny, Jocelyn Finlay, Margot Kaminski, Miltos
Ladikas, Carl Nathan, Noah Novogrodsky, Gorik
Ooms, Matt Rimmer, Doris Schroeder, Devi Sridhar,
Jie Tian, Ling Tong, Peter Tugwell, and Judith Whit-
worth. We have made presentations on this idea in
universities and conferences around the world, and
have immensely benefi ted from the many helpful
comments and criticisms off ered. Matt Peterson has,
on a very short timeline, given us all the help needed
to get the text ready for the printer.
1 Associate Professor of Economics, the University
of Calgary
2 Leitner Professor of Philosophy and International
Aff airs, Yale University

V
Contents
Preface ..........................................................................................................................III
Contents ........................................................................................................................V
Executive Summary .....................................................................................................1
1. The Health Impact Fund: A Summary Overview ..................................................3
The Health Impact Fund: Pay-for-Performance ...................................................................................................3
Why the Health Impact Fund Is Necessary .........................................................................................................4
Properties of the Health Impact Fund...................................................................................................................6
The HIF Is not Charity for the Developing World .............................................................................................7
How the Health Impact Fund Would Work .........................................................................................................8
The Health Impact Fund: Directions for Progress ............................................................................................11
Notes ..........................................................................................................................................................................12
2. Reward Mechanism ................................................................................................13
Introduction .............................................................................................................................................................13
Sketch of a Reward Mechanism ............................................................................................................................13
Design Options .........................................................................................................................................................18
Summary ....................................................................................................................................................................23
Notes ..........................................................................................................................................................................24
3. Health Impact Measurement ................................................................................27
Introduction .............................................................................................................................................................27
Measures of Health Impact ....................................................................................................................................28
Measuring Health Impact ........................................................................................................................................29
The Cost of Health Impact Assessment .............................................................................................................31
Summary ...................................................................................................................................................................34
Notes ..........................................................................................................................................................................35
4. Governance and Administration ...........................................................................37
Introduction and Summary ....................................................................................................................................37
VI
Governance ...............................................................................................................................................................37
Administration ..........................................................................................................................................................38
Expense of Administration .....................................................................................................................................41
Notes ..........................................................................................................................................................................41
5. Financing the Health Impact Fund ......................................................................43
Introduction .............................................................................................................................................................43
The Commitment Term of the Funding Partners .............................................................................................43
Annual Contributions by the Funding Partners ................................................................................................43
The HIF Budget ........................................................................................................................................................44
Commencement of Funding ..................................................................................................................................46
Leaving the Funding Partnership ...........................................................................................................................46
Sharing the Cost of the HIF Budget.....................................................................................................................47
Coping with Uncertainty ........................................................................................................................................47
Expanding the HIF over Time ................................................................................................................................49
Conclusion .................................................................................................................................................................50
6. A Moral Argument for Creating the Health Impact Fund ................................51
Introduction ..............................................................................................................................................................51
Assessing the Status Quo through Focused Comparisons with Alternative Options ..............................51
Comparing SQ to the Pre-TRIPS Regime ..........................................................................................................52
Comparing SQ to SQ+HIF ....................................................................................................................................54
Human Rights as a Globally Sharable Minimal Standard of Institutional Assessment ...............................57
The Applicability of Human Rights to Supranational Regimes .......................................................................58
Appeal to the Poor Being Doomed Anyway ......................................................................................................60
Appeal to “Volenti Non Fit Iniuria” .................................................................................................................61
The Libertarian Appeal to Property Rights ........................................................................................................62
Notes ..........................................................................................................................................................................68
7. The Last Mile Problem ...........................................................................................71
What Is the Last Mile Problem? ............................................................................................................................71
Pharmaceutical Companies, the Health Impact Fund, and the Last Mile Problem ....................................74
Conclusion .................................................................................................................................................................79
Notes ..........................................................................................................................................................................80
8. An Economic Analysis of Patents and the Health Impact Fund ........................83
Introduction ..............................................................................................................................................................83
The Health Impact Fund and Its Relationship to Patents ..............................................................................90
Summary ....................................................................................................................................................................94
Technical Appendix ..................................................................................................................................................94
Notes ..........................................................................................................................................................................95
9. Alternative and Complementary Solutions .........................................................97
Introduction ..............................................................................................................................................................97
Governmental and Non-governmental Direct Purchases .............................................................................97
Drug Price Reduction Efforts ................................................................................................................................98
VII
Patent pools ............................................................................................................................................................100
Push Mechanisms ...................................................................................................................................................100
Pull Mechanisms .....................................................................................................................................................103
Conclusion ...............................................................................................................................................................107
Notes ........................................................................................................................................................................107
10. The Health Impact Fund: A Cost-effective, Feasible Plan for Improving
Human Health Worldwide .....................................................................................109
The Need for Change ...........................................................................................................................................109
How the Health Impact Fund Works for Patients ..........................................................................................109
How the Health Impact Fund Works for Pharmaceutical Companies .......................................................110
How the Health Impact Fund Works for Taxpayers .......................................................................................110
Why for Pharmaceuticals? And Why Now? ......................................................................................................110
The Path Forward ..................................................................................................................................................111
Appendix A: Poverty, Global Health, and Essential Medicines .............................113
Introduction ............................................................................................................................................................113
The Disease Burden in Developing Countries ................................................................................................116
Conclusion ...............................................................................................................................................................118
Notes ........................................................................................................................................................................119
Appendix B: Pharmaceutical Markets and Innovation .........................................121
Introduction ............................................................................................................................................................121
Global Pharmaceutical Markets .........................................................................................................................121
Insurance and Pricing ............................................................................................................................................123
Summary ..................................................................................................................................................................130
Notes ........................................................................................................................................................................130
Notes on Quotations ...............................................................................................131
References .................................................................................................................133

Executive Summary
Th e Health Impact Fund (HIF) is a new proposal as well as substantial reductions in the human and
based on two simple insights: (1) privately fund- economic burdens of disease.
ed pharmaceutical R&D responds to incentives, Th e chief problems with the present system gov-
and (2) new drugs can have a much larger impact erning the development and distribution of medi-
if their prices are low. At present, the most profi t- cines are well known: despite relatively low manu-
able research eff orts are not the ones most needed facturing costs, patented medicines are oft en very
to alleviate the global burden of disease. And high expensive and are therefore unaff ordable for most
prices oft en put new drugs out of reach of most of people; and diseases concentrated among the poor
the world’s population. attract little or no pharmaceutical research. As a re-
Th e HIF seeks to correct both of these failings sult of both factors, the disease burden among the
by off ering to reward any new medicine, if priced poor is, avoidably, very high. Many diseases of the
at cost, on the basis of its global health impact. Any poor are communicable and expose all of humanity
fi rm receiving marketing approval for a new medi- to the risk of new and virulent strains. Th ese prob-
cine would be off ered a choice between (a) exercising lems are further aggravated: by patients who, oft en
its usual patent rights through high prices or (b) reg- deterred by high prices, fail to complete a full course
istering its product with the HIF. Registration would of treatment; by lack of access to competent medical
require the fi rm to sell its product worldwide at an staff who would ensure that medicines are taken cor-
administered price near the average cost of produc- rectly; and by counterfeiters, oft en attracted by high
tion and distribution. In exchange, the fi rm would prices, who may dilute a medicine’s active ingredi-
receive from the HIF a stream of payments based on ents. In addition, competitive marketing and litiga-
the assessed global health impact of its drug. Th e HIF tion costs reduce the return from innovation, and
is, in other words, an optional pay-for-performance make it a less attractive investment.
scheme for new pharmaceuticals. Each of these problems has provoked ideas and
Innovative companies would benefi t from this initiatives by academics, NGOs, governments, and
new option because they could profi tably introduce international agencies. By supporting both innova-
important new medicines that are needed mainly tion and real access, the Health Impact Fund extends
by patients who cannot pay high prices. Patients— the best of these ideas into one comprehensive, uni-
especially those in the developing world—would fi ed solution that makes substantial progress toward
benefi t through access to new drugs at low prices. By a rational system of developing and distributing
supporting the HIF, citizens and governments in all worldwide the pharmaceuticals we all need.
countries would reap large cost savings on medicines Th is book explains how the HIF would work and
why the world needs it. Chapter 1 provides a summa-