Health Impact Fund

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The Health Impact Fund is a proposed pay-for-performance mechanism that would provide a market-based solution to problems concerning the development and distribution of medicines globally. It would incentivize the research and development of new pharmaceutical products that make substantial reductions in the global burden of disease. The Health Impact Fund is the creation of a team of researchers led by the Yale philosopher Thomas Pogge and the University of Calgary economist Aidan Hollis, and is promoted by the non-profit organization Incentives for Global Health (IGH).

Contents

Motivation

In the current system of development and distribution of medicines, millions of people from developing countries die from diseases because the patented medicines they need are unaffordable or because no medicine exists to cure their ailments. Little pharmaceutical research is devoted to diseases specific to the poor. This is largely because it has been difficult for pharmaceutical companies to profit from research and development directed at products needed by the poor. The cost of pharmaceutical research and development is high and unlikely to be recovered from those in poor countries who cannot afford the medicines. Therefore, "the Health Impact Fund would give companies incentives to develop new products targeting the diseases and conditions for which existing systems have failed to produce results, which would especially benefit the poor." [1]

The allocation of pharmaceutical research and development effort is partly a result of the global patent regime established by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Prior to TRIPS, countries were free to not enact intellectual property laws covering medicines, leading to flourishing generic drug industries in countries such as India. Following TRIPS, all World Trade Organization members were required to institute strict, American-style intellectual property rights. As a result, the supply of generic medicines to poor countries has been sharply diminished. [2] According to Nobel Laureate Joseph Stiglitz, the pharmaceutical patent system needs an "alternative" that would "give large rewards for cures or vaccines for diseases like malaria that affect millions." [2]

Design of the Fund

The Health Impact Fund is intended to address the problems with an uncomplemented pharmaceutical patent system. The Health Impact Fund uses market forces to create incentives to develop medicines for typically neglected diseases and to distribute these medicines at low prices all over the world. [3] Pharmaceutical patent-holders would receive financial rewards by opting to register their new medicines, or new uses of existing medicines, with the Fund. By registering, a patent-holder agrees to distribute its medicine globally at cost and to cooperate in measuring the health impact of that medicine. In return, the firm receives an annual reward based on its measurable contribution to reducing the global burden of disease. [4] In order to achieve distribution at cost, the Health Impact Fund could require generic licensing, tendering, or price controls, depending on the nature of the product. [5]

Registrants of new drugs are eligible for reward payments for ten years starting at the date of marketing approval of their product. New uses receive rewards for five years. Following the reward period, registrants agree to allow generic manufacturing of their medicines, in order to prevent price spikes. [6] Registrants retain their rights to control follow-on innovation. [7]

Assessing the health impact of a registered product

When assessing the health impact of a registered product, “the Health Impact Fund would essentially estimate the difference between (1) the actual health status of people who consumed the registered product and (2) the estimated health status of those people, had they not had access to the registered product.” [8]

The standard measure of health impact is the Quality-Adjusted Life Year (QALY). For example, if all registered products were in conjunction estimated to have saved 10 million QALYs, then a registered product that saved 1 million of those QALYs would receive ten percent of the available reward funds for that year. [9] The health impact assessment of a registered product would be conducted for each year of its registration with the Health Impact Fund, and payments would be disbursed annually.

Funding

The Health Impact Fund might be financed by governments, with countries committing a fixed fraction of their gross national income (GNI) to the Health Impact Fund (0.03 percent of a country's GNI is the suggested minimum). [10] Alternatively, the Health Impact Fund might also be funded through an international tax on carbon emissions, say, or on disruptive financial speculations.

Next step: an innovative pilot

As performance measurement is a core component of the Health Impact Fund, it needs to be robust across diverse products, patient demographics, and social and natural environments. Working with leading health care assessment organizations such as The George Institute for International Health, NICE International, the Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen (IQWiG) and the Institute for Health Metrics and Evaluation, the Health Impact Fund would perform evaluations of the health impact of different products in a variety of countries. Such assessments would go beyond pre-approval clinical trials, using epidemiological data from actual usage, practical trials, physician surveys, and patient demographics, as modifiers to the core health impact assessment. IGH aims to pilot the proposed Health Impact Fund mechanism by rewarding a pharmaceutical manufacturer on the basis of measured health impact in a region. This will allow the pay-for-performance approach to be field-tested and refined before it is implemented on a wider scale.

Outcomes and Benefits of the Pilot: (1.) Create a comprehensive metric to evaluate the health impact of medicines based on the actual reductions in mortality and morbidity each achieves. (2.) Determine how to apply this metric reliably through a field-test that focuses on a new drug's introduction into a specific area. No attempt has ever been made to measure the health impact of a newly introduced medicine. (3.) Benefit people in the field-test area by giving them access to an important new product at an affordable price and by rewarding the innovator promoting its wide and effective use by those who can benefit from it. This pilot would break new ground by being the first-ever effort to measure the health impact of a newly introduced medicine.

IGH is currently[ when? ] exploring opportunities for a potential pilot.

Relationship to other proposals

The Health Impact Fund can be seen as a development of Advanced Market Commitment, which also incentivizes new research while ensuring access at low prices. Compared to the Advanced Market Commitment, the Health Impact Fund is comprehensive by offering to reward any new drug or vaccine. Moreover, the Health Impact Fund would not guarantee a market: how much an innovator would earn from its registered products would depend on how much health impact it achieves with them as well as on the reward rate, which in turn depends on the aggregate health gains achieved by all registered products. A third way of viewing it is as a supplementary global drug insurance system, in which the copayment made by consumers is equal to the cost of production.

The Health Impact Fund staff has prepared a memo setting out their view of the intellectual history of the Health Impact Fund. [11]

Reception

Criticisms

When the Health Impact Fund was proposed in 2008, it attracted criticism from Professor Brook Baker and Knowledge Ecology International for not requiring open licensing of registered drugs. [12] [13] Instead, it allowed drug manufacturers to maintain a monopoly, subject to regulated prices. The proponents modified the proposal in response, suggesting greater flexibility about this aspect of the Health Impact Fund. [5]

Brita Pekarsky (2010) has argued that the cost of the Health Impact Fund may be too high, if it is taking money away from other valuable development or health related activities. [14] She does not, however, identify what opportunity cost is relevant.

Paul Grootendorst (2009) states that the primary challenge for the Health Impact Fund is the difficulty of measuring health impact accurately. [15] He notes particularly the problems of trying to attribute health impact to drugs that have long latency periods in their effectiveness (such as vaccines and anti-hypertensives); the problems of consistency across different therapeutic areas; and the technical difficulty of disentangling the effect of the drug from confounding factors.

Jorn Sonderholm (2009) argues that there is a lack of evidence that patents create a barrier to access, so that the Health Impact Fund may fail to address a real problem. [16] This is due to a misunderstanding about the nature of the Health Impact Fund, which addresses the problem that there are insufficient incentives to invest in vaccines and treatments for diseases that lack effective market demand.

Sakiko Fukuda-Parr and Proochista Ariana (2011) criticized the Health Impact Fund on a variety of grounds, including its approach to the distribution of benefits and costs, the impact on generic competition and the role of the Health Impact Fund in strategic negotiations on intellectual property rights, [17] leading to a response from IGH. [18]

Afschin Gandjour and Nadja Chernyak state that the Health Impact Fund does not have a rational basis for the underlying willingness to pay per health gain. They propose a system in which the reward for innovative drugs would be based on "willingness to pay." [19] Since willingness to pay is quite low in low-income countries, their approach requires altruistic motivation by high-income countries to address existing global health inequities.

Support

The Health Impact Fund is supported by a distinguished advisory board.

In June 2010, the Social Democratic Party of Germany officially endorsed the Health Impact Fund and called on the German government to actively support a Health Impact Fund pilot. [22]

The World Health Organization Expert Working Group on Research and Development Financing (related to Public health, innovation and intellectual property) described the Health Impact Fund as one of a few "promising" proposals deserving further examination. [23] A new WHO Consultative Expert Working Group (CEWG) has noted that the Health Impact Fund proposal would benefit from a pilot to demonstrate feasibility.

Carl Nathan (2009) suggests that the Health Impact Fund could help to overcome obstacles to the control of tuberculosis such as development and distribution of vaccines and medicines to the poor. [24]

John J. DeGioia, President of Georgetown University, has complimented the Health Impact Fund for bringing moral imperatives and pragmatic market principles together. He states, "that this is the beauty of the Health Impact Fund . . . it translates idealism into innovation." [25]

Christian Barry and Matt Peterson favour the Health Impact Fund as a mechanism for providing innovators with incentives to develop new medicines that have significant health impacts rather than significant sales impacts. [26]

James Orbinski states that the Health Impact Fund is an innovative policy proposal that "should be implemented." [27]

Related Research Articles

An orphan drug is a pharmaceutical agent that is developed to treat certain rare medical conditions. An orphan drug would not be profitable to produce without government assistance, due to the small population of patients affected by the conditions. The conditions that orphan drugs are used to treat are referred to as orphan diseases. The assignment of orphan status to a disease and to drugs developed to treat it is a matter of public policy that depends on the legislation of the country.

<span class="mw-page-title-main">James Orbinski</span> Canadian physician, humanitarian activist, author and leading scholar in global health

James Jude Orbinski, is a Canadian physician, humanitarian activist, author and leading scholar in global health. Orbinski was the 2016-17 Fulbright Visiting professor at the University of California, Irvine, and as of September 1, 2017, he is professor and inaugural director of the Dahdaleh Institute of Global Health Research at York University in Toronto, Ontario, Canada. He was previously the CIGI Chair in Global Health Governance at the Balsillie School of International Affairs and Wilfrid Laurier University (2012-2017), Chair of Global Health at the Dalla Lana School of Public Health (2010-2012) and full professor at the Faculty of Medicine, University of Toronto (2003-2012), where he was the founding Saul Rae Fellow at Massey College. Orbinski's current research interests focus on the health impacts of climate change, medical humanitarianism, intervention strategies around emerging and re-emerging infectious diseases, and global health governance.

<span class="mw-page-title-main">Pharmaceutical industry</span> Industry involved with discovery, development, production and marketing of drugs

The pharmaceutical industry discovers, develops, produces, and markets pharmaceutical drugs for the use as medications to be administered to patients, with the aim to cure and prevent diseases, or alleviate symptoms. Pharmaceutical companies may deal in generic or brand medications and medical devices. They are subject to a variety of laws and regulations that govern the patenting, testing, safety, efficacy using drug testing and marketing of drugs. The global pharmaceuticals market produced treatments worth $1,228.45 billion in 2020 and showed a compound annual growth rate (CAGR) of 1.8%.

<span class="mw-page-title-main">Thomas Pogge</span> German philosopher (born 1953)

Thomas Winfried Menko Pogge is a German philosopher and is the Director of the Global Justice Program and Leitner Professor of Philosophy and International Affairs at Yale University. 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, a Professorial Research Fellow at the Centre for Applied Philosophy and Public Ethics at Charles Sturt University and Professor of Political Philosophy at the University of Central Lancashire's Centre for Professional Ethics. Pogge is also an editor for social and political philosophy for the Stanford Encyclopedia of Philosophy and a member of the Norwegian Academy of Science and Letters.

<span class="mw-page-title-main">Medical research</span> Wide array of research

Medical research, also known as experimental medicine, encompasses a wide array of research, extending from "basic research", – involving fundamental scientific principles that may apply to a preclinical understanding – to clinical research, which involves studies of people who may be subjects in clinical trials. Within this spectrum is applied research, or translational research, conducted to expand knowledge in the field of medicine.

The pharmaceutical industry is one of the leading industries in the People's Republic of China, covering synthetic chemicals and drugs, prepared Chinese medicines, medical devices, apparatus and instruments, hygiene materials, packing materials, and pharmaceutical machinery. China has the second-largest pharmaceutical market in the world as of 2017 which is worth US$110 billion. China accounts for 20% of the world's population but only a small fraction of the global drug market. China's changing health-care environment is designed to extend basic health insurance to a larger portion of the population and give individuals greater access to products and services. Following the period of change, the pharmaceutical industry is expected to continue its expansion.

The Biodefense and Pandemic Vaccine and Drug Development Act of 2005, nicknamed "Bioshield Two" and sponsored by Senator Richard Burr, aims to shorten the pharmaceutical development process for new vaccines and drugs in case of a pandemic, and to protect vaccine makers and the pharmaceutical industry from legal liability for vaccine injuries. The proposed bill would create a new federal agency, the Biomedical Advanced Research and Development Agency (BARDA), that would act "as the single point of authority" to promote advanced research and development of drugs and vaccines in response to bioterrorism and natural disease outbreaks, while shielding the agency from public Freedom of Information Act (FOIA) requests. BARDA would be exempt from long-standing open records and meetings laws that apply to most government departments.

The pharmaceutical industry in India was valued at an estimated US$42 billion in 2021 and is estimated to reach $130 billion by 2030. India is the world's largest provider of generic medicines by volume, with a 20% share of total global pharmaceutical exports. It is also the largest vaccine supplier in the world by volume, accounting for more than 60% of all vaccines manufactured in the world. Indian pharmaceutical products are exported to various regulated markets including the US, UK, European Union and Canada.

<span class="mw-page-title-main">James Love (NGO director)</span>

James Packard Love is the director of Knowledge Ecology International, formerly known as the Consumer Project on Technology, a non-governmental organization with offices in Washington, D.C., and Geneva, that works mainly on matters concerning knowledge management and governance, including intellectual property policy and practice and innovation policy, particularly as they relate to health care and access to knowledge.

Humanitarian use licenses are provisions in a license whereby inventors and technology suppliers protect in advance the possibility of sharing their technology with people in need. Thus, humanitarian use licenses set the conditions for the provision of access to innovations for people in need at a royalty free basis or at lower costs. Humanitarian use licenses assure that products of research and development stay publicly available and that at the same time the incentive function of exclusive intellectual property rights are maintained.

Pharmaceutical policy is a branch of health policy that deals with the development, provision and use of medications within a health care system. It embraces drugs, biologics, vaccines and natural health products.

Legal scholars, economists, activists, policymakers, industries, and trade organizations have held differing views on patents and engaged in contentious debates on the subject. Critical perspectives emerged in the nineteenth century that were especially based on the principles of free trade. Contemporary criticisms have echoed those arguments, claiming that patents block innovation and waste resources that could otherwise be used productively, and also block access to an increasingly important "commons" of enabling technologies, apply a "one size fits all" model to industries with differing needs, that is especially unproductive for industries other than chemicals and pharmaceuticals and especially unproductive for the software industry. Enforcement by patent trolls of poor quality patents has led to criticism of the patent office as well as the system itself. Patents on pharmaceuticals have also been a particular focus of criticism, as the high prices they enable puts life-saving drugs out of reach of many people. Alternatives to patents have been proposed, such Joseph Stiglitz's suggestion of providing "prize money" as a substitute for the lost profits associated with abstaining from the monopoly given by a patent.

Medication costs, also known as drug costs are a common health care cost for many people and health care systems. Prescription costs are the costs to the end consumer. Medication costs are influenced by multiple factors such as patents, stakeholder influence, and marketing expenses. A number of countries including Canada, parts of Europe, and Brazil use external reference pricing as a means to compare drug prices and to determine a base price for a particular medication. Other countries use pharmacoeconomics, which looks at the cost/benefit of a product in terms of quality of life, alternative treatments, and cost reduction or avoidance in other parts of the health care system. Structures like the UK's National Institute for Health and Clinical Excellence and to a lesser extent Canada's Common Drug Review evaluate products in this way.

Some authors advocating patent reform have proposed the use of prizes as an alternative to patents. Critics of the current patent system, such as Joseph E. Stiglitz, say that patents fail to provide incentives for innovations which are not commercially marketable. Stiglitz provides the idea of prizes instead of patents to be awarded in order to further advance solutions to global problems such as AIDS.

Pharmaceutical innovations are currently guided by a patent system, the patent system protects the innovator of medicines for a period of time. The patent system does not currently stimulate innovation or pricing that provides access to medicine for those who need it the most, It provides for profitable innovation. As of 2014 about $140 Billion is spent on research and development of pharmaceuticals which produces 25–35 new drugs annually. Technology, which is transforming science, medicine, and research tools has increased the speed at which we can analyze data but we currently still must test the products which is a lengthy process. Differences in the performance of medical care may be due to variation in the introduction and circulation of pharmaceutical innovations.

Access to medicines refers to the reasonable ability for people to get needed medicines required to achieve health. Such access is deemed to be part of the right to health as supported by international law since 1946.

The US carries out 46% of global research and development (R&D) in the life sciences, making it the world leader in medical research.

<span class="mw-page-title-main">Louis Preston Garrison</span> American health economist (born 1950)

Louis Preston Garrison Jr. is an American health economist who has made significant contributions to pharmacoeconomics, pharmacogenomics and personalized medicine, regulatory benefit-risk analysis, insurance, pricing, reimbursement and risk-sharing agreements. He also made numerous contributions on the economic evaluation of pharmaceuticals, diagnostics, devices, surgical procedures, and vaccines, particularly as related to organ transplantation, influenza, measles, obesity, and cancer. Garrison has published over a hundred manuscripts in peer-reviewed journals and contributed to several book chapters.

<span class="mw-page-title-main">Economics of vaccines</span>

Vaccine development and production is economically complex and prone to market failure. Many of the diseases most demanding a vaccine, including HIV, malaria and tuberculosis, exist principally in poor countries. Pharmaceutical firms and biotechnology companies have little incentive to develop vaccines for these diseases because there is little revenue potential. Even in more affluent countries, financial returns are usually minimal and the financial and other risks are great.

<span class="mw-page-title-main">Proprietary drug</span>

Proprietary drug are chemicals used for medicinal purposes which are formulated or manufactured under a name protected from competition through trademark or patent. The invented drug is usually still considered proprietary even if the patent expired. When a patent expires, generic drugs may be developed and released legally. Some international and national governmental organizations have set up laws to enforce intellectual property to protect proprietary drugs, but some also highlight the importance of public health disregarding legal regulations. Proprietary drugs affect the world in various aspects including medicine, public health and economy.

References

  1. ↑ S.J. Hoffman, T. Pogge. 2011. “Revitalizing Pharmaceutical Innovation for Global Health,” Health Affairs 30(2):367. doi:10.1377/hlthaff.2011.0103.
  2. 1 2 Joseph Stiglitz, "Scrooge and Intellectual Property Rights," British Medical Journal 333, no. 7582 (2006), pp. 1279.
  3. ↑ Aidan Hollis and Thomas Pogge, The Health Impact Fund: Making Medicines Available for All (New Haven, CT: Incentives for Global Health, 2008), p. 3.
  4. ↑ Aidan Hollis and Thomas Pogge, The Health Impact Fund: Making Medicines Available for All (New Haven, CT: Incentives for Global Health, 2008), ch. 2.
  5. 1 2 Hollis, Aidan (April 23, 2009). "The Health Impact Fund and Price Determination" (PDF). Health Impact Fund.
  6. ↑ Aidan Hollis and Thomas Pogge, The Health Impact Fund: Making Medicines Available for All (New Haven, CT: Incentives for Global Health, 2008), pp. 13-14.
  7. ↑ Aidan Hollis and Thomas Pogge, The Health Impact Fund: Making Medicines Available for All (New Haven, CT: Incentives for Global Health, 2008), p. 17.
  8. ↑ Aidan Hollis and Thomas Pogge, The Health Impact Fund: Making Medicines Available for All (New Haven, CT: Incentives for Global Health, 2008), p. 9.
  9. ↑ Aidan Hollis and Thomas Pogge, The Health Impact Fund: Making Medicines Available for All (New Haven, CT: Incentives for Global Health, 2008), pp. 3-4.
  10. ↑ Aidan Hollis and Thomas Pogge, The Health Impact Fund: Making Medicines Available for All (New Haven, CT: Incentives for Global Health, 2008), pp. 10-11.
  11. ↑ Health Impact Fund intellectual history memo
  12. ↑ Baker criticism
  13. ↑ Knowledge Ecology International criticism
  14. ↑ Brita Pekarsky, “Should Financial Incentives be Used to Differentially Reward ‘Me-Too’ and Innovative Drugs,” Pharmacoeconomics 28.1(2010): 1-17.
  15. ↑ Paul Grootendorst, “How Should We Support Pharmaceutical Innovation?,” Expert. Rev. Pharmacoeconomics Outcomes Res. 2009: 9(4) – 313-320.
  16. ↑ Jorn Sonderholm, “A Reform Proposal in Need of Reform: A Critique of Thomas Pogge’s Proposal for How to Incentivize Research and Development of Essential Drugs,” Public Health Ethics 0.0 (2009): 1-11.
  17. ↑ Sakiko Fukuda-Parr and Proochista Ariana, "Health Impact Fund – Raising Issues Of Distribution, IP Rights And Alliances," IP-Watch.Org, September 26, 2011.
  18. ↑ Response to criticism by Fukuda-Parr and Ariana
  19. ↑ Gandjour, Afschin; Chernyak, Nadja (October 2011). "A new prize system for drug innovation". Health Policy. 102 (2–3): 170–177. doi:10.1016/j.healthpol.2011.06.001. PMID   21724290.
  20. ↑ HIF Advisory Board
  21. 1 2 A philosopher with a plan
  22. ↑ German Social Democratic Party, "Germany's responsibility to fight for health in developing countries - neglected diseases, reduce child and maternal mortality and a strong Global Fund," Drucksache 17/2135, June 6, 2010.
  23. ↑ "WHO Working Group Endorses Health Impact Fund", Incentives for Global Health. 17 January 2010.
  24. ↑ Carl Nathan, “Taming Tuberculosis: A Challenge for Science and Society,” Cell Host and Microbe 5(2009): 222.
  25. ↑ John J. DeGioia, “Making New Medicines Available to All: The Health Impact Fund,” Archived 2010-06-09 at the Wayback Machine Georgetown University, Gonda Theater. 1 December 2008.
  26. ↑ Christian Barry and Matt Peterson, “Shallow Cuts: GSK’s Voluntary Price Reductions and Patent Pooling Are Not Enough,” Public Ethics Media, 4 March 2009.
  27. ↑ James Orbinski, “Are Patents Impeding Medical Care and Innovation?”, PLoS Medicine Archived 2010-03-22 at the Wayback Machine 7.1(2009): 3.

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