Over the last decade, the public sector has recognized the need to develop new health technologies to address the problems of the poor in developing countries. It acknowledged that the only way to bring products successfully to the marketplace is to work in conjunction with the private sector, that is, the multinational and local pharmaceutical and biotechnology firms.
This book argues that the traditional paradigm in which the ‘public crowd’ and the ‘private crowd’ confront each other represents incomplete and counterproductive views of the world. It offers instead a unifying innovation framework that fosters public private partnership. In today’s market economies, firms usually seek to obtain a high return on their investment particularly those that take the risk of investing in complex products. However, there is little incentive in developing drugs, diagnostics or vaccines if patient-consumers cannot access them. Poverty stricken countries have the most vulnerable populations, but are least capable of accessing the health services and products needed.
In many cases, these countries are simply unable to afford prices that would cover investment costs in research and development (R&D). It is imperative to find innovative solutions that resolve this conundrum. This study provides new insights into the relations between corporate investment, and technical, market, and financial risks, as well as economic incentives including patent rights. An integrated model that characterizes and evaluates novel funding mechanisms to support medicines R&D has been constructed, and the positive, as well as unintended negative consequences, of a number of ‘push-pull’ mechanisms are examined. We recommend that governments support only those systems that are likely to accelerate the development of medicines for neglected diseases, and thereby improve the welfare of the most deprived populations in the world.
Specifications
ISBN 978 90 5278 790 9
16,5 x 24 cm; 352 pages; hardbound cover
An interview with Rudi Daems
How can companies be incited to produce medicines that will only be purchased in poverty-stricken countries?
Over the past decade, the idea of “business as a force for social good” has gained ground among corporations, academia and entrepreneurs. However, in this world of 6.6 billion people, more than half live on less than $2 a day. In addition, more than 6 million people die every year in the least developed countries (LDC) due to three conditions alone: Malaria, Tuberculosis (TB) and HIV/AIDS. Unfortunately, there are no preventive medicines available as yet, and many of the bacteria and viruses that are causing these communicable illnesses rapidly become resistant to currently available medicines.
Against that backdrop, how can companies serve the “base of the global population pyramid” – the very poorest of the world’s poor, who often do not have access to even the most basic services? Philanthropy and corporate donations will of course bring relief and it is important to encourage any of such initiatives. Given the sheer magnitude of the problem, however, this will not be enough. What we need is a solution that is sustainable from a socio-economic as well as a business perspective.
We argue that given the scale of the problem, private firms while being an important driving force in new medicines innovation and product development, cannot on their own tackle the grand challenges the world faces. Therefore, they will increasingly have to collaborate with the public sector, governments and universities in particular, and NGOs. We have provided evidence that financial, rather than scientific knowledge is in fact the major barrier to developing new medicines for diseases that disproportionately affect the largest part of the population in the world. Furthermore, health care systems in developing countries need to be strengthened. It doesn’t make sense to develop important new medicines if they cannot be accessed by patients.
When you speak of novel funding mechanisms, do you refer to government funding?
Economic incentives for the private sector to engage fully their resources in these disease areas are currently not in place. Were it available, donor funding on behalf of the LDCs that are by definition lacking investment capital and buying power themselves, would increase the number of products under development and accelerate worldwide research and development Even then this doesn’t make their development a foregone conclusion. On the whole, this will require significant and sustained efforts from a variety of partners, ranging from governments of developing and industrialized countries, the World Bank, WHO, NGOs, foundations and of course the local and multinational industry itself.
Our goal is to foster enhanced collaboration between the public and private sector partners and to formulate public policy and corporate strategy recommendations based on a range of options from which governments, supra-national agencies, and industrial organizations can select. This could prove as important to the private sector as to the public sector. For the early stages of the ‘upstream’ discovery process, universities and government-funded biomedical research institutes are likely to remain the primary sites of innovation, as maintaining a climate that supports new ideas and open source innovation will be essential in overcoming basic challenges in science. For the late(r) stages of what is often referred to as the product-oriented ‘downstream’ development process (comprised of applied research, engineering and large-scale production), the bulk of work can efficiently be carried out by the multinational and/or local pharmaceutical and biotech companies.
Two forces must be coupled to stimulate R&D on neglected diseases: ‘technology push’ strategies based upon creation of new knowledge, and ‘market pull’ mechanisms that reward output.
Can you give examples of ‘push-pull mechanisms’?
Broadly speaking, technology push systems exert greater influence early in the value chain, while market pull systems are stronger at a larger stage in the new medicines innovation process. Specifically, we examined a series of ‘push-pull’ incentive mechanisms and calculated the size of private and public investments needed.
For diseases prevalent in both industrialized countries as well as LDCs, most of the R&D fixed costs can be written of on high-and middle-income countries. The patients in poor countries can have immediate access to these medicines through a system of international trade and tiered/ preferential pricing. However, for illnesses that are mainly if not exclusively affecting the developing world extra measures must be taken. Besides classical systems like tax breaks and grants for research, much of the debate revolves around designing appropriate ‘pull systems’ that mimic competitive market conditions. Through a two-stage system of Advance Market Commitments (AMC), international donors make legally binding pledges to pay for a new product on behalf of low income countries, if and when one is developed.
To successfully implement this AMC system, it is essential to maintain the innovator’s intellectual property protection in order to incentivize pharmaceutical R&D. Alternative innovation frameworks like open source can be a supplement but not a substitute for a pharmaceutical or biotech firm’s intellectual property rights (IPRs).
Will you bring your recommendations to the attention of governments of the Western world and of developing countries?
The G7/G8 Heads of State and Finance Ministers expressed a clear interest in further exploring the AMC incentive framework.
The request to pilot an AMC-led innovation project in collaboration with governments of the poorest countries was brought to the table at the July 2006 Summit in St. Petersburg, Russia. This has been well received and experimentation in practice with this mechanism will take place over the coming years. Ultimately, it will be applied to different disease areas.
At present, several countries have officially announced support for testing this new approach. Pledges up to $1.5 Billion have been made for the pilot project, that is, the development of a novel pneumococcal vaccine to be used in developing countries. If success is booked by 2010, the project is likely to be extended to include TB and malaria. The additional funding needed can be calculated with our model.
