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Providing Medicines For The Poor

Two views on how the pharmaceutical industry can best meet the medical needs of impoverished people around the globe

by William G. Schulz
December 1, 2008 | A version of this story appeared in Volume 86, Issue 48

Credit: Hæge Håtveit (left) Pfizer (right)
Pogge (left), Leitner Professor of Philosophy & International Affairs at Yale University, contends that an option called the Health Impact Fund could provide medicines to the poor and improve global health; Hedger, executive managing director of international affairs at Pfizer, argues that today's intellectual patent system is providing solutions for global health needs.
Credit: Hæge Håtveit (left) Pfizer (right)
Pogge (left), Leitner Professor of Philosophy & International Affairs at Yale University, contends that an option called the Health Impact Fund could provide medicines to the poor and improve global health; Hedger, executive managing director of international affairs at Pfizer, argues that today's intellectual patent system is providing solutions for global health needs.

CARING FOR THE POOR, especially their medical needs, seems an eternal quest. In countries rich and poor around the globe, untold millions of people need lifesaving drugs and other medical treatments. This need often goes unmet, particularly in the developing world where tropical diseases most of the rest of us will never encounter ravage lives and communities. HIV/AIDS continues to be an especial burden there.

In recent years, a growing chorus has called for the removal of patent protection on some drugs as a means of providing affordable treatments to the poor. Generic versions of patented medicines can be produced and sold for a fraction of the cost. The counterargument is that removing intellectual property rights will stifle innovation by taking away the monetary reward for risk-based R&D. Pharmaceutical companies, like all funders of innovation, must have a mechanism by which they recoup the enormous R&D costs that go into each new drug and other medical treatments.

Now, Thomas W. Pogge, a professor of philosophy at Yale University, presents another approach, which he calls the Health Impact Fund. Such a fund, he claims, will provide medicines for the poor, reward innovation, and allow drug companies to recoup their costs. A counterargument, in favor of the intellectual property rights system in place in most of the developed world, comes from Philip Hedger, executive managing director of international affairs at Pfizer. He argues that there is demonstrable flexibility within the extant system to work on models and mechanisms that apply state-of-the-art technologies to tropical and other neglected diseases. The private sector, in concert with governments and charitable organizations throughout the world, he says, provide millions of people with lifesaving medicines at little or no cost.

Pogge Point

Treatments for HIV illustrate the dilemma between access to and innovation in medicines: Second-line therapies have dramatically reduced the burdens of HIV infection in affluent countries, but at a price of $800 to $1,500 per year, they are out of reach for the majority of people until the 20-year patents run out. We could insist on lower prices, but that would undermine the incentives for pharmaceutical companies to develop new medicines. By facilitating access we strangle innovation, and by stimulating innovation through strong patents we obstruct access for many people to new medicines they urgently need.

This terrible dilemma can be avoided by introducing a new option: the Health Impact Fund (HIF). This publicly funded pay-for-performance mechanism would give pharmaceutical innovators the option to register any new product. They would promise to make it available at marginal cost wherever it is needed in exchange for annual reward payments based on the product's global health impact during its first 10 years. The reward payments would be a share of a massive annual payout, with each registered product receiving a share equal to its share of the assessed health impact of all registered products.

After years of unusually high concern for global health, we still lack many of the innovations that matter most.

HIF would foster innovation, especially against diseases concentrated among the poor: tuberculosis, malaria, and other tropical diseases. Such diseases are now neglected because innovators cannot recover their R&D costs from sales to the poor. But with the option of an alternative reward based on health impact, heretofore neglected diseases would become some of the most lucrative R&D opportunities.

The fund would promote access to new medicines by limiting the price of any registered product to the lowest feasible cost of production and distribution. It would motivate registrants to ensure that their product is widely available, perhaps at even lower prices, and that it is competently prescribed and optimally used. Registrants are rewarded not for selling their product, but for making it effective toward improving global public health.

HIF will provide optimal incentives only if potential registrants are assured that the rewards will actually be there in the decade following market approval. Core funding of HIF is therefore best guaranteed by a broad partnership of countries. If governments representing one-third of global income agreed to contribute just 0.03% of their gross national incomes, HIF could get started with $6 billion annually. This is a reasonable minimum because the high cost of developing new medicines requires large rewards and because the cost of health impact assessment should not consume too much of the annual budget. If HIF works well, it could be scaled up through increased allocations and accession of new funders. Governments would have the option of phased withdrawal over a 10-year period.

HIF can be seen as an annual competition among innovators that ranges over all countries and diseases, with firms earning more money if their product has a larger impact on health. Health impact can be measured in terms of the number of quality-adjusted life years saved worldwide. The QALY metric is already extensively used by private and state insurers in determining prices for new drugs, so employing it in calculating HIF rewards is not a big leap. Taking as a benchmark the pharmaceutical arsenal before the registered medicine was introduced, HIF would estimate to what extent it has added to the length and quality of human lives. This estimate would be based on data from clinical trials, including pragmatic trials in real-life settings, on tracking randomly selected medicines to their end users, and on statistical analysis of sales data as correlated with data about the global burden of disease. These estimates would necessarily be rough, at least in the early years. But so long as any errors are random, or at least not exploitable by registrants, HIF incentives would be only minimally disturbed.

With HIF so designed, innovators would register products that can reduce the global burden of disease most cost-effectively. Products with the largest health impact would make the most money, thereby creating exactly the right incentives for innovation. And because HIF would be an optional system, the rate of reward is certain to be reasonable. If rewards were too high, new registrants would enter and dilute the payments to all registrants. If profits were too low, the reward rate would naturally increase as firms would choose, for more of their new products, to exploit their patent-protected pricing powers instead of registering them with HIF. Competition would ensure that registered products are rewarded at a rate that is profitable for innovators and maximizes the effect of HIF.

To be certain that HIF is cost-effective relative to other public health expenditures, one can stipulate a maximum reward rate; if one year's funds are not fully used, the remainder can be rolled over into future years. To reassure potential innovators, one can also add some protection against unreasonably low rewards.

By creating incentives to provide important pharmaceutical innovations at low prices, HIF would easily pay for itself. Through lower drug prices, taxpayers would realize offsetting savings in national health systems, insurance premiums, and direct pharmacy purchases. They would benefit from reductions in counterfeiting, wasteful litigation, and excessive marketing. By stimulating development of important but currently unprofitable medicines, making new high-impact medicines much more widely accessible, and encouraging efforts to ensure that medicines are optimally used, HIF would greatly reduce the global burden of disease and thereby produce large medical cost savings and gains in economic productivity.

For a much fuller account of how HIF would work and why it is needed, visit

Hedger Point

How can we stimulate innovation in the pharmaceutical industry without excluding the poor? Pharmaceutical innovation is benefiting patients in all socioeconomic environments. As new pharmaceutical and vaccine discoveries and innovations become available it is very important to find ways to ensure that patients the world over continue to benefit from such medical advances. The very high investment risk and funding required to support and stimulate this innovation is dependent on a system that can help ensure the prospect of a fair return on that investment. This assurance is largely provided through the intellectual property rights (IPR) system and patents in particular.

Three questions arise. First, what is the evidence that the IPR system is benefiting the poor? And we can define "the poor" as those who are unable or almost unable to afford health care, including medicines, and who also often suffer from additional diseases that do not afflict populations in wealthy nations. Second, are there gaps in the innovation pipeline and research for diseases that especially afflict the poor? And third, is the IPR system mutually exclusive to other potential complementary sources of financial, regulatory, and legal stimulations that may promote further research into diseases that especially affect the poor?

For the first question—What is the evidence that pharmaceutical innovation is reaching the poor?—three key perspectives are important. The first is the extent to which there is access to existing medicines and vaccines for a wide range of diseases and medical conditions. That access is mostly evidenced by the World Health Organization's Essential Drugs List of more than 300 safe, effective, and inexpensive medicines and vaccines. Most of these interventions were initially discovered or developed by the pharmaceutical industry and were patented products.

The second perspective is the availability of interventions for diseases that mostly or exclusively affect the poor. There are, for example, treatments currently available for onchocerciasis, leprosy, trachoma, lymphatic filariasis, Guinea worm disease, schistosomiasis, malaria, and HIV/AIDS. These pharmaceutical inventions and developments are available notwithstanding the fact that there is little or no commercial return on these products. The two exceptions are drugs to treat malaria and HIV/AIDS. Malaria treatments have a modest "traveler's market"—that is, prophylaxis for Western visitors to malaria-endemic countries, and HIV/AIDS treatments are reimbursed in industrialized nations. However, the vast majority of patients who need both antimalarials and antiretrovirals reside in countries where either the price of these drugs is very low or the drugs are provided free.

The third perspective asks, What is the pipeline for new treatments and cures for diseases that mostly afflict the poor? In this category, pharmaceutical companies currently have R&D in Chagas disease, dengue fever, human African trypanosomiasis, leishmaniasis, leprosy, malaria, HIV/AIDS, onchocerciasis, and various soil-transmitted helminths.

For the second question—Are there gaps in the innovation pipeline and research for diseases which especially afflict the poor?—the answer is yes. Despite the work cited above, there are some diseases for which the existing treatments are not optimal and a few for which interventions are nonexistent or inadequate. And these diseases pose additional and particular challenges to discovery and development of medicines and vaccines. Among them is designing and conducting clinical trials in less regulated environments because clinical trials can only be done where these diseases exist.

These diseases are deserving of focus, resource, and sustained advocacy. Society has recognized that it cannot expect the pharmaceutical sector to have all the answers to these challenges. The need is too urgent, the cost is too great, the science is too complex. Recent years have therefore witnessed more funding, more focus, more advocacy, more innovative mechanisms and models, and the creation of various initiatives to add to the research pipeline for such diseases.

Among these innovative mechanisms are disease-specific organizations that provide advocacy, access to medicines and vaccines, and product development, as well as research initiatives probing new interventions for tropical diseases. An example is the Medicines for Malaria Venture. This nonprofit organization focuses on developing new treatments for and access to drugs for malaria. It is funded by a mix of nongovernmental organizations (NGOs), foundations, and governments.

Another example is the Drugs for Neglected Diseases Initiative. This drug development organization was initiated by the charitable group Doctors Without Borders five years ago. It now attracts funding and technology from a range of public and private players and focuses on four neglected tropical diseases: human African trypanosomiasis, visceral leishmaniasis, Chagas disease, and malaria.

Much of the funding for diseases of the developing world is genuinely new and incremental, coming from governments, NGOs, and foundations. There are also new mechanisms aimed at more sustained access to funding, such as additional revenue from airline taxes.

There are also new models of R&D for these diseases set up by private pharmaceutical companies in developing countries. These are stand-alone research facilities dedicated to diseases of the poor.


Other varied and innovative approaches to ensuring a focus on diseases that affect the poor include differential or tiered pricing mechanisms for drugs and vaccines by the private sector, voluntary licensing arrangements with generic drug companies in the developing world, advanced funding instruments, and technology-transfer agreements. And that is not the entire list. Often these initiatives involve academia, the private sector, NGOs, government institutions, foundations, and the public sector. This is society operating to protect the poor in a mutually supportive and unified way, as it should.

The pharmaceutical sector is engaged directly or indirectly in virtually all these mechanisms and initiatives. And all of these initiatives are feeding off and supported by the essential innovation that is propelled by the basic intellectual property system, especially patents.

Is the IPR system mutually exclusive to other, potentially complementary sources of stimulation for diseases that especially affect the poor? Of course not. Most of the mechanisms and initiatives outlined above are relatively new, and many complement and draw upon the technology, expertise, and innovation of the pharmaceutical sector.

For example, Pfizer has provided its new class of HIV/AIDS entry inhibitor technology to the International Partnership for Microbicides under a royalty-free agreement. Under this agreement, Pfizer has provided the technology for the entry inhibitor and technical assistance so that it could be developed into a microbicide that would protect women from HIV infection.

Pfizer also has an agreement with the Special Programme for Research & Training in Tropical Diseases under which Pfizer, TDR, and African scientists are analyzing compounds in Pfizer's molecular library to assess their utility for treating some of the tropical diseases that need better or new interventions. These are but two examples of many direct and partnering approaches that private, research-based biomedical companies are working on.

There is debate, too, about potential new funding models and other types of fiscal and legal instruments and incentives that may support, accelerate, or sustain R&D for diseases that mainly affect the poor. Some believe that these would add even more to the arsenal of instruments and funding already laid out here. These may well have merit but need further careful analysis.

This debate will continue, as it must, so that no one institution or government becomes complacent or ambivalent about the need for patient equity in receiving the benefits of biomedical innovation. However, the critical focus of the private sector is to continue to listen and consider additional viable, innovative ideas to ensure that existing medicines and technologies are available to the poor.

Pogge Counterpoint

In discussing his third question, Philip Hedger agrees that the existing IPR system is compatible with adding a supplementary reward mechanism such as HIF, which is optional for innovators. Focusing on Hedger's first and second questions, I will here substantiate the urgency of such an addition.

On the first question, I agree that the poor have better access to medicines under the IPR system than if pharmaceutical innovation were not incentivized at all. But I argue that there would be much better access still if HIF were added to the IPR system.

There is much room for improvement. Today, some 30% of all human deaths are from poverty-related causes. Many of these deaths could be averted through better access to better medicines that are routinely available to the affluent. For most people in the world, price is a serious obstacle to getting needed medicines. This problem is not confined to the developing world. Some 50 million Americans, mostly poor, lack health insurance, and many of them face painful choices when prescribed an expensive medicine. Increasingly, even the insured in affluent countries find that their insurer does not cover important, but expensive, medicines, or that insurance covers only a fraction of the cost. The British National Health Service recently caused an uproar by refusing to fund, at an annual cost per patient of $34,000–$60,000, four kidney cancer drugs, including Pfizer's Sutent.

It is awful, of course, that lifesaving medicines cost so much, especially when they can be manufactured for a tiny fraction of this amount. But Hedger is right: Pharmaceutical innovators must make a sizable profit on marketing their medicine because they must cover the costs and risks of their R&D. Without such profits, commercial pharmaceutical innovation is simply unsustainable.

HIF can help solve this dilemma. It would ensure that all HIF-registered drugs are available everywhere at the lowest feasible cost of production and distribution. And it would amply reward the development of such drugs on the basis of their global health impact. Such rewards are ultimately funded by taxpayers and, disproportionately, by the better-off. These same people are now funding different rewards for new medicines through high insurance premiums and high drug prices. So for them it makes little difference whether a new high-impact medicine is HIF-registered or rewarded through high prices.

But this makes all the difference to the less affluent. They have a much better chance of getting access to a new drug when its price is low and when the innovator is paid for achieving health impact. By offering to reward important innovations differently, HIF would ensure—at little additional net cost—that getting new medicines to poor patients can be profitable. HIF provides a systemic, long-term solution to the innovation-access dilemma by providing rewards that pharmaceutical innovators can predict and count on.

Hedger's second question is about gaps in today's pharmaceutical arsenal. Here, too, HIF would bring great gains over the IPR system as complemented by charitable initiatives.

What gaps there are depends on the economic status of the patient, and Hedger's second question is therefore related to his first. Most advanced medicines today are so expensive that only a minority can get them. For the rest of humanity, these new medicines are as good as nonexistent—or worse, they are a degrading reminder that their health and survival is counted for less. To be sure, there are cheap medicines that poor people can afford. But these are often greatly inferior. Antimony (schistosomiasis) is toxic and melarsoprol (sleeping sickness) even kills 5% of users. Chloroquine (malaria) and acetaminophen (dengue fever) have little effect. Existing drug cocktails for tuberculosis require compliance over many months. And first-line AIDS treatments simply don't work for many patients. HIF makes new high-impact medicines accessible for all.

I share Hedger's admiration for the great efforts that have been made in recent years to develop much-needed new medicines. These wonderful initiatives, including Pfizer's sharing of its microbicide technology, are making a real difference to new drug development and access. But this welcome addition to the IPR system depends on a continuing flow of favorable funding decisions. We have just entered a global financial crisis that is likely to curb the charitable endeavors of companies, governments, foundations, and individuals for years to come. Moreover, patterns of advocacy and giving fluctuate and may not be focused on the diseases that can be reduced most cost-effectively. A treaty-backed systemic solution, the HIF reliably rewards innovators in good times and bad. It rewards performance—health impact—and thereby focuses innovators on the most cost-effective ways of promoting global public health.

After years of unusually high concern for global health, we still lack many of the innovations that matter most. We have no drug for Ebola, for instance. Or consider that since the generic rifabutin in 1975, no new drug has been introduced for tuberculosis (Am. J. Respir. Crit. Care Med. 2001, 163, 1055). The long and cumbersome regimen associated with the old TB drugs has contributed to poor compliance, which has eroded their effectiveness and spawned new multi- and extremely drug-resistant strains of the disease—MDR and XDR TB—that now pose great dangers to us all. Tuberculosis kills some 1.7 million people each year, more than any other communicable disease save AIDS. We urgently need new medicine for TB.

HIF is an extremely cost-effective innovation stimulator. This is so because it lets innovators compete in realizing health impact. Even more important is that HIF, by funding a drug's development expenses differently, multiplies the social benefit of any such R&D investment. To illustrate, think of cases like those kidney cancer drugs. Suppose an annual supply of such a drug costs $1,000 to manufacture and deliver when it is sold to 5,000 patients worldwide at $51,000 each. Here the innovator makes $250 million annually toward recovering its R&D expenses. If such a drug were HIF-registered, and therefore cheap and its impact rewarded, it might reach 100,000 patients while being priced at $300 (thanks to economies of scale in manufacturing and distribution).

The innovator of such a drug would register it only if the expected annual health-impact reward were at least $250 million. Paid by taxpayers worldwide, this reward expense would be largely offset by taxpayer savings: lower medical expenses and insurance premiums when 5,000 patients each get the drug for $300 rather than for $51,000. And there would be enormous further gains to the public, as the drug also reaches 95,000 poorer patients who would otherwise have been excluded. This low-cost gain to the public cannot be realized without HIF. Poor people cannot pay high prices, and setting a lower price only for the poor is difficult: One cannot realistically expect that a country's wealthy, well-connected citizens will pay $51,000 for medicine that their poor compatriots can get for $300. So in practice, innovators charge a high price to all and hope that charities will help at least some poor people to gain access.


With Hedger, I welcome any effort to examine and discuss how to supplement the IPR system. Potentially an amazing opportunity, HIF certainly deserves constructive scrutiny. But its great potential will be realized only if we proceed beyond debate and refinement to implementation. Health care is firmly on the public agenda in many countries, and HIF has a genuine chance of becoming a reality.

Hedger Counterpoint

Thomas Pogge makes a thoughtful and helpful contribution to the global debate regarding access to biomedical technology. The fundamental premise—that additional, sustained, and focused funding may help spur investment in neglected diseases—is, at first glance, attractive.

His proposal, however, is cast in rather binary and general terms, and some of the key arguments used in support of HIF are less than robust. It asserts that "by facilitating access we strangle innovation, and by stimulating innovation through strong patents we obstruct access for many people to new medicines they urgently need." The history of and data relating to HIV/AIDS do not support this assertion. In addition, using malaria as an example of lack of innovation and access does not fit well with the premise.

When the virus that causes AIDS was identified, AIDS was a neglected disease as there were no pharmacological interventions available. Today, the medicines are so effective that HIV/AIDS is effectively now a chronic disease, with a significant quiver of first- and second-line drugs approved and in use around the globe. Furthermore, some 80 new compounds are at varying stages of development. The private sector is responsible for development of these medicines. In addition, where access to poor populations is restricted, it is primarily due to barriers that bear little relationship to the cost of the drugs. First-line drugs are now generally less than 5% of the initial price of such medicines.

Society has recognized that it cannot expect the pharmaceutical sector to have all the answers to these challenges.

By contrast, and after several years and hundreds of millions of dollars, neither the private sector nor NGOs dedicated to developing a vaccine against HIV/AIDS have yet been successful. This would argue that patents (and they have to be "strong" to have any value) have provided the stimulus that the private sector requires to discover and develop new medicines. The vaccines story to date also shows that other models—even when well funded and having access to skilled scientists and clinicians—are still subject to the vagaries and challenges of science.

It is a similar case with malaria. Despite the minimal nature of the commercial market for malaria drugs, new compounds have been developed and brought to market, and there is a considerable amount of R&D activity within the private sector, among NGOs, and with collaborative private/NGO models.

So far as the specifics of the HIF approach are concerned, there are basic imponderables about the operating principles and assumptions that underpin the approach. And here are just a few:

• How would innovation be defined and by whom? For example, many key medical interventions are the result of incremental innovation, rather than breakthrough science. Society and governments are tending to mark down the value of incremental innovation, despite clear evidence of its value and necessity.

• Many barriers to access exist other than financial incentives, especially in the countries for which the HIF products are targeted. Poor infrastructure, poor or nonexistent regulatory systems, lack of skilled health care workers, inadequate distribution systems, and challenging clinical-trial capabilities are among these.

• The sustainability of a government-funded reward system has various areas of uncertainty. Governments change, as do their objectives and their funding mandates. Totally unpredicted issues can arise, as the world is currently witnessing. These and more reasons provide plenty of opportunity for governments to review their commitments, whatever the nature of the original agreement.

• The proposed financial structure and the nature of measuring the value of the invention are problematic. Essentially, companies would be asked to take the risk of investing up front, assuming that the invention would be deemed to be innovative, would pass some criteria based on quality-adjusted life years—which themselves have been the subject of criticism (J. Med. Ethics 1989, 15, 148)—and that governments would honor their commitments 10 years hence. Then there is the question of the net present value of the funds some years hence.

There are other more general points relating to the HIF concept, such as the appetite among donor countries for another major funding commitment, especially in the current global economic environment. Another significant consideration is the fact that a model of this nature has not been attempted in this or any other sector as far as can be seen. As a result there is no basic proof of concept, and this may also be a deterrent to donor states.

As I noted previously, there are a significant number of public- private partnerships, NGOs, and private-sector programs that are working on many of these important tropical diseases. They vary in many ways, including the models employed for funding and operating the organizations. They are producing meaningful scientific results. It could be that an approach modeled on HIF could be set up to support the ongoing funding and operations of these product development organizations. Perhaps too, a component of such a fund could address the pull through of those new medicines, diagnostics, and vaccines, so that regulatory, distribution, and other barriers that impede getting these new lifesaving treatments to the patients who need them are minimized.

Certainly, the challenges of science, regulation, product approval, distribution and logistics, health care worker availability, and other such impediments to serving patients with hard-to-treat diseases deserves a continued focus by society. Academia, the public and private sector, and governments must continue to search for the most effective ways to work together to meet these critical challenges.


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