The World Health Organization global strategy on public health, innovation and intellectual property calls for the exploration of alternative mechanisms to incentivise research and development, including the use of prize funds. A diverse group of nongovernmental agencies, government and pharmaceutical industry representatives recently looked at prize funds in detail, to determine different possible approaches and where they might best be applied to medical innovations.

The need to separate the price of drugs from incentives for researching and developing drugs is essential, said the organisers of a recent event.

The event, entitled “Designing Innovation Inducement Prizes for Diagnostics, New Drugs and Vaccines for Type II and III diseases and conditions, with a particular focus on TB and Chagas Disease” met on 16-17 January. It was cosponsored by Knowledge Ecology International (KEI), Health Action International, Médecins Sans Frontières, Universities Allied for Essential Medicines, Oxfam and IQsensato.

KEI Director James Love said that there is “under-investment in R&D in places where you don’t get IP,” and that prizes could help incentivise innovation in those areas.

For example, John Maki, president and CEO of Vicus Therapeutics, a US biopharmaceutical company involved in combining and repurposing off-patent drugs, said that their work is not eligible for IP in many countries, as their IP tends to be in business method patents. Prizes can be “remarkably valuable” for companies like his, he said, though he raised concern that some prize vouchers would exclude off-patent drugs.

Prizes also could help give incentives to the sharing of patented technologies for development purposes, speakers said. It might be possible to convince companies to provide, in exchange for prize reward, their IP for free or very inexpensive use. This is particularly true if such technological assistance could be applied to developing country diseases without threatening patent validity elsewhere, said one industry participant at the event.

But for needed new innovation it is important to “recognise that the patent-based system doesn’t work for the developing world, and that different incentives are needed,” said Ben Plumley of pharmaceutical firm Johnson & Johnson’s Global Health Partnerships department. The need for new incentives could potentially be the driver of a new business model, Plumley added.

One useful aspect of prizes, Love added later, is that they can be designed in a variety of ways: to be specifically geared at one medical product, for example a diagnostic for tuberculosis, or to be more like funds, open to a wide variety of medical products and distributed according to public health benefits. Criteria for eligibility can be set to help achieve development goals: for example, medicines might be required to have a viable mechanism for delivery in resource-poor areas in order to qualify.

Competition; Interim Rewards

Attendees were concerned that prize funds not recreate the same problems as the current system. As such, said Nicoletta Dentico, an advisor for Geneva-based think tank IQsensato, “competition is key.”

A fixed prize fund that is divided according to the innovations made in a year could provide a good model for this, Love said. That way, “the dynamic of criticism between competitors for prizes will help punch holes in exaggerated claims” on health benefits, he explained. The amount of reward could be predicated on efficacy over and above the current state of the art, rather than above the placebo, he added, in order to discourage “me too” drugs that tend to have lower benefits for public health, though lower risk in terms of research and development costs.

Rewarding Progressive Steps, Incentivising Sharing

Another idea is to use open licensing, said Judit Rius Sanjuan of KEI. A prize fund might be divided such that ninety percent goes to the group that developed the medical product, and ten percent goes to those that shared data that helped in the development of a medical product. This “open source dividend” might encourage companies to share work that might otherwise have gone unused.

Prizes can also help incentivise research for which rewards from IP might otherwise be too far away. For example, prize-mechanism Innocentive ran a programme with the Tuberculosis Alliance Challenge which sought a better way to manufacture drugs for TB that would avoid an expensive three-step process involving an explosive starting material that is currently prevalent. The winners received $20,000 each for their ideas, which are now being explored further with the aim of developing a practical synthesis process.

Setting A Price

The amount of a prize matters, said Paul Wilson, assistant professor of Clinical Population and Family Health at Columbia University, “but you may not need as much as you think.” Also what the prize is stimulating may be surprising. Often, Wilson said, part of the award amount is just to attract attention, improve visibility, and therefore excite more potential innovators.

And academic researchers rarely see themselves as motivated by profit, though, noted Aaron Kesselheim of Harvard Medical School, they often need funding to carry out their research. And for businesses, Love said, a prize must be significant enough to make it appealing over the monopoly system currently in place.

The disease being researched may have an impact on the amount necessary.

“It is logical that the more neglected a disease, the greater the prize,” said Michel Lotrowska of the Drugs for Neglected Diseases Initiative. For example, Type III diseases – which are found either overwhelmingly or exclusively in developing countries – and for which there is often no market and therefore no incentive for research in that area call for big prizes. A prize in this area “could really matter, and a high prize may be a way for industry to want to finish development.”

But some questioned if the prizes could ever be high enough to cover all costs for some kinds of drug development.

Heather Ignatius of the TB Alliance said that effective treatment of TB is not a matter of inventing one new drug, but rather about inventing regimens, which could cost hundreds of millions of dollars. The US Food and Drug Administration now requires 2,400 people for new TB drug trials, Ignatius said, which costs an average of US$18,000 to $24,000 per patient. It is unlikely that there is a “prize big enough to recoup all R&D costs,” she said, and wondered if a partial recoup from prizes, plus added benefits such as prestige, could make up for that.

Another key question is where to find financing. There are three key questions, said Michelle Childs of MSF: who pays for R&D, who sets priorities, and how to spend the money. Currently, priorities are of necessity “skewed by profit-seeking,” because this is the only way to recoup costs.

Dentico noted that the consequences of the current financial crises are a likely decline in aid. “Are we ready,” she asked “to move away from aid dependence, which creates uncertainty and perverse incentives to tailor priorities to donors?” One way to generate independent revenues is to place a small levy on currency transactions, following the model of drug-purchasing mechanism UNITAID which uses a tax on airline tickets to fund drug purchasing. The proposed amount of currency levy is 0.005 percent, which is small per transaction but would raise a lot of money for research and development.

Of course, prizes cannot in and of themselves change a market, said Tido von Schoen-Angerer, executive director of MSF’s Access to Medicines campaign. The IP system of innovation may be a barrier, he said, but it is not the only barrier.