Health Initiative Proposes Rewarding Innovation On Impact Results; Some See Hurdles04/05/2010 by Catherine Saez, Intellectual Property Watch Leave a CommentShare this Story:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Google+ (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window)IP-Watch is a non-profit independent news service, and subscribing to our service helps support our goals of bringing more transparency to global IP and innovation policies. To access all of our content, please subscribe now. You also have the opportunity to offer additional support to your subscription, or to donate.An alternative initiative to promote access to medicine with a method mimicking market mechanisms means to create additional incentives for health innovation, authors of the proposal said yesterday. But other health actors have reservations.A public event was organised on 3 May to discuss how the Health Impact Fund (HIF) could fit within existing structures and what challenges it could face.The HIF, the main project of Incentives for Global Health, a non profit organisation based at Yale University, aims at rewarding health innovations through remuneration calculated on the basis of their global health impact. A book was published in 2008, describing the mechanism: The Health Impact Fund: Making New Medicines Accessible to All.High prices brought by intellectual property rights are the main barrier to access to medicine, book co-author Thomas Pogge of Yale University told the audience at the Graduate Institute of International and Development Studies in Geneva. However, lowering prices is not enough, he said, as low prices would create very little incentive for companies to innovate, especially in diseases affecting primarily developing countries, he said.In the new mechanism, the HIF would pay for pharmaceutical innovation, according to Pogge. Companies opting to be part of the HIF would agree that their newly developed drugs be sold worldwide at a price near the average cost of production and distribution. Companies would then receive a stream of payments from the HIF, over the 10 years following the introduction of their products on the market.Companies would make no profit on direct sales but rather get a reward payment, conditioned by the health impact of their new medicines. The payments would depend on the health impact of the product, the health impact of the other products in the programme, and the total reward available.Patents on the invention would remain the property of the companies developing the drug. However, according to the book, at the end of the 10-year period, the HIF “is entitled to offer royalty-free limited licences in all jurisdictions, of all patents required to manufacture and sell the product, limited to use in manufacturing and selling the product. This would enable generic competition following the ten year payment period from the HIF.”The system does not undermine patent rights, Pogge said, it would just provide a different way of being paid. The HIF could also reward unpatentable products, such as traditional medicine, he said.The HIF is a market-based solution, said co-author Aidan Hollis of the University of Calgary (Canada). Payments are determined by competition between all registered products for the available reward. One of the difficulties of the HIF is the assessment procedure. Data collection might not be available in developing countries, and weaker healthcare infrastructure and less compliance with therapeutic regimen could hamper the process, Hollis said.The assessment process will be expensive to run but assessment of health impact is a priority in developing countries, he said.The HIF also depends on a long-term commitment from governments to offer companies the guarantee of continued payments once they commit to the system.The Expert Working Group on R&D financing set up by the World Health Organization has listed the HIF as a “promising proposal”. The expert group is set to report to the 17 May annual World Health Assembly.In its report [pdf], the Expert Working Group said that the HIF had innovative aspects but some difficulties were associated with the proposal such as the method of assessing health impact not being agreed and not open to dispute. Statistics on health impact are “likely to be most reliable for high-profit commercial diseases, for which developers would probably choose the intellectual property system over the health impact fund, and less reliable for low-profit neglected diseases, for which the health impact fund would theoretically be more attractive,” the report said.A participant asked if the HIF was working in the same way as advance market commitments. In the system of advance market commitments, donors commit money ahead of time to guarantee the price of drugs once they are developed. Pogge said that the HIF offered a better alternative as companies would be proposing medicines, for areas they have determined themselves. The HIF would not have to commit to a fixed financial reward, as the reward would depend on the market, he said. Advance market commitments offer more clarity for innovators, as with HIF there are new and unknown risks, said Hollis, describing this as a trade-off between the different mechanisms.One of the most urgent health problems in developing countries is that existing drugs are not reaching patients, not so much the need for new drugs, said Hans Hogerzeil, director of the Department of Essential Medicines and Pharmaceutical Policies at the World Health Organization.A system of differential prices is also very important, he said, as developed countries have to pay much more than developing ones, noting that the HIF offered one global single price for drugs, whatever the country they were sold in. The pricing for middle income countries is the real contentious issue, he said, adding that the HIF would face a hurdle on market prices.For Nina Schwalbe, managing director of the GAVI Alliance, a Geneva-based global partnership on vaccines, putting ideas to work in a real-life context is a challenge. She said the HIF should go see implementers to better understand potential problems and address practical questions such as supply chain control or the difficult task of verifying manufacture costs. Major pharmaceutical companies “are not ready to open their books,” she said.The HIF also should be aware that difficulties might arise when trying to sell the project to governments wary of complex systems. It needs “to be easily digestible,” she said. Companies will also need to sell the concept to their shareholders.New models are needed, said Tido von Schoen-Angerer, director of the Campaign for Access to Essential Medicines at Médecins Sans Frontières (MSF, or Doctors without Borders). But although the principle of rewarding companies based on health impact was a good idea, he said, the health impact assessment would be very difficult. He also said that delinking the cost of research and development from the price of the product would be interesting as that would provide a useful principle when looking at different models.A question about risk sharing was also brought up by Schwalbe, who asked what would happen if a company had lowered its price but nobody was buying the products, or if a company decided to opt out of the system and prices went up for patients. Hollis said this situation would create a whole new set of problems.Some observers commented earlier in the HIF project that retaining intellectual property rights on the products would perpetuate the right to exclude. The same observers said that the HIF system would unfavourably impact the generic drug industry as subsidised brand-name products offered at low costs would make it harder for generic companies to enter into a market against an established competitor with a brand name.Share this Story:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Google+ (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window)RelatedCatherine Saez may be reached at email@example.com."Health Initiative Proposes Rewarding Innovation On Impact Results; Some See Hurdles" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.