Viewpoint

The Health Impact Fund: incentives for improving access to medicines

Conventional cost-effectiveness analysis (CEA) for the value-based pricing of new medicines largely ignores the implications of limited market exclusivity (ie, patent-protection periods plus any exclusivity granted by regulators). This paper explores the implications of this methodological shortcoming, which produces several pricing anomalies with potentially unintended effects on research and development (R&D) incentives.

We illustrate these implications by comparing 4 stylized examples of increasing complexity, from short-term cures for acute conditions to long-term cures for rare, health-catastrophic conditions.

(1) Conventional-CEA will project a different result than an adjusted CEA that considers generic or biosimilar entry; (2) free and flexible pricing of long-term treatments (eg, statins for hypercholesterolemia) or repeated-dose cures (eg, insulin for type 1 diabetes) for chronic conditions will likely result in predictable price increases at the end of the exclusivity period that may be perceived as unjustified or unsupported; and (3) one-time administration “cures” (eg, gene therapy for spinal muscular atrophy) have the potential to allocate a large share of the social surplus to the manufacturer over the product lifetime, which may or may not be dynamically efficient per se, but may also inadvertently disadvantage the development of valuable long-term treatments or repeated-dose cures for chronic conditions.

We highlight the need for additional research on long-term solutions to these issues that would aim to promote dynamically efficient global R&D. More work is needed on the following: (1) relationships between social surplus allocation and the amount and composition of global R&D, as we may be as likely to be encouraging excessive R&D in some areas as to be undersupplying it in others; and (2) relating the size of the surplus reward to R&D cost and, thus, the return on investment.

The COVID-19 pandemic has witnessed highly successful efforts to produce effective vaccines and treatments at an unprecedented pace. This perspective discusses factors that made this possible, from long-term investments in research infrastructure to major government interventions that absorbed much of the risk from research and development. We discuss key economic obstacles in the discovery of new drugs for infectious diseases, from novel antibiotics to diseases that primarily affect the poor. The world's collective experience of the pandemic may present an opportunity to reform traditional economic models of drug discovery to better address unmet needs. A tax-funded global institution could provide incentives for drug discovery based on their global health impact. International co-operation would be needed to agree and commit to adequate funding mechanisms, and the necessary political will would require strong public support. With the current heightened appreciation of the need for global health system resilience, there may be no better opportunity than now.

The globalization of clinical research should also benefit the population in developing markets. In this context, the approval of tested medicines and the associated expansion of medical care beyond clinical studies would be desirable as a possible long-term benefit.

This study was designed to compare the development of the number of clinical trials with the number of marketing authorizations of medicines on the African continent. To contrast these 2 parameters, the data were analyzed using the model of an ecological study.

To reflect the broad spectrum of African developing countries with diverse levels of development, the data collection was based on 2 geographically selected sample countries each from Central, North, East, West, and Southern Africa. Based on the ClinicalTrials.gov registry, the first step was to collect trends data on the development of the clinical trials in the 10 selected countries of the country list of the African Region published by the World Health Organization for the period 2015 to 2018. Subsequently, data on the current number of marketing authorizations of medicines in the selected sample countries were identified using the online registries of the national authorities. The data were utilized in comparative analyses.

Eight out of 10 model countries showed an increase in the number of clinical trials, with the exceptions of Cameroon and Libya, which showed an overall decline in research activity over the entire time. In direct comparison with drug registrations, the numbers indicate a similar development. The only exception here is Nigeria, a country with a solid performance in clinical research and yet a decrease in medicine registrations since 2015.

The expected increase in the development of clinical research as result of the globalization trend can basically be observed in most of the model countries. However, this increase does not guarantee an improvement in the number of medicine registrations. Although this is evident in some of the selected model countries, it cannot be projected to the entire African region. This may be linked to the diverse development of the individual countries due to the different political situations and the varying degrees of clinical research infrastructure. (Curr Ther Res Clin Exp. 2022; 82:XXX–XXX)

Patents are a useful but imperfect reward for innovation. In sectors like pharmaceuticals, where monopoly distortions seem particularly severe, there is growing international political pressure to identify new reward mechanisms which complement the patent system and reduce prices. Innovation prizes and other non-patent rewards are becoming more prevalent in government’s innovation policy, and are also widely implemented by private philanthropists. In this paper we describe situations in which a patent buyout is effective, using information from market outcomes as a guide to the payment amount. We allow for the fact that sales may be manipulable by the innovator in search of the buyout payment, and show that in a wide variety of cases the optimal policy still involves some form of patent buyout. The buyout uses two key pieces of information: market outcomes observed during the patent’s life, and the competitive outcome after the patent is bought out. We show that such dynamic market information can be effective at determining both marginal and total willingness to pay of consumers in many important cases, and therefore can generate the right innovation incentives.