[Ip-health] Health Impact Fund: new proposal, book, conference

[Aidan Hollis]

The Health Impact Fund is a new proposal to incentivize innovation in
valuable new drugs and to ensure access at the cost of production.
Incentives for Global Health has produced a book to explain how this
proposal would work, and what its particular advantages are. The executive
summary is copied below, and the full text of the book is available at
www.healthimpactfund.org

The official launch of the book will occur on August 25 2008 in Oslo. More
details about the launch, to which all are invited, may be found by clicking
through events at the www.healthimpactfund.org website.


We hope that you find the book helpful and we welcome your comments.

Aidan Hollis and Thomas Pogge


Executive Summary
The Health Impact Fund (HIF) is a new proposal based on two simple insights:
(1) privately funded pharmaceutical R&D responds to incentives, and (2) new
drugs can have a much larger impact if their prices are low. At present, the
most profitable research efforts are not the ones most needed to alleviate
the global burden of disease. And high prices often put new drugs out of
reach of most of the world's population.

The HIF seeks to correct both of these failings by offering to reward any
new medicine, if priced at cost, on the basis of its global health impact.
Any firm receiving marketing approval for a new medicine would be offered a
choice between (a) exercising its usual patent rights through high prices or
(b) registering its product with the HIF. Registration would require the
firm to sell its product worldwide at an administered price near the average
cost of production and distribution. In exchange, the firm would receive
from the HIF a stream of payments based on the assessed global health impact
of its drug. The HIF is, in other words, an optional pay-for-performance
scheme for new pharmaceuticals.

Innovative companies would benefit from this new option because they could
profitably introduce important new medicines that are needed mainly by
patients who cannot pay high prices. Patients-especially those in the
developing world-would benefit through access to new drugs at low prices. By
supporting the HIF, citizens and governments in all countries would reap
large cost savings on medicines as well as substantial reductions in the
human and economic burdens of disease.

The chief problems with the present system governing the development and
distribution of medicines are well known: despite relatively low
manufacturing costs, patented medicines are often very expensive and are
therefore unaffordable for most people; and diseases concentrated among the
poor attract little or no pharmaceutical research. As a result of both
factors, the disease burden among the poor is, avoidably, very high. Many
diseases of the poor are communicable and expose all of humanity to the risk
of new and virulent strains. These problems are further aggravated: by
patients who, often deterred by high prices, fail to complete a full course
of treatment; by lack of access to competent medical staff who would ensure
that medicines are taken correctly; and by counterfeiters, often attracted
by high prices, who may dilute a medicine's active ingredients. In addition,
competitive marketing and litigation costs reduce the return from
innovation, and make it a less attractive investment.

Each of these problems has provoked ideas and initiatives by academics,
NGOs, governments, and international agencies. By supporting both innovation
and real access, the Health Impact Fund extends the best of these ideas into
one comprehensive, unified solution that makes substantial progress toward a
rational system of developing and distributing worldwide the pharmaceuticals
we all need.

This book explains how the HIF would work and why the world needs it.
Chapter 1 provides a summary overview. The next four chapters examine in
detail how the HIF would operate. Chapter 2 discusses the proposed mechanism
for deciding how much each innovative drug would earn based on its assessed
health impact. Chapter 3 shows how health impact can be measured while also
examining the difficulties such measurement would have to overcome. Chapter
4 explores the HIF's governance and administrative structure. Chapter 5
considers the commitment of funding partners.

The following four chapters explore the rationale for the HIF. Chapter 6
constructs a moral argument, based on widely recognized human rights, for
implementing the HIF. Chapter 7 shows how the HIF would help address the
important "last mile" problem of ensuring effective distribution and use of
pharmaceuticals in poor countries. Chapter 8 shows, from an economic
perspective, how the HIF would usefully supplement the patent system, and
Chapter 9 examines the relationship between the HIF and other proposed
reforms. Chapter 10 summarizes the above and shows how this new mechanism
can be brought into being.

The HIF is a work in progress, to be further perfected and completed with
the help of many stakeholders. This book's objective is to show that, and
how, the existing rules governing the development and distribution of new
medicines can be improved upon in ways that would dramatically enhance
global public health. The Health Impact Fund is a feasible complement to the
existing regime. Governments have decisive moral reasons to implement the
HIF and citizens have decisive reasons to urge their governments to do so.

Most countries are unable to institute the HIF single-handedly. But
governments can make a conditional commitment to participate if enough
others are also willing. Given a threshold participation of states
representing about one third of global income, the founding partner states
can commence the Fund at a cost of 0.03 percent of their respective gross
national products. The Fund would then become operational within three years
and be enhanced thereafter as experience warrants. There is little to lose,
much to gain, and no time to waste.



Aidan Hollis

Associate Professor
Department of Economics
University of Calgary

2500 University Dr NW
Calgary Alberta
T2N 1N4 Canada

tel: 403 220 5861  fax: 403 220 5861
email: ahollis@ucalgary.ca
web: http://econ.ucalgary.ca/profiles/aidan-michael-hollis