[Ip-health] HIF on the Sanders prize fund bill

[James Love]

http://www.keionline.org/blogs/2008/11/18/hif-on-sanders-prize-fund/

HIF on the Sanders prize fund bill

In their recent book on the Health Impact Fund,* Aidan Hollis and Thomas
Pogge discuss a number of issues. This is what they say about S.2210
(110th Congress), Senator Sanders=E2=80=99 proposal for the Medical Innovat=
ion
Prize Fund.

Page 105-106

    Medical Innovation Prize Act of 2007

    This bill, introduced in the US Senate by independent Senator Bernie
Sanders, proposes a non-voluntary replacement for the existing monopoly
patent system that would eliminate market exclusivity for patented
products in favor of a government fund that would reward innovators for
the health impact of their patented innovations.4 It is intended to
impact the domestic US pharmaceutical market exclusively. The
legislation establishs a Medical Innovation Prize Fund that would
incentivize research into new medicines that improve health outcomes,
especially in essential areas, and would expand access to new medicines
by separating rewards for innovation from monopoly pricing. Patents
would no longer serve to guarantee market exclusivity, but would instead
be used only to determine eligibility for reward funds. Patent holders
would be immediately forced to allow the open use and production of the
patented innovations, and the patentee would be rewarded by the
government according to the positive health impact of the innovation,
much as in the Health Impact Fund. The distribution of prize payments to
innovators would be made by a panel consisting of government officials
and representatives of stakeholder groups according to the criteria of
the incremental therapeutic benefit of a drug and access improvement as
compared to the baseline of existing drugs and the degree to which the
drug meets health priorities including global infectious diseases,
neglected diseases, and rare diseases and conditions.

    This proposal achieves a number of important advantages, going far
beyond any of the other proposals considered here to address both
problems of access and innovation. The prize fund would entirely replace
the market monopolies granted by patents to new medicines, completely
separating prices from drug valuation. The requirement that all patented
medicines be immediately available for generic production is intended to
allow prices to drop to the marginal cost of production, increasing
access. The proposal also contains provisions for special payments to be
made for drugs treating neglected diseases.

    Despite these important advantages over the current patent system,
the Medical Innovation Prize Act is problematic in some respects. The
fact that it is a mandatory, comprehensive system for all
pharmaceuticals, not just for those products which opt in, means that
its implementation requires a substantial re-organization of the entire
pharmaceutical industry, which is unlikely to be politically feasible.
At the same time, its comprehensive approach would create problems for
innovators developing drugs with relatively small measured health impact
but which patients were willing to pay for. In such cases, a willing
exchange between innovator and patient could be blocked, since the Act
would require only small payments to the innovator, inadequate to
incentivize the innovation. There are also questions regarding whether
the act would be compliant with the TRIPS agreement.

    The HIF has several important advantages over the scheme envisioned
in the Sanders bill. The HIF does not aspire to be a comprehensive,
mandatory system. Rather, it would provide an additional option that
firms could choose selectively for products with large health impact but
small profitability under the existing patent scheme. This makes it more
attractive to pharmaceutical companies and to significant numbers of
affluent patients and therefore easier to implement and to sustain. In
addition, by allowing firms to maintain their exclusivity rights =E2=80=93 =
but
not freedom of pricing =E2=80=93 for products registered with the HIF, the =
HIF
has an advantage in creating fewer problems related to licensing.
Finally, the HIF is clearly compliant with the TRIPS Agreement.

=E2=80=94=E2=80=93
* Aidan Hollis and Thomas Pogge, The Health Impact Fund, Making New
Medicines Accessible for All, A Report of Incentives for Global Health,
2008
--
James Love, Director, Knowledge Ecology International
http://www.keionline.org | mailto:james.love at keionline.org
Wk: +1.202.332.2671 | US Mobile +1.202.361.3040 | Geneva Mobile +41.76.413.=
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