The Health Impact Fund

Last week I spoke with Yale Professor Thomas Pogge about his proposal for a "Health Impact Fund." The mission is to provide incentives to develop and distribute drugs that will achieve major global health impacts. Pogge sees the current patent system as valuable, but lacking. The problem is that the most innovative pharmaceutical companies find it very difficult to make money from treatments that are focused on the problems of the developing world. Although helpful, charity donations of drugs are typically insufficient and lead to the problem of parallel imports.

The solution proposed by Pogge is to form a global fund and pay innovator companies based on the global health impact of their new treatment. The more "quality adjusted life years" (QALYs) saved, the more money a company gets. The intent of this reward scheme is to focus the innovators on developing and distributing treatments that will have the greatest worldwide health impact.

The system is intended simply as an additional incentive layer. A drug developer may obtain patents as usual. However, in order to qualify for the program, the patentee would agree to sell its drugs at cost and guarantee access.

Pogge's models suggest that the fund would have a major impact if funded with $6 billion annually.

Notes:

• HIF Book is online
• I like the idea of aligning economic interests of the innovators with a health impact. If structured correctly, innovators will like this program because it does not take away the option of simply using the traditional patent system. The problems are primarily logistical: who pays the $6b?; how do you measure health impact?; how do you prevent gaming the system (by, for example, only using the program when the patents are likely to be challenged)?; etc.
• President Bush's "Emergency Plan for AIDS Relief" is set to spend about $6 billion on global AIDS treatment this year. [Link]

Comments

[6000]

If I had 6b dollars I'd use it to bribe congress to fix the patent system, thus causing innovation to flourish unhampered by the dregs of overclaiming and not claiming the subject matter which you regard as your invention. After that, all that is wrong with the world will be put right. Including, but not limited to, disease. I envision a significant down turn in the murder rate, as well as there being no more hungry people. Anywhere. Also, wars would end because there would be too much ecomonic properity all over the world so nobody would have time to think about war. If only I had 6b dollars.

You could totally trust me with it 0:)

[Hank Rearden]

"If I had 6b dollars I'd use it to bribe congress to fix the patent system..."

I think the CPF already spent that, and more, in its failed attempt to get patent reform passed.

Of course, nobody in the CPF has the advocacy skills of the vaunted e6k.

LOL

[Gray Market Goods]

"in order to qualify for the program, the patentee would agree to sell its drugs at cost and guarantee access"

How, exactly, does this solve the problem of parallel importation / arbitrage? Looks like it would make it worse.

[6001]

This seems like a good idea. I like that it is self-funding by reducing the price of medicines.

I also like that it offers a way for innovators to be rewarded when the patent system isn't up to the job of protecting exclusivity.

As for parallel imports, it seems like this would reduce the economic incentive for arbitrage by requiring low prices everywhere.

[Anon E. Mouse]

Gray Market Goods:

It doesn't.

Politically, this is a wedge for the anti-patent folks to say: "I told you the drug companies don't need their evil monopoly profits from drugs. We need to have a Drug Development Czar that decides what drugs get rewarded. This synergy of government and industry will cure the world of disease."

Practically, I think the drug co's won't buy into this unless they feel the PR hit will be worse than the GMG hit...and/or that they can capture the regulators (i.e., control the awards system including the definition of "at cost" and "guarantee access").