Imagine the first Ebola outbreak in 1976 had been in a rich part of the world. Somewhere near London, Brussels, Osaka, Sydney or Chicago. No doubt, pharmaceutical companies, building on early research into the disease, would have worked very hard to develop effective remedies and to do the required clinical trials to get them approved for marketing. Ebola would not have had a chance to stage a second major outbreak — let alone another dozen.
In fact, of course, the first outbreaks were in the Sudan and in Mobuto’s Congo (then Zaire), and subsequent ones occurred in other impoverished areas of Africa, not places where pharmaceuticals can be sold at patent-protected hundredfold mark-ups. And even with the latest, much larger outbreak — some 20,000 cases with 8,000 deaths — the urgently needed trials are conducted not by pharmaceutical companies but by the NGO Médecins Sans Frontières and by publicly funded agencies such as the U.S. Centers for Disease Control and Prevention.
Ebola’s flourishing is further favored by the fact that pharmaceutical companies have little interest in the two classes of medicines most likely to work against infectious diseases: vaccines and antimicrobials. Vaccines are unlucrative because they tend to be purchased in bulk by large buyers who can bargain down the price. Antimicrobials are unlucrative because they often either become ineffective as a resistant strain of the disease becomes prevalent or else are prescribed only rarely precisely to avoid such emergence of drug resistance.
It is easy to blame pharmaceutical companies for the problem. Their single-minded pursuit of profits leads them to pass up important challenges and to focus instead on medically unneeded me-too drugs, on the expensive development of lifestyle drugs (e.g., against hair loss and impotence), and on maintenance drugs for which they can extort well into the six digits per annum. But it would be fairer and more productive to blame ourselves first and foremost for regulating the pharmaceutical industry so as to give it all the wrong incentives. Companies go after profits; if we want them effectively to promote human health and justice in health care, then we must align their incentives with these goals.
How can we do this? In past work with Aidan Hollis, I have proposed creation of the Health Impact Fund (HIF). The HIF is a pay-for-performance scheme that would offer innovators the option to register any new medicine, thereby undertaking to make it available at or below manufacturing cost during its first 10 years on the market (roughly matching the effective patent life of conventionally rewarded medicines). The registrant would further commit to allowing, at no charge, generic production and distribution of the product after expiry of this reward period. In exchange, the registrant would participate during that decade in fixed annual reward pools divided among all registered products according to each drug’s measured health impact. The size of these pools could be chosen to incentivize an appropriate number of important R&D projects. At $6 billion annually, one-third of one percent of global military spending, the HIF might support some 25 new medicines at any time, with 2 or 3 entering and leaving each year.
The HIF would foster the development of new high-impact medicines and, in particular, turn the now-neglected diseases of the poor into some of the most lucrative pharmaceutical R&D opportunities. It would avoid the bias that currently favors maintenance drugs by fully rewarding health gains achieved by preventative and curative products. It would also discourage the development of me-too drugs by rewarding them only insofar as they produce health gains beyond those achieved by their similar predecessors.
The HIF would promote access to registered medicines by limiting their price to the lowest feasible cost of manufacture and distribution. Registrants would often benefit from selling to the very poor at extremely low prices—even below cost—because of the increased health impact they would thereby achieve.
The HIF would motivate registrants to care not about mere sales but about health gains. Registrants would focus their marketing on patients who can really benefit from their product, regardless of their socioeconomic status. Registrants would have a stake in ensuring that their medicines are widely available, competently prescribed, and optimally used.
Additional dramatic efficiency gains would arise from avoiding deadweight losses (no mark-ups) and counterfeiting: with the genuine item widely available at or below cost, making and selling fakes is unprofitable. The HIF would also avert much costly litigation: generic firms would lack incentives to compete, and registrants would lack incentives to suppress generic products. Registrants might therefore not even bother to file for patents in many countries.
Targeting infectious diseases in particular, the HIF could offer, specifically for registered antimicrobial drugs, an additional E-reward based on their preserved global efficacy. While health-impact or H-rewards are sensitive to the number of patients served and to the health gain a product achieves for each patient (relative to the treatment s/he would otherwise have received), E-rewards are sensitive to the percentage of patients susceptible to the medicine and to the health gain it brings to the average susceptible patient (relative to no treatment at all). Thus, an innovator could receive substantial E-rewards for a product that is used only rarely, in cases where other treatments fail. E-rewards pay for the protection we all enjoy by having an efficacious product in reserve.
Seeking to raise the sum of the two rewards, innovators would want to discourage low-value uses of their product (where the expected loss in E exceeds the expected gain in H plus any permissible price mark-up). E-rewards might last an additional 5—10 years beyond the 10-year period of H-rewards so as to give the innovator an incentive to continue its efforts to provide the medicine at a low price and to preserve its efficacy.
The reward scheme might be complemented by a new intergovernmental agency for infectious diseases, organized perhaps as a corporation on the model of the Global Fund. Harvey Rubin and his collaborators at the University of Pennsylvania have recently proposed such an agency under the name of Global Governance Structure for Infectious Disease (GGSID). This agency could oversee and coordinate worldwide efforts in basic research, vaccinations, surveillance, diagnostics, infection control, general antibiotic stewardship and other public health measures focused on infectious diseases. It would control the use and licensing of all antimicrobials and administer the E-reward scheme and the supplementary efforts. It could be financed through user fees on all non-human uses of antimicrobials worldwide and on all human uses of any (including generic) antimicrobials in high-income countries. With human antimicrobial expenditures at over $30 billion, $3 billion could easy be raised just from the latter funding source.
At relatively low cost of $9 billion each year, such an expanded Health Impact Fund would greatly strengthen our arsenal of vaccines and antimicrobials, thereby ensuring a rapid and effective response to new infectious diseases (which emerge at a rate of about four per annum) and to new, drug-resistant strains of old ones. Millions of lives would be saved, especially among the world’s poor. And all human beings would be much better protected against the ever-changing threats from infectious diseases.
Confronting ever-rising health care costs by tying reward to performance, the HIF would pay for itself many times over: through lower prices for advanced medicines and by averting disease with its associated costs of medical treatment and lost productivity. It would save millions of people each year from death or serious illness. It would be an exemplary global public good to which all nations could contribute and from which all would benefit.
We had promising Ebola medicines decades ago and we let them sit on the shelf, undeveloped. Let us not do the same with the HIF idea. With a few leading developing countries, including India and Brazil, let Europe take the lead in piloting the HIF reward mechanism and then promote its implementation through the G20.