Health

The Failure of Pharmaceutical R&D: Current Responses (2/4)

This is part 2 in a 4 part series. Read Part 1.

Since the 90/10 gap was first understood, it has been a top priority of international agencies, philanthropists, and governments involved in global healthcare. As a result, several strategies have been deployed.

In the area of existing drugs, several mechanisms have been used to improve the access to drugs in poor countries. Private companies, under pressure, have created drug donation programs. As an extension, public-private partnerships have blossomed, such as the Global Fund, The Rollback Malaria Initiative of Novartis, and the now defunct Accelerating Access Initiative for HIV/AIDS.

There have also been more market-oriented responses. Governments in many developing countries have taken on the role of purchaser for drugs. The increased purchasing power allows governments to purchase drugs at better prices. Some governments have also used the threat of compulsory licensing to bargain for better prices. Perhaps the most famous, and maybe only case, is the falling prices of anti-retrovirals used in the treatment of HIV/AIDS, where generics were provided by Cipla, an Indian pharmaceutical company, to African countries at a fraction of the price of the original patented drug.

Finally, private companies too have moved towards differential pricing. In this mechanism, companies price drugs lower in developing countries, based on local purchasing power, while recouping profits from higher prices received in the developed world. There is, of course, an element of free-riding involved, but if that is accepted this is a sustainable model.

Unfortunately, none of these strategies address the lack of development of and investment in new drugs afflicting poor countries. A separate set of strategies has been deployed there.

First, there has been some investment in neglected disease R&D directly by pharmaceutical companies. Astra-Zeneca and Novartis have setup dedicated R&D centers in Bangalore, India, and Singapore. Second, public-private partnerships focused exclusively on new drug development have also been created. OneWorld Health is one such example. Others include the Medicines for Malaria Venture and the Global Fund to Fight AIDS, TB and Malaria.

These two strategies – private investment and PPPs – are promising. But even together their resources are miniscule at best, compared to the scale of the problem. Besides, while they do channel money into neglected disease research, they do nothing to change the underlying lack of financial incentives for such research and can, therefore, hardly be considered sustainable.

A final strategy, therefore, has been to consider ‘advanced market commitments’ (AMCs) that create guarantee funds for a given vaccine or drug. Under this mechanism, a declared amount of money would be placed in a guarantee fund to purchase vaccines or drugs for a given condition, should a private company be able to develop an appropriate drug to combat it.

In December 2005 the G-8 proposed a plan to fund between $800 million to $6 billion worth of purchases. There are, of course, questions and doubts about the proposal, as well as several details to be worked out. The idea is also essentially a long-term bet, as drug/vaccine development can take years. Still, the underlying idea is to make market incentives that have so far been denied to poor countries, available to them.

This mechanism, unfortunately, also falls short of long-term sustainability, as it is dependent on donations just as every other mechanism discussed so far.

What this seems to suggest is that the health gap is not easily solved. As I will argue next, there are other problems beyond the ability of consumers to pay, that exacerbates the health gap. In the absence of a fundamental shift in values and policy, no partnerships or donor initiatives will garner the kind of resources necessary.

© 2006 The Discomfort Zone.