7 PM Editorial |Health Impact Funds as alternative to existing Intellectual Property system to reward innovation| 7th June 2020


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Health Impact Funds as alternative to existing Intellectual Property system to reward innovation


COVID 19 has brought focus on public healthcare and affordability of medicines to the poor. Medicines improve health and longevity, save costs by reducing sick days and hospitalization. Current global market for pharmaceuticals is about 110 lakh crore. Of this, 55% is branded medicines with patents.

Pharmaceutical patenting and it’s issues:

Research and Development(R&D) in pharmaceuticals is rewarded through patents for new medicines. This patent provides patent holders exclusive privilege for commercial production and sale of these medicines. It is valid for 20 years. Intent of the patent is to recover R&D costs, costs of clinical trials and reward the researcher with profits. IP (Intellectual property) laws of respective nations and global frameworks like TRIPS deal with granting patents.

This method of rewarding R&D has issues. These are:

  1. Due to profit motive, R&D is focused on diseases affecting affluent sections. For diseases affecting the poor, there is miniscule R&D investment. 20 WHO listed neglected tropical diseases affect a billion people but attract only 0.35% of global R&D investments. Similar is the case with Malaria, Tuberculosis.
  2. In pursuit of high profits, high selling prices of branded drugs is leading to lack of affordability with the poor. An Example is USA where profits of 100000% are also permitted. Affluent patients with insurance are not affected by the same. This unaffordability for the poor is leading to deaths which are preventable especially in developing countries.
  3. There is no linkage between therapeutic value and patents. Even those medicines which don’t contribute to the health of patients are manufactured and sold by questionable marketing methods. Roping in doctors to prescribe certain drugs despite no impact on health is an example.
  4. Evergreening: It refers to an extended period of patent beyond the original 20 years  without any real improvement in therapeutic benefits. Firms do this by citing minor changes in formulations, methods of medicines. In India this is restricted by stringent provisions of Patent act and Supreme court judgment on NOVARTIS case of 2013. But it is prevalent in other countries
  5. No focus on diseases where patients are low in number due to lack of profits. Such diseases are called orphan diseases.

Considering these issues, an alternative method of rewarding innovation and R&D is needed. Health Impact funds can be a solution

Health Impact Funds (HIF):

In HIF framework, after patenting, medicines are sold at cost price i.e. only manufacturing and distribution costs are included without profits. Innovators are awarded annually based on public health outcomes for a set number of years (say 10 years). These rewards are funded by governments and development institutions through contributions to funds. For affluent countries which do not contribute to this fund, existing framework based on profits can continue

Benefits of HIF
  1. For tuberculosis and other communicable diseases which impact large poor populations, HIF framework provides a profitable business model for pharmaceutical companies. Since large populations can be saved, rewards linked to this outcome will also be significant.
  2. Due to focus on outcomes, HIF framework prevents wastage of R&D investment into drugs without any therapeutic value
  3. Outcome focus also pushes pharmaceutical companies in tracking overall health of patients. Companies will deal with any complications to improve recovery o f patients. They will also focus on affordability to increase public health, elimination of diseases like malaria
  4. Removes need for compulsory licensing (removing exclusive privileges of patents to ensure public health). Outcome focus will automatically take care of improving accessibility, affordability and availability of medicines.
Limitation of HIF:

In emerging diseases like COVID, HIF cannot work in the short term. This is due to a lack of baseline to measure effectiveness of new medicine on improvement in public health.  In case of prevalent diseases like Malaria, this won’t be the case as there is data on how disease impacts health. So here we can measure improvements.

Going ahead:

By shifting focus to outcomes based rewards, HIF can bring immense benefits in healthcare. Innovation too is rewarded for contributing to public healthcare outcomes. In midst of COVID 19 crisis, opportunity to develop a new beneficial pharmaceutical R&D should not be missed

Source – https://www.thehindu.com

Mains Question:
  1. Pharmaceutical patenting is leading to adverse public health outcomes. Alternatives are needed for improving affordability, accessibility and availability. Discuss? [15 marks, 250 words]
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