Reimagining pharmaceutical innovation | Thomas Pogge at TEDxCanberra

Summary

The speaker addresses the flawed pharmaceutical industry, advocating for a reimagined system based on three principles: universal access to essential medicines, innovation targeting the most damaging diseases, and overall system efficiency. They introduce the Health Impact Fund, a novel incentive mechanism rewarding pharmaceutical companies based on the health impact of their medicines, rather than profit-driven mark-ups. This scheme aims to align industry goals with global health needs, ensuring equitable access and focusing on impactful research.

Takeaways

• 😷 The speaker emphasizes the importance of access to affordable medicine for maintaining health, contrasting it with the high costs of alternatives like hospitalization and operations.
• 🔬 The pharmaceutical industry is acknowledged for its role in developing medicines but is criticized for its lack of popularity and being compared unfavorably to tobacco and arms companies.
• 💡 The speaker proposes three main principles for organizing the pharmaceutical industry: universal access to important medicines, innovation focused on the most damaging diseases, and system efficiency to minimize waste.
• 🌐 The current system is criticized for failing on all three counts: lack of universal access, misaligned innovation focus, and inefficiency with money wasted on lobbying, litigation, and marketing.
• 💊 The high cost of medicines under patent is highlighted as a barrier to access, with pharmaceutical companies accused of pricing for the rich and neglecting the poor.
• 🔄 The concept of the '10/90 gap' is introduced, illustrating the mismatch between research funding and the global burden of disease, with more money spent on less damaging diseases.
• 💰 The unequal distribution of global income is identified as a driver of the industry's focus on wealthy markets, with the bottom half of the world's population having minimal income.
• 📉 The inefficiency of the pharmaceutical industry is further discussed, with funds being spent on lobbying, litigation, and marketing rather than on research and development.
• 🤝 The Health Impact Fund is introduced as a proposed solution, offering a new reward system for pharmaceutical innovation based on the health impact of medicines rather than profit margins.
• 💼 The Health Impact Fund would work with a fixed reward pool, rewarding medicines for their health impact over a ten-year period, after which the medicine would become generic.
• 🌟 The potential benefits of the Health Impact Fund are outlined, including aligning innovation with global health needs, providing a new market for innovators, and improving access to essential medicines for all.

Q & A

What is the main issue the speaker discusses regarding the pharmaceutical industry?

The main issue discussed is the lack of universal access to medicines, the misalignment of pharmaceutical research with the most damaging diseases, and the inefficiency of the system with significant funds wasted on non-productive activities.

Why are medicines expensive during the time they are under patent?

Medicines are expensive under patent because pharmaceutical companies have a temporary monopoly, allowing them to price for the rich, which often results in high mark-ups and excludes the poor from access.

What is the '10/90 gap' mentioned in the script?

The '10/90 gap' refers to the disparity where only 10% of pharmaceutical research funding is allocated to diseases that account for 90% of the global burden of disease, while 90% of the funding is spent on diseases that represent only 10% of the global burden.

How does the distribution of global household income affect pharmaceutical research priorities?

The unequal distribution of income influences pharmaceutical companies to focus on diseases and treatments for the wealthier segment of the population, as they are more likely to afford and generate profit from these medicines.

What are some of the wasteful activities in the pharmaceutical industry that the speaker mentions?

Wasteful activities include lobbying politicians to extend patent periods, paying generic companies to delay entry, litigation between companies, and excessive marketing campaigns to win favor with doctors and patients.

What is the Health Impact Fund proposed by the speaker?

The Health Impact Fund is a proposed system that offers pharmaceutical innovators a choice between traditional patent-protected mark-ups and a reward based on the health impact of their medicines. It aims to incentivize the development and distribution of medicines that have the greatest health impact.

How would the Health Impact Fund work in terms of rewarding pharmaceutical companies?

The Health Impact Fund would have a fixed reward pool and companies would receive a share of the pool based on the health impact of their medicines relative to all registered products. They would receive this reward for a period of ten years, after which the product would go generic.

What is the significance of the 'quality-adjusted life years' in the context of the Health Impact Fund?

Quality-adjusted life years is a method used to quantify the health impact of medicines. It considers both the quantity and quality of life that a medicine can restore or improve, which is then used to determine the reward for the pharmaceutical company.

How does the Health Impact Fund address the issue of counterfeit drugs in developing countries?

By providing genuine medicines at cost price, the Health Impact Fund would reduce the incentive for counterfeiting, as people would have access to affordable, authentic medicines without the need for cheaper, potentially ineffective alternatives.

What is the role of governments in the Health Impact Fund model?

Governments are crucial in funding the Health Impact Fund, providing long-term visibility and assurance for innovators that the reward money is available. They also play a role in supporting and implementing pilots for the Health Impact Fund model.

How can individuals contribute to the Health Impact Fund initiative?

Individuals can contribute by supporting the initiative, engaging with their governments, helping with publicity, and offering ideas to refine the Health Impact Fund scheme. They can also participate in starting a pilot program.

Outlines

00:00

💊 The Pharmaceutical Industry's Dilemma

The first paragraph introduces the importance of access to affordable medicines and the role of pharmacologists and the pharmaceutical industry in developing them. It highlights the industry's unpopularity and the challenges it faces, such as high costs for patented drugs, a focus on diseases affecting the wealthy, and inefficiencies due to lobbying and litigation. The speaker proposes three main principles for organizing the pharmaceutical industry: universal access to important medicines, innovation targeting the most damaging diseases, and overall system efficiency. The current system is criticized for failing on all three fronts.

05:02

💼 Inefficiencies and Marketing in Pharma

The second paragraph delves into the inefficiencies of the pharmaceutical industry, including wasteful marketing practices and the issue of counterfeit drugs in developing countries. It discusses the trillion-dollar annual expenditure on pharmaceuticals, much of which is wasted on lobbying, litigation, and marketing battles. The speaker also addresses the unrealistic expectation that pharmaceutical companies will act morally to solve the access and innovation problems due to their obligations to shareholders, competitive pressures, and dependency on mark-ups for revenue.

10:03

🌐 The Health Impact Fund: A New Reward System

In the third paragraph, the concept of the Health Impact Fund is introduced as an alternative reward system for pharmaceutical innovation. It offers a fixed reward pool based on the health impact of medicines, with rewards distributed over ten years. The fund aims to incentivize the development and distribution of medicines that have the greatest health impact, regardless of the market size. It also suggests a method for determining the cost of production through tendering and selling at cost, with rewards based on real-world health outcomes measured in quality-adjusted life years.

15:03

🌟 The Benefits and Implementation of the Health Impact Fund

The final paragraph outlines the benefits of the Health Impact Fund for innovators, patients, and governments, emphasizing its potential to direct pharmaceutical innovation towards the most pressing health issues. It discusses the need for long-term funding visibility, the self-adjusting nature of the reward rate, and the importance of government funding. The speaker calls for public support, particularly for starting a pilot program to demonstrate the feasibility and effectiveness of the Health Impact Fund model.

Keywords

💡Pharmaceutical industry

The pharmaceutical industry refers to the sector of the economy that is concerned with the research, development, production, and marketing of medications. In the video, the speaker discusses the industry's role in developing new medicines and the challenges it faces, such as the high cost of drugs for the general population and the focus on diseases that affect the wealthy rather than the global burden of disease.

💡Health Impact Fund

The Health Impact Fund is a proposed alternative system for rewarding pharmaceutical innovation based on the health impact of the medicines developed, rather than through patent-protected mark-ups. The concept is introduced as a solution to ensure that medicines are accessible and that research is directed towards the most significant health problems. The video explains how this fund would work, with rewards based on the health outcomes achieved by registered products.

💡Quality-adjusted life years (QALYs)

QALYs is a measure used to quantify the health impact of a medical intervention in terms of the duration and quality of life gained. The video describes how the Health Impact Fund would use QALYs to determine the rewards for pharmaceutical companies, focusing on the real-world impact of their products rather than just clinical trial results.

💡Patent-protected mark-ups

Patent-protected mark-ups refer to the practice where pharmaceutical companies charge high prices for their products during the period of patent protection, often resulting in high costs for consumers. The video criticizes this practice, arguing that it leads to unequal access to medicines and a focus on profitable rather than necessary research.

💡Innovation

Innovation in the context of the video pertains to the development of new medicines and the research conducted by pharmaceutical companies. The speaker points out that the current system does not effectively incentivize innovation that addresses the most significant health issues, as only 10% of research funding is allocated to diseases that constitute 90% of the global disease burden.

💡Universal access

Universal access implies that all people, regardless of their economic status, should have the ability to obtain necessary medicines. The video argues that the current system fails to provide universal access due to high drug prices during patent periods, which disproportionately affects the poor.

💡Generic companies

Generic companies are those that produce and sell copies of brand-name drugs once the patent protection has expired. In the video, the concept of tendering the production of medicines to generic companies is introduced as a way to determine the actual cost of manufacturing and selling medicines at cost price, which is part of the Health Impact Fund model.

💡Evergreening

Evergreening is a strategy used by pharmaceutical companies to extend the patent life of their drugs, often through minor modifications, to maintain market exclusivity and high prices. The video criticizes this practice as it contributes to inefficiency and high costs in the pharmaceutical industry.

💡Litigation

Litigation in the context of the video refers to the legal battles between pharmaceutical companies, often over patents and market access. The speaker mentions that a significant amount of money is spent on litigation, which is considered wasteful and detracts from the development and distribution of medicines.

💡Counterfeiting

Counterfeiting in the pharmaceutical context involves the production and sale of fake or substandard drugs, often in response to the high cost of genuine medicines. The video mentions counterfeiting as a problem in developing countries, where expensive drugs are replaced with cheaper, ineffective versions.

💡Public relations problems

Public relations problems refer to the negative image and lack of trust that the pharmaceutical industry faces due to its practices, such as high drug prices and focus on profitable diseases. The Health Impact Fund is presented as a solution to overcome these issues by aligning the industry's incentives with public health needs.

Highlights

The importance of medicines in healthcare and their cost-effectiveness compared to alternatives like hospitalization and surgeries.

The need for gratitude towards pharmacologists and the pharmaceutical industry for their role in developing new medicines.

The unpopularity of the pharmaceutical industry, ranking with tobacco and arms manufacturers in terms of public perception.

Three main principles for organizing the pharmaceutical industry: universal access, innovation focus, and system efficiency.

The current system's failure to provide universal access to medicines, especially while under patent, due to high costs.

The '10/90 gap' highlighting the mismatch between pharmaceutical research funding and global disease burden.

The role of wealth distribution in the focus of pharmaceutical research and development.

The inefficiencies in the pharmaceutical industry, including lobbying, patent litigation, and marketing waste.

Counterfeit drugs problem in developing countries as a consequence of high medicine prices.

The argument against relying on moral pressure as a solution for the pharmaceutical industry's issues.

The proposal of the Health Impact Fund as an alternative reward system for pharmaceutical innovation.

Details of the Health Impact Fund's operation, including a fixed reward pool and ten-year reward period for registered medicines.

The requirement for pharmaceutical companies to sell at cost price if they choose to participate in the Health Impact Fund.

The method of assessing health impact through quality-adjusted life years and its significance.

The benefits of the Health Impact Fund for innovators, patients, and governments, and its potential for sustainable innovation.

The call for support and the need for a pilot program to test the Health Impact Fund model.

The importance of long-term visibility and government funding for the success and sustainability of the Health Impact Fund.

The self-adjusting reward rate mechanism of the Health Impact Fund and its potential impact on innovator participation.

Transcripts

Transcriber: Judith Matz Reviewer: Megan Currie

Well. I hope you're all healthy

and I hope you all will remain healthy for the indefinite future.

But that hope is a little bit unrealistic

and so I've got a second back-up hope.

This second back-up hope is that insofar as we have health problems,

we will have good medicines to take care of them.

Medicines are very cheap to produce and they're very effective.

Much more pleasant actually than the alternatives:

hospitalization, operations, emergency rooms, the morgue...

None of these are good things.

So we should be very grateful that we have pharmacologists around,

people who research these things and develop new medicines,

and we should be grateful that we have a pharmaceutical industry

that supports their activities.

But there is a problem and you can tell from the fact

that the pharmaceutical industry isn't well-loved.

In fact, in terms of popularity, they rank just about with the tobacco companies

and the arms manufacturers.

So that's the problem that I want to talk about with you today.

How would you organize the pharmaceutical industry?

If we did it all over again, how would you do it?

I think we would think of three main principles.

The first one is: we want patients to have access to all the important medicines.

Remember, these things are very cheap to produce.

So everybody in the world should have access to all the important medicines.

Secondly, we want innovative activities,

the research and development that pharmaceutical companies do,

to track the diseases that are the most important, the most damaging.

We want them to aim for the greatest health impact.

And thirdly, we want the whole system to be efficient.

We want as little of the money that goes into the system to go to waste.

To go for overhead, for red tape, and so on.

Very simple three points.

Now, what about the existing system?

I think it does poorly on all these three counts.

First: Universal access. Forget about it.

The vast majority of human beings do not have access to medicines,

at least not while they're still under patent.

There are extremely high mark-ups and that's the problem.

The problem is that even though these medicines are very cheap to produce,

they cost a great amount of money during the time that they're under patent,

and the reason for that is that rich people can pay a lot of money,

pharmaceutical companies have a temporary monopoly,

they price for the rich, they forget about the poor.

The second problem is innovation.

Again, we don't focus on the diseases that do the most damage,

and that's often put into the phrase of the 10/90 gap.

Ten percent of all the money spent on pharmaceutical research

is focusing on diseases that account for ninety percent

of the global burden of disease.

And vice versa: Ninety percent of the money is spent on diseases

that account for only ten percent of the global burden of disease.

So there's a huge mismatch between where we spend the research money

and where the greatest problems are.

Now, both these problems, the problem with innovation

and the problem with access have to do with this:

The distribution of money in the world.

It's extremely unequal.

The blue area here is the top quarter of the human population.

They have more than ninety percent of the global household income.

The bottom half of humanity on the other hand

has not even three percent of global household income.

So if you're a pharmaceutical company and you look for profit opportunities,

you look at this sort of chart and you say:

"Well, where's the money? What am I gonna research?

Who am I going to provide with medicine?"

And again, that is in the context of there being only one way

in which pharmaceutical companies make money under the present system,

that is through patent-protected mark-ups.

That's how they make their money. Through mark-ups.

And if you make money through mark-ups,

then obviously you will go to where the people have the most income.

Now in terms of overall efficiency,

the system also does very, very poorly.

A lot of money goes for lobbying politicians

in order to extend patent periods to "evergreen", as it's called.

Data exclusivity and so on.

A lot of money goes for gaming, where brand name companies pay generic companies

to delay entry, for example.

A lot of money goes to take our patents into all the different jurisdictions.

Money goes – even larger amounts – for litigation.

They're litigating endlessly.

Brand name company against brand name company,

brand name company against generic company –

enormous amounts go there.

People say pharmaceutical companies make a lot of profit.

Well, yes and no, they do, but a lot of it goes to these wasteful activities.

Deadweight losses, I won't even tell you what they are because it's too complicated.

But there's also wasteful marketing.

A lot of the money that pharmaceutical companies make

goes into advertising campaigns,

trying to win favor with doctors,

trying to persuade patients to try this medicine.

And these marketing battles, of course, are a pure waste,

because what one company spends to get patients over to their drug

another company spends to win them back.

And then there is counterfeiting in the developing countries.

A lot of the drugs there, often more than fifty percent of what's sold,

are counterfeit drugs where people say,

"Because the drug is so expensive, I can offer you a cheaper version."

But of course it's not the real thing.

It's either diluted or it's completely inert.

So on the whole, all the money that is spent on pharmaceuticals,

and it's roughly a trillion dollars now, per annum,

much of that money is absolutely going to waste,

it's not going to where it should be going,

namely to the development of new medicines

and to the manufacturing of [the] ones we already have.

Now, many people think that the solution to the problem

is moral pressure on pharmaceutical companies.

And, sure, pharmaceutical companies have moral obligations

just like we do.

When we have to make a choice,

often between having a little extra money and saving a human life,

we often feel that we have a duty to spend the money

and save the life.

And why should pharmaceutical companies be any different?

But really, it isn't realistic to expect pharmaceutical companies

to act as well as you or maybe I might act.

And the reason is threefold.

One is that pharmaceutical companies are bound to their shareholders.

The executive of such a company wouldn't last very long

if he gave a lot of money away, or she, for good purposes,

and thereby lost money for the shareholders.

They would be replaced.

Also, pharmaceutical companies stand in fierce competition with one another

and if you do more, if you are nicer than the other company,

sooner or later, you'll be driven off the market.

You will not survive.

The other company will gain market share.

And finally, remember, the entire industry is dependent for its income

on one thing and one thing only: mark-ups.

And ultimately you have to be sustainable.

If you spend a lot of money on helping poor people

and you don't get paid for it, you lose this money,

you cannot continue with your innovative activities.

So for these reasons it's just unrealistic to expect

that pharmaceutical companies will solve the problem on moral grounds.

Who, then, should solve the problem?

I suggest it has to be us.

We, citizens and politicians, have to do better

in terms of regulating the pharmaceutical industry,

focusing them, giving them the right incentives,

focusing them on the problems that really matter.

The potential gains here are enormous.

About one third of all deaths each day, each year

are due to the diseases of [poverty] in the developing world.

Fifty thousand people every day die prematurely from these diseases.

And that's not even counting all the diseases we know only too well in the rich countries.

Cancer, heart disease and so on.

Again, poor people die often much earlier,

because they don't have good medical care including good medicines.

And even in rich countries,

many patients are not getting the best medicine.

That's sometimes due to the fact that insurance companies won't cover it,

because the prices are absolutely ridiculous,

and it's also due, sometimes, to the fact

that doctors and patients are falsely influenced

by advertising campaigns of pharmaceutical companies.

So what can we do? How can we change the system?

I want to show you a way in which we can better incentivize

pharmaceutical innovation and the provision [of] medicine

to poor people and rich alike.

And that is the Health Impact Fund.

The Health Impact Fund is basically opening up the second track

with which pharmaceutical innovators can be rewarded for their activities.

They have a choice.

They can either go with the old system,

patent-protected mark-ups,

or they can go with the new system,

being rewarded on the basis of the health impact

of the medicine that they develop.

And with each particular medicine, they have their choice.

So they can be partly on one track, partly on the other with different products.

Now, how would the Health Impact Fund work?

There would be a fixed reward pool every year.

We start with maybe six billion dollars,

but that can eventually be revved up.

Remember that the total money that the world spends

on pharmaceuticals is a trillion, so it's a thousand billion,

six billion is a drop in the bucket.

It's relatively small but it would work with six billion

and we would get a lot of bang for the buck if we introduced the Health Impact Fund

with just six billion dollars.

Any registered product,

if you have a product and you want to register it with the Health Impact Fund,

you will be rewarded for a period of ten years.

During these ten years, you get a share of these annual reward pools,

and that share would be proportional to your share of the health impact achieved

by all these registered products.

So if your product accounts for eight percent of the health impact

of all the registered products,

you get eight percent of the reward money that year.

That repeats for ten years and at the end of the ten years,

your product goes generic,

so you basically lose any further income from it.

Each year, the health impact from your product would be evaluated

and you would be paid on that basis.

Now, if you take that reward from the Health Impact Fund,

you can't claim the other reward. You can't mark up the price.

You have to sell at cost.

What does that mean?

Well, it doesn't mean that the pharmaceutical company

tells us what their cost is, but rather,

our preferred way of determining what the real cost is

of making a medicine, of manufacturing it,

is to ask the registrant to put the production of the medicine

out for tender, let generic companies compete for the production

and then the innovator would buy the product

from the cheapest supplier

and would sell it at that same lowest possible price to patients.

So the innovator would make no money at all on selling the product,

but would make all its money from the health impact rewards.

Now, how do we assess the impact of the introduction of a medicine?

Well, we assess it relative to the preceding state of the art.

So some people before the medicine came along,

had no treatment at all,

now for the first time they have treatment, because it's cheap, people can afford it.

So here, the impact is the difference between being treated and not being treated.

In other cases, the new product is better than the old products

and so a person gets switched over to a better product

and we pay for the impact, for the difference that the new product makes.

If you have a product on the Health Impact Fund

and you simply switch somebody from an existing product

to another product, to your product, and it's no better,

you get no money.

That's in stark contrast to the existing system,

where you get a lot of money for switching somebody

from one product to an equal product that is your product.

The Health Impact Fund does not pay for that.

We quantify health impact in terms of quality-adjusted life years.

That method has been around for about 20 years,

and it's very easy to explain.

Just think of a human life as a kind of plank,

it's eighty inches long, one inch high,

and when you die prematurely before you reach 80,

well, the plank is a little shorter.

And if you're sick during the time that you live,

the plank is a little bit thinner.

And what diseases can nibble away, well that, medicines can restore

or medicines can avert the taking away of these parts.

And they get paid for that. That's the method, basically.

Now, we look – of course, each year, we have to assess.

We have to spend a considerable amount of money

looking at how these various medicines that are registered with the Health Impact Fund

are doing in the various countries,

and here, statistics is extremely helpful.

You all know how exit polling works and this is a similar method.

You look for a statistically significant sample,

you look for a sample and then you try to figure out

what the health impact of the medicine is in different locations,

in different demographic groups,

and of course you look very carefully at the actual world.

This is in contrast to how medicines are rewarded today.

Sometimes, there is a reward based on performance,

but it's the performance in clinical trials, in the laboratory, if you like,

but not the performance in the real world.

The Health Impact Fund would look at real world impact,

it would look not just at the quality of the drug,

but also at how widely it is distributed,

whether the innovator manages to target those patients

who can benefit the most,

and also, how well the drug is used in the field.

So innovators would have much stronger incentives than they do now,

to make sure that every patient who takes the drug

knows exactly how to take it to optimal effect.

Today, most packaged inserts are not even translated into local languages

and so it's not surprising that patients don't make the best use of the product.

Now, how would the financing work?

Basically, the Health Impact Fund, as I said,

could start with something like six billion dollars,

it's not nothing, but it's also not a lot of money

compared to what the world is already spending on pharmaceuticals.

So the best way to think of it is as a new way of paying

for what we are already paying for, namely new medicine.

You pay with one hand through the tax system,

but you get something back, with the other hand,

because you also get these medicines for cheap.

This is not just for poor people.

Everybody would have this Health Impact Fund registered medicine at cost,

at a very low price.

Now, one very important hurdle, politically, is,

we have to make sure that we have longterm visibility for innovators,

that innovators know that the money is actually there,

and so we need governments to fund the Health Impact Fund,

because only governments can make predictable commitments

for a long period of time.

Because the Health Impact Fund registration is voluntary,

you basically have a self-adjusting reward rate.

As the rate rises too high, innovators will come in

and drive the rate down.

Conversely, if the rate falls too low,

innovators would be reluctant to register and the rate will recover.

So the rate will always be at a reasonable level.

The Health Impact Fund is beneficial for all parties.

It benefits innovators by giving them a new market,

and most importantly by overcoming their public relations problems

that we started with.

It benefits patients, because patients are much more likely

to get the right medicine, and also for these medicines to be developed,

the medicines that we most need.

And it also benefits governments or tax payers if you like,

because it creates a permanent source of pharmaceutical innovation

that will be here for all future times.

It's a kind of machine that always directs pharmaceutical innovation

to where we have the greatest problems,

maybe for diseases that don't even exist yet.

The Health Impact Fund will always channel innovation

in the direction where it's most needed.

Now, we have a little bit of help already.

You can see here the number of people who have agreed to help us,

but we want your help as well.

We want you to join us, maybe to talk with your government

to help us with publicity,

to help us with your ideas in perfecting the Health Impact Fund scheme,

and what we most urgently need for the moment

is to start a pilot.

A pilot would introduce one medicine into one jurisdiction

on the Health Impact Fund model.

The innovator would get paid according to the cost of the medicine for the sales,

and would then get additional money on the basis of the health impact.

Here, we need funding for the rewards, funding for the assessment,

and in particular, we need political support

to get politicians to support a pilot of that sort.

If you have any further questions, don't hesitate to write us and contact us at this address.

Thank you very much.

(Applause)