As Pogge explained, the world’s poor are afflicted with health problems for which medicines are either too costly or unavailable. This stems from the fact that pharmaceutical companies’ patents create monopolies that keep costs high. The current framework is such that pharmaceutical companies’ profits are maximized when they mark-up the prices and make drugs accessible only to the richest portion of the world’s population, rather than keeping costs low and reaching a more substantial portion of the population. Moreover, pharmaceutical companies have little financial incentive to solve health problems affecting the world’s poor, such as tuberculosis and sleeping sickness.
Despite these problems, many experts often predict that changing patent policies and regulations would have the negative effect of decreasing pharmaceutical companies’ incentive for innovation.
The legal framework at play
Further, Pogge explained that the World Trade Organization’s TRIPS agreement requires that its member states (ie, all the developed countries and most developing countries) grant 20-year patents for pharmaceutical innovations. Hence, there is little wiggle-room for governments or other bodies wishing to decrease the cost of new medicines.
The solution: Paying for performance
Pogge’s plan consists of the Health Impact Fund (HIF), an alternative reward program that financially incentivizes pharmaceutical innovators to help the greatest number of people possible, and creates an optional, parallel system to TRIPS. This way, the plan would create an incentive to innovate medicines that the poor do not have access to now. The HIF would pay innovators based on their share of the health impact on the population whose health was improved. By being optional, the plan would not violate TRIPS. Further, since companies’ profits would depend on health impact, the HIF would also incentivize proper drug delivery to patients.
Registration and reward pools: Pharmaceutical innovators would register a drug with the HIF and enter a reward pool comprised of all the drugs targeting the particular health issue. If Drug A saved 10% of the total Qualify-adjusted life years (QALY) in a given year, drug A would receive 10% of the reward pool. Its impact would be re-evaluated every year for 10 years. Afterwards, drug innovators would allow the generic version of their products to go on the market.
Prices: Innovators would agree to sell the medicine at the lowest feasible cost of manufacture and distribution, as determined by a tender process. This would also be favorable to developing countries who are most likely to be the lowest bidders.
Funding: Countries would have to register with the plan at an initial 6 billion dollars, which Pogge argues will be worth it in terms of the health care costs. Also, richer countries could pay the registration costs for poorer countries as part of their foreign aid package. If countries with a high rate of poverty did register, the medicines would still be distributed at the HIF rate, but this would not be the case for richer countries, such as Canada.
Final thoughts: how refreshing!
My classmates and I were both struck by the novelty of being presented with a solution to a problem, along with a concrete implementation plan. Pogge’s plan seems very plausible because it is grounded in reality – it finds a way to work without disrupting WTO’s TRIPS agreement and without upsetting “Big Pharma’s” interests. However, one might wonder whether governments might see supporting the HIF as being too radical a step, in light of conservative economic trends.
Should the HIF gain ground in Canada, where health care is a provincial prerogative but is still reliant on transfer funds from the federal government, what would happen if there were tensions between provincial and federal actors? For better or for worse, the fate of the HIF seems to be closely tied to the capriciousness of state support.
Also check out: MJLH’s live tweets from the Pogge lecture.