NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, March 24, 2015

A Yale paper published online on Feb. 11 in the Journal of Global Health argues that implementation of a new agency to fund pharmaceutical companies could have decreased the severity of the recent Ebola outbreak.

Professor of philosophy and international affairs Thomas Pogge, who is the paper’s lead author, has developed the Health Impact Fund as a way to motivate pharmaceutical companies to produce drugs that will have the greatest global health impact instead of just those that generate a profit. The idea of the fund is for governments to contribute 0.01 to 0.03 percent of their Gross National Incomes to the fund to support companies in developing drugs that they might not otherwise pursue. This structure would take the buying power of the individuals impacted by a disease out of the equation, making drug development a more equitable process.

“We have to align the incentives with what we want pharmaceutical companies to do,” Pogge said. “We want them to improve human health, so we need to incentivize them in such a way that the amount of money they get is proportional to the health gain they produce.”

Pharmaceutical companies could use their research and development money much more efficiently to have a greater global health impact, he said, adding that too many companies produce drugs that serve the same function as a drug already on the shelf. Using a slightly different molecule for the drugs — which are often referred to as “me too drugs” — companies are able to cut into the market share for a common drug without violating an already existing patent. Though the drugs are profitable, they do not improve health overall, Pogge said.

“The Health Impact Fund would open up a second track for pharmaceutical innovators to be rewarded for their innovations,” he said.

But it would also improve equity for buyers — HIF reward payments are contingent upon companies selling their drugs at market cost, he noted. The profit then would no longer come from a markup to consumers, but from the HIF’s coffers.