The Incentive to Heal
Backwards incentives push the pharmaceutical industry to produce drugs curing erectile dysfunction rather than malaria.By Hewsan Pang
May 28, 2008
A young boy waits his turn to be tested for malaria, in Manhica, Mozambique, in this February 2000, file photo. (AP Photo/ Karel Prinsloo)
Before he could walk, 18-month-old Phillip Odong of northern Uganda had already suffered three bouts of malaria. And on the day mosquito nets were distributed to his family, he had his fourth. It killed him.
Phillip is one of 10 million children who die annually from preventable and treatable illnesses. While treatments exist for many "neglected" diseases, those who need them most oftentimes don’t have access to them. For instance, mosquito nets that help reduce instances of malaria only cost $10. Yet the disease continues to kill a child every 30 seconds in places like sub-Saharan Africa and Southeast Asia.
In addition to providing poor regions with basic health services, a comprehensive solution is needed to find cures for diseases that are exclusive to poor regions. Mosquito nets and antibiotics may be effective Band-Aids for malaria, but ultimately, as with any disease, immunizations are the best defense.
The problem is that, currently, the pharmaceutical industry offers little incentive to firms to pour much-needed research into developing life-saving but largely unprofitable treatments for pandemics that are confined to poor global populations. Since international patent agreements ensure that inventor firms can recoup their research expenses as long as their innovations sell, there’s little point for pharmaceutical firms to develop treatments that can’t sell.
A public-private partnership could plug this market failure. Such an arrangement would connect the available capital resources of governments and organizations with the medical prowess of the pharmaceutical industry, thereby giving firms the incentive to develop drugs that target diseases afflicting the poor.
Columbia University professor Thomas W. Pogge, a leading researcher on pharmaceuticals and global justice, has proposed an alternative incentive structure that encourages previously unprofitable but much-needed medical innovations. Under Pogge’s plan, pharmaceutical firms would be given the option to pass up the conventional patent protection scheme in favor of one that rewards them based on the health impact of their inventions. As a result, firms would be able to recover their fixed overhead research cost with public funds that compensate and reward them for their innovations. In return, the absence of patent exclusivity would encourage generic drug companies to replicate these life-savers under the much lower production costs needed for mass distribution to poor regions. In 2000, for example, generic drugs brought the cost of treatment for AIDS from $10,000 to $130 a year.
Hypothetically, since this system of remuneration offers the biggest prizes to high-impact treatments, major killers (the “big three” of AIDS, tuberculosis, and malaria collectively took 6 million lives in 2004) would receive the bulk of research attention. So that begs the question: What about minor, lower-profile diseases that affect roughly one billion people worldwide? Currently the World Health Organization estimates that of the 1,393 new drugs registered between 1975 and 1999, less than 1 percent of them (0.001 percent of $60-70 billion industry funds) were for small tropical diseases.
These “neglected” pandemics may not kill, but they still induce chronic pain and lead to both social stigmatization and debilitating quality of life. Take Human African trypanosomiasis, for example. The “Sleeping Sickness” affects 60 million people in sub-Saharan Africa by reducing them to a zombie-like state. Yet its treatment is painfully outdated, difficult to administer, and may even be deadly itself. As a result, victims are generally isolated, out of sight and silent.
Consequently, any reform must also encompass a system that offsets the financial risk burden pharmaceutical firms would shoulder if they partake in socially-conscious but lower-impact research. This would encourage the differentiation between developing sleeping pills or treatments for erectile dysfunction versus immunizations for trachoma, schistosomiasis, cholera, and a host of other neglected tropical diseases. Firms should be rewarded for simply shifting their focus toward tackling neglected diseases. And after a research breakthrough, public and semi-public money would be used to compensate the initial research cost in exchange for a free release of the drug—“as much as necessary for as long as necessary.” If the production burden is still too great, pharmaceutical firms could partner with generic drug companies who churn out these medications cheaply for mass distribution.
Despite the impression of selfishness, Big Pharma has a history of helping out. In the late 1980s, Merck & Co, under the leadership of their CEO Roy Vagelos, developed a treatment for river blindness, an infection that strikes tens of millions of people across Africa. Vagelos was conflicted on how to release the drug—because the only ones who needed it could not afford it. In the end, Vagelos made an historic decision. Merck, with support from public organizations such as the Carter Center and the World Bank, would donate the treatment for river blindness free of charge—“as much as necessary for as long as necessary.” Since that pioneering step two decades ago, more than 530 million people have been treated.
It’s been two decades since Roy Vagelos made the historic decision that saved millions from blindness. A similar act on a grander scale today might require a strong moral appeal from the public sector, coupled with judicial willingness from private firms. But the current dire state of affairs demands the same sensibility and compassionate leadership for a new generation.
Reforming the incentives for Big Pharma won’t save the lives of 18-month-old Phillip Odong and the millions of others who have already died from preventable diseases. But for the millions more who have yet to suffer and die from these diseases, more idle neglect would be the deadliest killer of all.
Hewsan Pang is a Speechwriting Intern at the Center for American Progress. He graduated from American University in 2007.
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