Pharmaceutical products for these diseases cannot be developed through the traditional ‘patent’ system
Neglected tropical diseases (NTDs) predominantly affect the world’s poorest populations. Accordingly, pharmaceutical products for these diseases cannot be developed through the traditional ‘patent’ system. This one grants monopoly power to pharmaceutical companies usually for a period of 20 years to encourage them to invest in research and development (R&D). More explicitly, this means that the pharmaceutical company holding a patent on a product, will for 20 years be the only one able to produce, sell and hence make profit out of that product. The resulting lack of competition enables pharmaceutical companies to recover their R&D investment costs by setting a market price well above the cost of production.
Only five new therapeutic products were approved for neglected tropical diseases between 2000 and 2011
Pharmaceutical companies are hence reluctant to invest in R&D for diseases that predominantly affect the developing world because of the consumers’ reduced ability-to-pay; as it would imply – in some cases – setting a market price equal or below the cost of production in order to make it affordable for the poorest.
The context of NTDs does not only challenge the development of products but also their accessibility
Translating this market failure into concrete facts, only five new therapeutic products were approved for neglected tropical diseases between 2000 and 2011, accounting for less than 1% of all approved products. Moreover, the context of NTDs does not only challenge the development of products but also their accessibility to populations in need: for example, NTDs mostly affect people living in remote areas with limited access to adequate healthcare.
Proportion of new products approved for neglected tropical diseases during 2000-2011
Source: Pedrique B, Strub-Wourgaft N, Some C, Olliaro P, Trouiller P, Ford N, et al. The drug and vaccine landscape for neglected diseases (2000-11): A systematic assessment. Lancet Glob Heal. 2013;1(6):371–9.
The economic and political context of NTDs calls for “creative capitalism”
The economic and political context of NTDs calls for, as Bill Gates puts it, “creative capitalism”. Illustrations of “creative capitalism” include push, pull and mixed (push-pull) schemes. Push schemes are used to push the product on the market (as its name indicates) by reducing upfront costs inherent to R&D activities through various grants and subsidies that are offered before the product is developed. Common examples of push schemes are R&D grants (provided prior to product discovery) and R&D tax credit (making firms who invest in R&D for NTDs eligible for reduced taxation).
PPPs are loosely defined and it is not clear which scheme they should adopt
Pull schemes, on the contrary, work as ¨the carrot and the stick” by offering a variety of rewards that are obtained once the product is developed. One example of pull schemes is advance market commitment (AMC), under which donors make a prospective commitment to purchase a successful drug or vaccine at a pre-specified price for a fixed quantity.
Push, pull and mixed schemes offer avenues for public-private partnerships (PPPs) to overcome the barriers to the development and accessibility of products for these diseases. A public-private partnership exists as soon one or more public and private institutions collaborate. One example applied to neglected tropical diseases is the Drug for Neglected Diseases Initiative (DNDi): a consortium of partners (the pharmaceutical industry, the public sector, the international research community, and others) initiating and coordinating drug R&D projects.
However, in reality, PPPs are loosely defined and it is not clear which scheme they should adopt. Overall, it seems that pull schemes are more efficacious than push schemes but the literature on PPPs is weak. It is mainly descriptive with little research/empirical investigation conducted on the topic. Surprisingly, no robust impact evaluation analyses of PPPs exist. These are essential if we want to assess how these models perform, compared to alternative ones. In other words, impact evaluation analyses enable us to report what works and what doesn’t, to then inform the public and private sectors on the best way to operate.
Health economics is about informing governments, health policy makers and other stakeholders about what works best given a set of resources
You may now wonder: how can we evaluate PPPs? Well, one way to evaluate PPPs is to assess how changes in their characteristics/composition affect their research and development path. That is, not only the probability to reach the market but also to successfully move along the R&D phases. In addition to that, we can also look at the time spent within each of the R&D phases. By doing this, we would be able to answer questions like the following:
- What is the likelihood that products developed through PPPs will reach the market?
- Do PPPs shorten the time for a NTD product to reach the market?
- In which R&D phase do PPPs fail the most?
- Is it the case that PPPs consisting of a large number of partners are more likely to reach the market than those having a small number of partners?
This is what health economics is also about; it is about informing governments, health policy makers and other stakeholders about what works best given a set of resources.
You can join us for Health Economics, a short course that covers covers key economic concepts as applied to global health policies, interventions and evaluations from 9-18 January 2017.