[Ip-health] suggestions for a HIF pilot drug

Aidan Hollis ahollis at ucalgary.ca
Mon May 24 15:33:03 PDT 2010

Dear Patrick,
As you know, there is considerable interest in de-linkage between the price of new drugs and the cost of innovation. If innovation is not rewarded on the basis of price -- which is generally related to willingness (and ability) to pay -- then it should be rewarded on some other basis. In my view, measured health impact makes the most sense as the basis on which to reward innovation. 

Perhaps you disagree with the concept of de-linkage. Or perhaps you feel that there is a better basis on which to base payments for innovation -- such as willingness to pay.

But if you like the idea of de-linkage, and you like the idea of paying for the thing that we actually value -- health impact -- then the proposed pilot is a sensible way to explore how to operationalize these ideas. Of course, it may not do as much as you would like in terms of opening up patents. But it is an important step to learn about making payments depend on assessed health impact. 
As you may be aware, the prize fund proposals of Bangladesh, Barbados, Bolivia and Suriname on chagas disease and cancer also rely on the idea of payments based on assessed incremental health impact. I think that these proposals could therefore benefit from the experience gained from the proposed pilot. 

I don't see how the approach of the HIF is fundamentally opposed to any of the approaches you mention. For certain products, it might be an alternative way of achieving a desired outcome. For example, one way of achieving a given innovation is for government to engage in the research, run clinical trials, and openly license the relevant technologies to enable generic production. The HIF approach, by offering a reward, attempts to induce private persons or corporations, to engage in research and invest in clinical trials, based on their private information about the likely success of the R&D project, and then rewards them on the basis of achieved health impact, given mandated low pricing (which could include generic production). There is evidently room for both approaches, and both are aiming to achieve wide access to new drugs. I am unaware of any evidence that shows that one approach is superior to another, given that the HIF approach hasn't even been tried; most likely each would have advantages in different areas.

Thanks for your comments. And of course, if you have some ideas about products that would be suitable for a pilot, please let me know.

Aidan Hollis
Professor of Economics
University of Calgary, 2500 University Dr NW Calgary AB T2N 1N4 Canada
tel: +1 403 220 5861  fax: +1 403 220 5861
email: ahollis at ucalgary.ca
web: http://econ.ucalgary.ca/hollis.htm
Incentives for Global Health

On 2010-05-22, at 10:18 PM, Patrick Bond wrote:

Thanks for this important work, Aidan.

But I'm wondering about its appropriateness, as I've always felt there are two directions for global public policy on health R&D:

1) creative incentivization strategies that further *commodify* drug R&D (albeit by performance not effective demand) as along the lines below (Thomas Pogge has also set out the case in detail);

2) creative public investment in *decommodified* drug R&D, production and distribution - e.g. NHI for early ARVs, TRIPS exemptions (Doha 2001), and the Global Fund for subsidized supply of generics and assistance in establishing local production facilities, all prompted by civil society activists, exemplified by South Africa's Treatment Action Campaign;

While we have so many public health disasters, it makes sense to try as many strategies as possible, as each disease needs a different approach.

However, it strikes me that these two foundational approaches above are fundamentally opposed, at some stage. Is that correct? And if so, isn't the TAC model preferable, and proven?


Aidan Hollis wrote:
> ****Seeking suggestions for a HIF pilot****
> Incentives for Global Health is working towards a pilot of the reward mechanism for the Health Impact Fund (http://www.healthimpactfund.org). The goals of the pilot are (1) to enable the distribution of a medically valuable drug at a low price in a developing country; and (2) to explore the feasibility of making reward payments depend explicitly on the measured health impact of a drug. We are now seeking suggestions for a suitable drug.
> (1) How would the pilot work?
> The pilot would consist of a contract between a country, a pharmaceutical company, and probably a third-party payer. The contract would require the company to supply a specified product at a specified low price in the country during a specified period. In return, the company would be eligible for a supplementary payment explicitly based on the assessed health impact of the product in the country during the period.
> (2) What products are suitable?
> We are particularly interested in identifying patented products that have a substantial therapeutic potential but are currently underused because of high pricing.
> (3) What countries are suitable?
> We would like to run pilots in a variety of countries at different stages of development and with different health systems.
> (4) What value would such a pilot have?
> First, such a pilot would help to increase access for patients in the country to the pilot product. Second, the pilot would enable a real test of contracting over assessed health impact. The HIF is one of several proposals that delink the reward for innovation from prices, and that make the reward for innovation conditional on assessed health impact. The pilot would offer some practical lessons on how to write contracts in which payments are based on health impact.
> (5) Who will be involved in the pilot?
> This will depend on the pilot, but the actors could involve: (1) The country government, (2) the company, (3) In-country health experts, (4) Incentives for Global Health, (5) A qualifying international health or aid organization granting financial or technical support to the trial, and (6) various technical experts including epidemiologists, health economists, lawyers, etc.
> If you have ideas about what drugs would be most suitable for a test of assessing health impact, please contact me at the address below. I would also welcome other comments or suggestions on the pilot. 
> Aidan Hollis
> Professor of Economics
> University of Calgary, 2500 University Dr NW Calgary AB T2N 1N4 Canada
> tel: +1 403 220 5861  fax: +1 403 220 5861
> email: ahollis at ucalgary.ca
> web: http://econ.ucalgary.ca/hollis.htm
> Incentives for Global Health
> http://www.healthimpactfund.org
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