Can the Pharmaceutical Industry Cure the Poor?

It is a stark reality that between 80% and 85% of the population in developing countries who are in need of a medicine cannot afford it. There is an infamous quote by Novartis officials at a 2004 World Bank meeting, “India has 50 million customers”. India has a population of over £1.25 billion. Somewhat incautiously implying the company has no interest in 96% of the population.

By the time a drug reaches the market, at least £1 billion and, at most, £8 billion has been spent on Research and Development. Facts like this are characteristic of Pharma companies justifying the price they set once their patent has granted them monopoly.

Pharmaceutical companies are businesses operating under boards of shareholders, making the primary interests financial.

The price of a drug is set to be profit maximising, and due to the steep nature of the demand curve, the optimal price can be an astonishing fifty-fold mark up.

This result yields significant ‘dead weight’ in the market – the portion of consumers who would buy the medicine at a price that is still profitable, but are unable to afford it.

Now the question has to be asked. Is there another way? Thomas Pogge proposed one: the Health Impact Fund or HIF. Designed to be complementary to the current patent system and not to substitute it.

The HIF could remove the ‘dead weight’ by rewarding a medicine’s beneficial impact.

Companies would have the option to either patent, or to sell the drug at cost and gain profit from the HIF. Rewards would be granted in concordance with global health impact for which there is already an established measurement based on quality adjusted life years.

The Health Impact Fund, a pool of money from taxation, would not only deliver medicine to more of those in need but also would encourage R&D into medicines where the potential profitability is low. An example disease is Malaria, a drug for which could perform infinitely on the HIF but poorly on the patent system. For drugs such as Viagra, the performance would be reversed.

Some companies are completely opposed while others have acceptant. The industry is split. Whether such a system will ever be implemented is up for debate but the proposal is gaining ground.

Individual companies may not be able to change the system but the industry can.

Peter Walters

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Image courtesy of the-island-boy via Flickr


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