Millions of people across the world cannot afford the drugs they need. A new business model for the pharmaceutical industry could help
No one can honestly deny the positive impact of modern medicine on our lives. Thanks to antibiotics and routine operations, childbirth and catching bacterial pneumonia are no longer life-threatening events. From bipolar disorder to hypertension and Parkinson’s, drugs ease or eliminate conditions that would be excruciating, debilitating or fatal. Yet most people in the world are still too poor to pay for such drugs. Millions die each year from diseases that we already know how to treat, and many more are left to suffer chronic illness. From their point of view, there is a serious problem with the pharmaceutical industry’s business model. Now, researchers may have come up with a better one.
The problem is not just that many drugs are too expensive, but also that research is not focused on the most urgent global needs. New drugs to combat resistance in malaria or tuberculosis, say, don’t offer a sufficient profit incentive for pharmaceutical companies. This is not sheer heartlessness: developing a drug is very expensive and protracted, making altruism a sure path to financial ruin. What’s more, the pipeline for urgently needed new drugs is drying up: fewer and fewer are being launched each year. And thanks to the emergence of new resistant strains of microbes, particularly to antibiotics, (see “Lab Report,” September 2010), old drugs are fast becoming impotent.
Some researchers feel that all these problems stem from the same cause. The business model, says microbiologist Professor Carl Nathan, of Weill Cornell Medical College, is to go for the blockbuster drug which works on everyone suffering a particular, widespread health problem. Commonly these drugs treat a condition without actually curing it: atherosclerosis, hypertension, osteoporosis, neurodegenerative diseases and so forth. That’s not to say that cures are purposely withheld, but that these diseases, which need long-term, repeated use of drugs, offer the greatest revenue. And it is precisely because antibiotics and antimalarials are generic, aimed at a broad spectrum of pathogens, that they are so widely used and thus so quickly rendered obsolete by resistance.
This is a classic market failure: chasing profits does not deliver most people the goods they need at a price they can afford, and so the market is much smaller than it could be. In short, we should not entrust the world’s health to free-market capitalism—not because of ideological objections, but because it is an ineffective approach to human welfare. Investors and shareholders in drug companies will always demand the highest rates of return that the market will bear: a CEO who doesn’t deliver won’t last long. This pressure, in turn, tempts the companies to “market more widely than the science will bear,” as Nathan puts it—a polite way of saying that they make false claims. At the same time, high prices elicit a black market for drugs that have been adulterated (diluted with inert powders, say), or outright counterfeits. The resulting hazards are not just to users: ineffectual doses may boost the emergence of resistance even while failing to protect.
What is really needed is an entirely different market model. That’s why philosopher Thomas Pogge and economist Aidan Hollis have set up the non-profit organisation Incentives for Global Health at Yale University. Their aim is to create an alternative market-based system for stimulating the development of drugs and increasing their accessibility. They accept that pharmaceutical companies need financial incentives for embarking on the costly, risky venture of producing a new drug. But at the core of their proposal is a way to make rewards truly performance-based.
The current patent system means that profits accrue from the price of a drug and how much of it is sold. But Pogge and Hollis want the revenue to be determined by how much impact the drug has on global health, according to an agreed metric: to reward results, not sales. That money would be awarded to companies from a multibillion-dollar pot called the Health Impact Fund. It would remove the incentive to charge prohibitively high prices, motivate research on diseases that are not lucrative, and undermine the black market.
Who fills the pot? There are several possibilities. Signatory countries could commit to a small share of their annual gross national income: 0.03 per cent should suffice, which for affluent countries would amount to a per capita yearly contribution of around $12: a trivial sum compared to what failures in drug development and availability cost both governments and individuals. Equally, the money might be taken from the cash pool created by something like a Tobin tax on financial transactions.
Nathan believes that our strategies of drug discovery need revising too. “With antibiotics,” he says, “the legacy of success turned into dogma: ‘this is the way we do it.’” But if you want an antibiotic that will work on most common pathogens without knowing their identity, there are only a very limited number of generic ways to attack the cells’ biochemical processes— by disrupting cell walls, for example. So you soon run out of targets as resistance spreads, particularly as resistance genes can be passed between bacterial species.
Innovative approaches do occasionally emerge—on 3rd September, for example, the journal Science reported on a new antimalarial that takes a novel line of attack on parasite cells. But occasional lucky hits like this one cannot sustain global public health. That is why the future may lie with drugs more closely tailored to specific micro-organisms—a hitherto relatively neglected area. It’s an approach that demands speedy diagnostic tests to identify the infecting pathogen and whether it is resistant to specific antibiotics. But in the age of rapid genomic profiling, this looks increasingly feasible. In the New England Journal of Medicine on 1st September, an international team of researchers detailed a test that could detect, within just 90 minutes, the presence of the TB pathogen Mycobacterium tuberculosis—and whether it is resistant to the common antimicrobial drug rifampin.
Yet the biggest obstacles to a globally effective pharmaceutical industry remain those concerning business and marketing, not science. There is widespread dissatisfaction within the industry about the pace of innovation, and a spate of recent mergers and layoffs has dampened morale. Several former pharmaceutical CEOs have criticised the research climate after stepping down, while other leading researchers have moved to academia, where they can explore innovative science free from the constraints of profitability.
In the end, if we’re serious about global health, there is nothing to be gained by casting Big Pharma as the villain. Instead, we must ensure it gets rewarded not for canny marketing, but for curing people.
No one can honestly deny the positive impact of modern medicine on our lives. Thanks to antibiotics and routine operations, childbirth and catching bacterial pneumonia are no longer life-threatening events. From bipolar disorder to hypertension and Parkinson’s, drugs ease or eliminate conditions that would be excruciating, debilitating or fatal. Yet most people in the world are still too poor to pay for such drugs. Millions die each year from diseases that we already know how to treat, and many more are left to suffer chronic illness. From their point of view, there is a serious problem with the pharmaceutical industry’s business model. Now, researchers may have come up with a better one.
The problem is not just that many drugs are too expensive, but also that research is not focused on the most urgent global needs. New drugs to combat resistance in malaria or tuberculosis, say, don’t offer a sufficient profit incentive for pharmaceutical companies. This is not sheer heartlessness: developing a drug is very expensive and protracted, making altruism a sure path to financial ruin. What’s more, the pipeline for urgently needed new drugs is drying up: fewer and fewer are being launched each year. And thanks to the emergence of new resistant strains of microbes, particularly to antibiotics, (see “Lab Report,” September 2010), old drugs are fast becoming impotent.
Some researchers feel that all these problems stem from the same cause. The business model, says microbiologist Professor Carl Nathan, of Weill Cornell Medical College, is to go for the blockbuster drug which works on everyone suffering a particular, widespread health problem. Commonly these drugs treat a condition without actually curing it: atherosclerosis, hypertension, osteoporosis, neurodegenerative diseases and so forth. That’s not to say that cures are purposely withheld, but that these diseases, which need long-term, repeated use of drugs, offer the greatest revenue. And it is precisely because antibiotics and antimalarials are generic, aimed at a broad spectrum of pathogens, that they are so widely used and thus so quickly rendered obsolete by resistance.
This is a classic market failure: chasing profits does not deliver most people the goods they need at a price they can afford, and so the market is much smaller than it could be. In short, we should not entrust the world’s health to free-market capitalism—not because of ideological objections, but because it is an ineffective approach to human welfare. Investors and shareholders in drug companies will always demand the highest rates of return that the market will bear: a CEO who doesn’t deliver won’t last long. This pressure, in turn, tempts the companies to “market more widely than the science will bear,” as Nathan puts it—a polite way of saying that they make false claims. At the same time, high prices elicit a black market for drugs that have been adulterated (diluted with inert powders, say), or outright counterfeits. The resulting hazards are not just to users: ineffectual doses may boost the emergence of resistance even while failing to protect.
What is really needed is an entirely different market model. That’s why philosopher Thomas Pogge and economist Aidan Hollis have set up the non-profit organisation Incentives for Global Health at Yale University. Their aim is to create an alternative market-based system for stimulating the development of drugs and increasing their accessibility. They accept that pharmaceutical companies need financial incentives for embarking on the costly, risky venture of producing a new drug. But at the core of their proposal is a way to make rewards truly performance-based.
The current patent system means that profits accrue from the price of a drug and how much of it is sold. But Pogge and Hollis want the revenue to be determined by how much impact the drug has on global health, according to an agreed metric: to reward results, not sales. That money would be awarded to companies from a multibillion-dollar pot called the Health Impact Fund. It would remove the incentive to charge prohibitively high prices, motivate research on diseases that are not lucrative, and undermine the black market.
Who fills the pot? There are several possibilities. Signatory countries could commit to a small share of their annual gross national income: 0.03 per cent should suffice, which for affluent countries would amount to a per capita yearly contribution of around $12: a trivial sum compared to what failures in drug development and availability cost both governments and individuals. Equally, the money might be taken from the cash pool created by something like a Tobin tax on financial transactions.
Nathan believes that our strategies of drug discovery need revising too. “With antibiotics,” he says, “the legacy of success turned into dogma: ‘this is the way we do it.’” But if you want an antibiotic that will work on most common pathogens without knowing their identity, there are only a very limited number of generic ways to attack the cells’ biochemical processes— by disrupting cell walls, for example. So you soon run out of targets as resistance spreads, particularly as resistance genes can be passed between bacterial species.
Innovative approaches do occasionally emerge—on 3rd September, for example, the journal Science reported on a new antimalarial that takes a novel line of attack on parasite cells. But occasional lucky hits like this one cannot sustain global public health. That is why the future may lie with drugs more closely tailored to specific micro-organisms—a hitherto relatively neglected area. It’s an approach that demands speedy diagnostic tests to identify the infecting pathogen and whether it is resistant to specific antibiotics. But in the age of rapid genomic profiling, this looks increasingly feasible. In the New England Journal of Medicine on 1st September, an international team of researchers detailed a test that could detect, within just 90 minutes, the presence of the TB pathogen Mycobacterium tuberculosis—and whether it is resistant to the common antimicrobial drug rifampin.
Yet the biggest obstacles to a globally effective pharmaceutical industry remain those concerning business and marketing, not science. There is widespread dissatisfaction within the industry about the pace of innovation, and a spate of recent mergers and layoffs has dampened morale. Several former pharmaceutical CEOs have criticised the research climate after stepping down, while other leading researchers have moved to academia, where they can explore innovative science free from the constraints of profitability.
In the end, if we’re serious about global health, there is nothing to be gained by casting Big Pharma as the villain. Instead, we must ensure it gets rewarded not for canny marketing, but for curing people.
