A New Way of Stimulating Research & Development

for Life-Saving Pharmaceuticals

July 31, 2010

AIDAN HOLLISahollis@ucalgary.ca

Outline

The problems in pharmaceutical markets. Open science in pharmaceuticals: passing

through Scylla and Charybdis Importance of clinical trials

An introduction to the Health Impact Fund proposal

How the HIF complements open science Directions for future progress

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The problems

Current paradigm of pharmaceutical research is inefficient Secrecy in research leads to duplication, excessive

costs, and hence fewer promising leads followed Information is not shared, potentially leading to lost

clinical opportunities Companies that direct the research spending focus it

on drugs for rich people Current paradigm of pricing is inefficient

Companies are rewarded for valuable therapies by the grant of patent rights over the use of the invention.

They use these rights to exclude competitors and keep prices high.

High prices result in massive underuse of drugs High prices fail to stimulate R&D for diseases of

poverty 3

An open science proposal

Aled Edwards and others in the Structural Genomics Consortium have proposed a new model:

A consortium of academics and industry that would perform drug-target validation in the lab and in people, with all research output to be open access. SGC has already had considerable success “Clinical proof-of-concept studies for selected targets

should no longer be considered as a step on the path to commercialization, but rather as a precompetitive scientific experiment whose output can be made available to all.”

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Scylla and Charybdis

According to Homer, Odysseus had to steer his boat between two horrible monsters on either side of a very narrow channel.

Scylla was horrible sea monster with six long necks with grisly heads.

Charybdis has a face that is all mouth. Unfortunately, I wasn’t able to provide a picture for

you.

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Open Science meets Scylla and Charybdis Scylla: the final product is unpatentable and

unprotectable, in which case: who will invest in Phase III clinical trials to achieve regulatory approval? It may be difficult to protect drugs using selection

patents, as they tend to be attacked on non-obviousness grounds.

The validated target is never used. Scientists who worked on the target validation are disillusioned because their work has been wasted.

Charybdis: the final product is protected by patents and sold at high prices, excluding many poor patients. The scientists who worked on the target validation,

thinking of the public good, are disillusioned. 6

Clinical trials

Essential to product approval Typically very expensive

DiMasi et al (2003) claim a mean cost per Phase III trial of over $80m.

In US in 2005, estimated trial expenditures were $24bn. In Europe in 2008, trials cost $32bn.

Risky Tufts Center for Study of Drug Development claims

13% success rate (includes earlier Phases) Not easily organized in an open science framework Can be funded by government, but governments

have usually avoided this.

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The Health Impact Fund

The HIF would pay out each year a fixed sum for pharmaceutical innovations.

Innovators could elect to charge the usual patent-protected mark-ups, or to opt in to the HIF.

Opting in would mean that the firm would:

sell its product at a low price (around average cost of production) or license it openly and

be compensated through direct payments from the HIF based on its product’s health impact.

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Proposed Reward Mechanism

The HIF would offer a fixed reward pool each year, financed by governments.

Each participating firm would be given a share of the reward pool in each of the 10 years following the introduction of its product.

Each product’s share would be equal to its share of total QALYs generated by all participating products.

QALY: Quality-Adjusted Life-Year

The share would be re-evaluated annually based on current data. 9

Why would innovators opt in?

The expected health benefits of the product are relatively large compared to the profits that could be made from typical exploitation of the monopoly i.e. a drug or vaccine to treat a disease mainly

suffered by poor people

The firm is reluctant or unable to charge high mark-ups that would exclude many poor patients Condition of a public-private partnership

The product lacks effective patent protection

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Health Impact Assessment

Health impact will be assessed annually based on available information and inference relating to QALY benefit associated with the drug.

Assessment will rely on data from clinical trials, pragmatic or practical trials, audited data on sales stratified sampling of use of the product in

different environments, and survey data on patient demographic and

clinical characteristics. 11

Financing

Only governments countries can reliably commit large sums long-term.

Countries could contribute proportionally to income

The cost of rewards is at least partially compensated by savings owing to low prices of registered drugs

Because HIF registration is voluntary, the HIF reward rate is self-adjusting, assuring firms that it won’t sink unreasonably low and taxpayers that it won’t produce windfalls for innovators. 12

The HIF Resolves Three Critical Problems in Prize Determination

Which health problems to target; How to define the “finish line”; How large to make the reward (self-adjusting).

The HIF is a market-based solution: payments are determined by competition among all registered products for the available rewards.

A drug for malaria can directly compete against a drug for HIV/AIDS.

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The HIF and open science

The HIF offers firms a mechanism to be rewarded for developing a product through to approval, and then ensuring that it is effectively promoted and distributed.

Because payment is conditional on assessed health impact, they have an incentive to get the product out even to poor people who can pay little.

Rewards need not depend on patent status.

A firm that financed a clinical trial to achieve market approval could apply to the HIF for rewards even for an unpatentable drug. The rewards would be based on global sales of the drug by all manufacturers.

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Next Step: A Pilot

Piloting the Health Impact Fund reimbursement model

with a specific novel drug product in a developing country environment in partnership with industry

We have begun conversations with countries and companies.

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Outcomes of the Pilot

A comprehensive metric to evaluate the health impact

of medicines,

Procedures for how to apply this metric reliably,

Benefits to patients in the field-test area who gain access

to an important new product at an affordable price,

Observation of how innovators promote their product

differently when they are paid according to health impact.

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Developing the proposal

We are working on building a team to move this proposal ahead. A growing high profile advisory board A newly formed scientific advisory team to guide the pilot

We are engaged in talks with governments, industry, foundations, and academics in a variety of disciplines

We see the HIF as one of many related and complementary proposals for change and hope that what we do helps others.

The German Social Democratic Party recently endorsed the proposal and called for a pilot.

The WHO’s Expert Working Group on R&D Financing endorsed the HIF as promising and called for more exploration of the idea. 17

Thank you!

More information available at

www.healthimpactfund.org

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