Gutting the research and development treaty

imagesFor several years, health advocates have tried to assemble a treaty to fund research and development on neglected diseases that predominate in poor countries. This week, US and EU negotiators gutted that goal.

At the World Health Organization, negotiations had been ongoing this week about a health R&D treaty to get sustainable resources to fund research in developing countries. The US/EU position, designed to avoid commitments, was that it would be too difficult to determine what dollar amount could help R&D in developing countries. (Though this might be said of all international aid; an exact amount is not needed, as the amounts given are usually not enough). Instead, the US and EU argued that “demonstration projects” should be started to explore the matter into the perpetual future. This assumes that scientific discoveries and innovations are so routine that they can be accomplished via pilot studies (in reality, these pilots will demonstrate, predictably, absolutely no returns, since no one can “pilot” a revolutionary discovery).

nm0612-838a-I1The details of the negotiations have been posted online — they are revealing of the internal politics of  health policy negotiations, and include insights into negotiating techniques used by different countries…for example, waiting until 2am when US and EU negotiators can “switch out” one negotiator for another (one negotiator sleeps while the other stalls the discussion), taking advantage of the fact that negotiating ‘teams’ from poor countries often have only one member. Hence, if the poor country’s negotiator wants to sleep, he or she will have to forfeit their vote during these negotiations. Needless to say, the final voting took place in the wee hours of the night, with the “agreement” to postpone any treaty discussions until 2016.

All of this, of course, assumes that pharmaceutical companies will not address R&D on neglected diseases, given the fact that such diseases almost universally appear among the poor. That’s probably a correct assumption. But what the data show is that the converse may not be true either: that is, even when people can pay, it doesn’t necessarily mean they’re getting good R&D for drugs they pay for. While the US allows 20 year patents on pharmaceuticals, sustaining high drug costs before generic competition can enter the market, this is not necessarily awarding the innovators and incentivizing good R&D, contrary to intuition and popular belief.

A look at the tax forms of the US-based pharmaceutical industry shows vastly greater sums from patent profits going towards marketing than R&D:


So while high drug prices are being paid, they are often going more to advertising than innovative research. And new drugs, as we’ve reviewed earlier, are almost entirely low-yield products like hair loss treatments as opposed to high-yield products like innovative cancer therapies.

There are at least two interesting structures being proposed to repair this dilemma and provide a more hopeful future for pharmaceutical R&D. The first is a type of “innovation prize fund” that would replace profits from patents with direct payments to innovators–if you were to make a massive discovery, you get a windfall prize based on some metric of its value to society (e.g., number of quality-adjusted life years saved, or some other similar metric), but generics are allowed to be made off the product immediately, so that the price of the pill is still affordable to the public. A second idea is an advance market commitment, which is essentially the same thing: have a co-payment from the government to the innovator if they make a key new drug, so that the consumer can pay a lower price while the innovator gets a reward. Both of these mechanisms might help maintain incentives for R&D without price-gouging the public on medicines. But it remains to be seen if the political barriers to such ideas can be overcome…

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