Time for new pharmaceutical-innovation models

[This commentary was published by Barrons on 7 February 2020 under the title: Coronavirus: The latest problem big pharma won’t solve. It is republished here with permission.]

The pharmaceutical industry is one of the most profitable on earth, expected to be worth $1.4 trillion by the end of 2020. Last year, the four drug companies that dominated the vaccine market made $30 billion selling vaccines. The pharmaceutical industry benefits from considerable incentives, including in the form of patents and other market monopolies to sustain vaccine and treatment prices well above production cost. Society pays this price—in theory—because it enables the industry to generate money needed to invest in developing new health innovations.

With the outbreak of the novel coronavirus, 2019-nCoV, a disease for which there is neither a vaccine nor an effective drug treatment, the call for such innovations is growing louder by the day. With global sales in vaccines alone totaling $54 billion in 2019 and predicted to near $60 billion in 2020, one would think that industry has the reserves to jump at this challenge. But so far, as reported by Barron’s, none of the four top vaccine companies has shown significant interest. It has been the Coalition for Epidemic Preparedness Innovations, a government- and charity-funded initiative to accelerate the development of vaccines to respond to outbreaks, that has been leading the effort to find a vaccine for 2019-nCoV.

The coronavirus seems poised to join a lengthy list of health problems the industry turns its back on unless additional incentives are made available: antimicrobial resistance, pediatric medicines, medicines to treat diseases of the poor, new infectious diseases such as Ebola, neglected tropical diseases, and rare diseases. Should the public allow them to do so? After all, the billions this industry rakes in every year is extracted from public sources: in low-income countries from out-of-pocket payments for drugs; in middle- and high-income countries mostly from social health-insurance schemes and taxes. Patients overpay for existing medicines because they expect something in return. The privatization of public resources implies a social responsibility for industry to develop new treatments and vaccines when needed. But the world lacks a mechanism to make this happen when industry refuses for lack of a blockbuster profit prospect. The inability to do so is becoming a detriment to public health.

Still, early trials of potential 2019-nCoV treatments are beginning to emerge. China is testing Gilead’s antiviral remdesivir. In response, Gilead’s shares rose 13%. Other known compounds, initially developed for the treatment of HIV, have been identified as potentially useful. It is too early to say whether any of the medicines currently in clinical trials will turn out to be effective treatments for the 2019-nCoV. But it is not too early to start thinking about how to make the products affordable and available to large numbers of people if they do.

Let’s not repeat the horrific delay in access to life-saving medicines that happened with HIV treatments. In the ‘80s, massive government research efforts and public investments accelerated the development of antiretroviral drugs. This public spendingturned HIV from a death sentence into a chronic disease in high-income countries that could afford drug prices of$15,000–20,000 per patient per year. The millions of people suffering from HIV/AIDS in the developing world were initially left out in the cold. The pharmaceutical industry, patents in hand, defended their market exclusivity, which barred lower-priced generic versions from becoming available. It took global campaigning and international action for this situation to change.

Today, companies have licensed the patents for all HIV regimens recommended by the World Health Organization to the Medicines Patent Pool, a U.N.-backed initiative that enables qualified generic producers to produce low-cost medicines. Today, MPP patent licenses allow generics companies to provide antiretrovirals to around 90% of the people living with HIV in low- and middle-income countries. Prices for first-line treatment have dropped to $75 per patient per year. This is good news, but it could have happened much earlier. We should learn from this experience for new treatments in development. The MPP is ready to play the same role for the treatment of 2019-nCoV.

“The system is broken,” wrote the Dutch ministers of health and trade in 2017 at the launch of the report of the Lancet Commission on Essential Medicines. “Patent and intellectual property exclusivities are the only cornerstone of the current model. Companies can ask the price they like. This will no longer do. We need to develop alternative business models,” they continued. But not much progress has been made in designing and testing out new models for drug development. For that to happen, public resources currently tied up in the monopoly/high-price model will need to be made available.

The next health crisis is here. Again, patients and the public hear that the current innovation model is not delivering. The industry says it wants more incentives. How much more does this trillion-dollar industry need before it fulfills its social responsibility?

The global health emergency caused by the new coronavirus outbreak should bring countries, international organizations, NGOs, investors and industry together to agree on a new social contract where industry acknowledges it cannot have and eat the cake: If more public money is going to be spent directly on the development of new products and vaccines, the price of the products has to be closer to the marginal cost of production. Governments then need to keep their end of the bargain and invest in robust health systems to provide prevention, treatment, and care. Drug markets will not fix themselves.

Ellen 't Hoen
Ellen 't Hoen
Ellen ‘t Hoen, LLM PhD, is a lawyer and public health advocate with over 30 years of experience working on pharmaceutical and intellectual property policies.


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