Pharmaceutical IP and global healthcare: a positive alliance
Source: Pharma Times Magazine (May 2016); Authors: Professor Walter Van Dyck (Director of the Vlerick Healthcare Management Centre) and Professor Leo Neels (Chairman of the Advisory Board of the Vlerick Healthcare Management Centre).
In an ideal world, everyone has access to quality health services that they need without financial hardship. In the real world, there is no strong, efficient and well-run health system in every country. Medical progress was very significant in rich countries, and pharmaceutical companies were named and shamed for focusing on these countries and on markets that could afford to pay the prices they need for recouping high R&D costs.
That is until the term neglected diseases was coined, under the aegis of WHO, lumping together a number of diseases associated with poverty which struggled to gain attention. From then onwards, quite high attention was given to diseases that had long been eliminated from the developed world and that are primarily found near the equator.
Today, we see significant strategies by international organisations, philanthropic initiatives – with the Bill and Melinda Gates Foundation in the lead – and pharmaceutical companies that focus on neglected tropical diseases.
Nowadays, good treatments are available for HIV, malaria and Tuberculosis, as a result of intelligent combined efforts of all people concerned, bringing together science, capital, focus and resolve in order to meet these formerly unmet medical needs. The health related Millennium Development Goals played a key role to find treatments that save lives and reduce the toll of these diseases. Some of the Goals may have been missed, but the progress was significant.
A focus is also on vaccines, with the GAVI Alliance combining efforts by the Bill and Melinda Gates Foundation, WHO, Unicef, World Bank and pharmaco’s such as GSK, Janssen, Novartis, MSD, Pfizer and Sanofi Pasteur. The Foundation is committed to saving children’s lives through the widespread use of vaccines – the best available medicine since it prevents diseases to spread.
With GAVI and the Drugs for Neglected Diseases Initiative, a turbo was placed on these developments, and DNDi regards the R&D landscape for tropical neglected diseases – under the header of an essential health R&D agenda. It develops a collaborative R&D model on some of the most neglected tropical diseases, such as human African trypanosomiasis, leishmaniosis, Chagas disease, filarial diseases, pediatric HIV. This allows to address patient needs in low- and middle-income countries, whereas these were not prioritized in the past. It is about novel R&D models and a dynamic approach. Malaria was handed over to the Medicines for Malaria Venture, and new diseases are added in the recent business plan.
Global access to health was often hindered by poor healthcare provisions in poor and unstable countries on the one hand, and traditionally high prices for medicines on the other hand. With regard to healthcare provisions, pharmaceutical companies intervene with aid to ameliorate awareness, training and systems as well. This can relate to financially supporting hospitals or emergency units, or the education and training of nurses.
With regard to pricing, the pharmaceutical companies did evolve in a very significant manner. One remembers incidents with regard to ‘Western’ prices for the first HIV treatments in South Africa, that led to litigation and severe criticism from world authorities addressed to some pharmaceutical companies indeed. It inspired frontal attacks on IP and patents as triggers for pricing abuses as well.
Pharmaceutical companies did react in a significant manner. An overview can be found on the website of the International Federation of Pharmaceutical Manufacturers and Associations (Developing World Health Partnerships Directory). Nowadays there is a wide range of optional plans with adaptive pricing, related to standard of living criteria in different regions.
This allows a more flexible approach that combines IP protection as a vital incentive for investment in innovation, and affordability of medicines in poorer parts of the world at prices that are fair for the local patients. GSK recently announced not to seek patent protection on medicines in low-income countries in order to widen access for local authorities and patients. This was a new and significant step, announced just before an important meeting at WHO.
The new initiative that Sir Andrew announced is an elegant example of adaptive pricing… adapted, that is, to the standard of living of different countries. In least developed low-income countries (as classified by the World Bank), GSK Medicines will be freely available for generic manufacturers for local production. In middle-income countries (amongst others Guatemala, Pakistan, the Philippines…), GSK will file for patents but it will actively seek license agreements with generic companies for a small royalty fee. And full IP protection and consequential pricing will be applied in all high- and middle-income countries and the 20 major economies – allowing an internal ‘subsidy’ form richer markets to poorer markets. Emerging countries, such as China, Brazil and India, that combine emerging economies with wealthy and poorer parts of the population, will have to negotiate affordable pricing on a country-basis.
Sir Andrew’s move is yet another example of a global company’s’ non-market strategy’ striving for credibility and building trust. While fundamentally market strategy is about creating value and making profits, non-market strategy is about values, in this case about doing good. Of course, one should always see this in the context of Ramsey optimal pricing being used by global pharmaceutical firms. Following this principle different prices in different markets are based on their willingness and ability to pay. In these poorer countries ability to pay is anyway low so why not give it for –almost– free, but in a controlled way? It almost sounds like Microsoft’s strategy not to sue copycats in China. This in contrast to the developed world where they do take imitators court. Overall, to do good for the poor? Maybe it’s because anyway at least like this you get a handle on your brand and control distribution in poor countries where you will be copied otherwise anyway. Lost profits will have to be recuperated in richer economies like the US and EU then. After all, somebody needs to pay for innovation.