we can pay for innovative new medicines without high drug prices and rationing

The monopoly-based system of R&D has proven inefficient at advancing a needs-driven public health agenda. Even by Pharma’s estimates, barely more than a sixth of what is spent on drugs is invested in R&D, and the actual amounts may be significantly less. What is spent gets directed to health problems where there is market demand; this sometimes correlates to priority health needs, but often does not. The Medical Innovation Prize Fund suggests an altogether different, market-based system of supporting innovation. It promises to deliver much more bang for the buck, incentivize research in priority health areas currently under-addressed (including but not limited to “neglected diseases” prevalent in poor countries but not rich nations), end wasteful expenditures on marketing, and make medicines dramatically more affordable. These advantages can all be achieved because the prize fund eliminates inefficient monopolies and enables generic competition as soon as products reach the market. Whatever complexities the Medical Innovation Prize Fund approach may engender pale beside the irrational and wasteful complications that we take for granted in the current system of medical R&D.

Governments need to migrate to a system of delinkage of R&D costs from product prices, for drugs, vaccines and diagnostic tools. The appropriate way to deal with global free riding for cancer research is a global R&D treaty or trade agreement, rather than agreements on cancer IPR or prices. To reform the incentive for product development, governments should replace legal monopolies with cash rewards for successes in product development.

No one would have an objection to rewarding effort and innovation when this also serves the humanity for whom it is developed in the first place. However when this makes the product serve only those who have and not those in need, humanity must look at ways to change this equation. It is my hope that this panel will therefore seriously consider enabling affordable pricing of these products by delinking R&D costs from volume-based revenues (price x quantity). There are good models which have been proposed, what is needed is the commitment and the action to be put them into effect and the time is now.

Mechanisms like patent pools, prize funds, or Research & Development treaties allow for the de-linking of the costs of research from the price of the final product and provide a pathway for orienting R&D towards priority health needs.

UN Member States should begin negotiations to draft a global R&D agreement based on the recommendations of WHO’s Consultative Expert Working Group on Research and Development Finance and Coordination. This agreement should be based on the principle of delinking of cost of R&D from the price of the product.

Delinking the prices of medicines from the alleged high costs of R&D requires a combination of policies. A new model for prioritizing, financing and coordinating R&D needs to be developed. Significant progress has been made in discussing possible approaches and instruments in this regard, but effectively establishing such a model will take some time. However, immediate action can be taken by governments to promote delinking through the application of rigorous patentability criteria that prevent evergreening and by allowing for the use of or reliance on test data to facilitate the registration of generic medicines, as permitted by the TRIPS Agreement.

The goal of R&D should be to produce the most necessary medicines based on global disease burden, with products of such R&D made widely available at affordable prices. To reach this goal, we recommend the following changes to reform and realign the R&D system…A delinked R&D system: the costs of innovation and production should be delinked.

It is a longstanding fallacy that Pharma’s revenue from high drug prices would be used to pay for R&D. It serves mostly to buy-out small companies at hefty prices, pay for massive marketing, and enrich shareholders and the financial markets. Given that governments and the public already pay for much of the R&D, and again through paying high drug prices, it will be much more efficient and save money to do away with the monopolies in the middle and directly pay for the innovation we need. It would also allow to direct innovation to real health needs, instead of letting it follow market opportunities.

One idea that seeks to address the root cause of the tension between stimulating innovation and ensuring widespread access to innovative medicines is to break the link between funding/rewarding innovation and the price of the resulting product. This would require funding and rewarding innovation directly rather than via patent protection. By enabling early competition for innovative medicines, “delinkage approaches” could also result in more affordable prices for new medicines, and thus have the potential to significantly expand access to innovative products. R&D approaches that encompass the principle of “delinkage” therefore merit to be seriously explored.

Delinkage offers clear efficiency gains: by reorganizing the way we pay for pharmaceutical innovation, companies can be fully compensated for their investments while more patients get access to new drugs. In addition, because of flexibility in how companies are rewarded, delinkage can enable improved incentives to invest in the treatments of greatest social value.

Innovation should not be viewed within the narrow prism of intellectual property monopolies but framed within a holistic, knowledge ecosystem that includes open innovation, open knowledge approaches and the de-linkage of R&D costs from product prices.

[W]e are exploring delinking the R&D charge from the pack price. What does that mean? . . . [W]e actually have a pack price at one level, and we have a lump sum, if you can conceptualize it that way, of the R&D charge. Entirely possible that two different parts of the system pay for those two different things. Government maybe pays for one, patients pay for another. What does that mean? It means that once you’ve paid the R&D charge, you don’t pay forever.

By de-linking research and development incentives from product prices, and by eliminating legal monopolies to sell products, it is possible to induce investments that are medically more important, procure products at low prices from competitive suppliers, radically lower pricing barriers for access to new medicines, reduce wasteful marketing and research and development activities, and dramatically lower the overall costs of acquiring innovation, while expanding access to that innovation.

When drug companies create a new product, current law gives them unchecked monopoly rights to make and sell it for long periods of time. There is no regulation of the prices they can charge. … To make sure drug prices are fair, we need to change the rules that give drug companies unchecked monopoly rights. … We also should explore approaches that begin to delink the prices patients pay for lifesaving drugs from how we pay for innovation, as well as take a serious look at how we define innovation when granting monopoly rights.

I think the issue of how value-based pricing is applied does marry well to a sort of prize or delinkage model. … We want people to develop things that they wouldn’t naturally develop because we have societal goals, and the classic example of this is orphan drugs. Right, and you’ll hear over and over again, and it’s true, that if you wanna create a drug for 1,000 people, you shouldn’t even get out of bed, unless there’s an incentive there for you, because you’re never gonna kind of make these huge returns that you can make when you make a drug for millions of people. … [T]his delinkage idea would separate all of the investment in marketing from the investment in biomedical science and I think it’s a very intriguing idea, and I’m interested, particularly in the orphan space. And then, you would make the prize value-based, and I think it actually would work pretty well. It would take real societal will because you would be writing enormous checks up front, but I actually think that wouldn’t be a bad model.

In order to truly fulfill/realize the right to health, it is imperative that delinkage, the de-coupling of the costs of R&D from the price of health technologies, becomes part of the DNA of UN discussions to remedy the policy incoherence in public health, trade, the justifiable rights of inventors and human rights.

Delinkage represents a crucial building block towards the creation of a more equitable, people-centered R&D system – where we value human lives, and value lives equally.

There will never be universal access to new drugs unless we switch to delinkage models. Never. That is one reason why the delinkage debate is so important. Unless we move toward delinkage, even where access is possible, we will see restrictive formularies, burdensome and access limiting co-payments, and other barriers for patients. Incentives based upon the ability of a company to charge high prices for new drugs not only lead to inequality of access between countries of higher and lower incomes, but also significant restrictions on access in high and middle income countries. For us to make the change, we have to accept that delinkage approaches are not free, we will have to pay for R&D, if not through high drug prices, through other parts of the government or health care budget. We can learn to pay for new drugs without measures that kill the patients, and create inequality. If you believe equality and universal access is in the future, then delinkage is the future. Now we have to move the future forward.

… we must support, as a matter of urgency, research and development of antimicrobials, especially new antibiotics, vaccines, diagnostic tools and innovation, including in traditional and herbal medicine. This must be done while ensuring that R&D efforts are needs-driven, evidence-based, and a shared responsibility. These efforts must be guided by the core principles of affordability, effectiveness, efficiency, and equity through delinking research and development costs from prices and sales volume. The Group of 77 and China is pleased to see this delinkage principle underlined in the Political Declaration.

R&D requires adequate, sustainable funding from governments, which should be available at the national, regional, and international levels, as well as mechanisms to incentivize innovation and secure access, based on the principle of delinkage. Funding and incentive mechanisms should promote open, collaborative approaches that aim from the start to deliver affordable products efficiently. In order to best direct funding to agreed priorities, at least some portion of health R&D funding should be pooled. WHO is moving forward with a health product R&D fund for certain diseases, which is an important first step. However, it is essential to think beyond a narrow disease mandate so that all areas of public health importance are included.

The right to the “highest attainable standard of physical and mental health” extends to the poor. Therefore, human rights is not silent on whether national and international institutions should pursue R&D models that will help foster the innovation of affordable drugs to fight diseases afflicting the poor. Rather, the right to health suggests that national and international institutions must support models that delink the price of medicines from the funding of R&D. Such delinkage is a means both to direct research to meet pressing global health needs, and to generate medicines that are more affordable for those who need them.

State interventions to ensure health technologies are available, particularly for neglected diseases and conditions primarily affecting the poor, including development of a treaty-based system of mandatory resource pooling and coordination for research and development of new health technologies, and increasing investments in alternative incentive models based on the principles of delinkage, open innovation, and licensing for access.

Monopoly is not a magic bullet to generate innovation and it has many negative side effects for patients and health systems. If you believe that there should be a link between the price of the medicines and the money going to R&D, you end up with the dead end we are now in with pharmaceuticals. On the contrary, the priorities for the medical R&D have to be set according to the populations’ health needs, while competition between producers is necessary to make health innovation’s accessible. In order to shape R&D priorities and to allow competition to make product prices affordable, governments have to replace monopolies with new R&D funding mechanism.

A coordinated global financing and coordination mechanism for health R&D would allow for a number of existing problems to be addressed if appropriately designed. First, it would ensure an increased and more stable source of public funding to make up for the current absolute deficit in R&D funding for neglected conditions and adaptation of existing products. Second, it would allow for greater and better coordination of such funding, allowing funding to be driven more efficiently towards areas of human rights and public health need. However, this will all only be effective in addressing the problem of access to medicines if it also makes use of the three R&D design features – delinkage, open innovation and licensing for access – that will ensure affordability.

Public policy, including at the international level, should play a much greater role in steering the R&D priorities, coordinating financing and developing approaches to access to new medicines. One way for public policy to take on this role is to develop new financing models for medicines development. And delinkage should be at the core of such models.

Underline also that all research and development efforts should be needs driven, evidence-based and guided by the principles of affordability, effectiveness and efficiency and equity, and should be considered as a shared responsibility: in this regard, we acknowledge the importance of delinking the cost of investment in research and development on antimicrobial resistance from the price and volume of sales so as to facilitate equitable and affordable access to new medicines, diagnostic tools, vaccines and other results to be gained through research and development, and welcome innovation and research and development models that deliver effective solutions to the challenges presented by antimicrobial resistance, including those promoting investment in research and development; all relevant stakeholders, including Governments, industry, non-governmental organizations and academics, should continue to explore ways to support innovation models that address the unique set of challenges presented by antimicrobial resistance, including the importance of the appropriate and rational use of antimicrobial medicines, while promoting access to affordable medicines…

New initiatives and business models to stimulate R&D in medical products that “de-link” the cost of R&D from prices should be promoted. However, principles need to be established to ensure that if public resources are used to promote de-linkage, there is full transparency on the real costs of activities; disclosure of terms in contractual agreements for R&D and for IP; and that priorities for R&D are defined in accordance to public health needs.

Monopoly prices inject an important monetary consideration into what should be a treatment decision based on health considerations alone. We have created a whole industry of pharmacy benefit managers just to deal with monopoly drug pricing. And, when people can’t afford the prices, their health suffers or they die. The system of patent monopolies grew out of the medieval guild system. We can do better in the 21st century. We can finance R&D without granting monopolies.

Delinkage is a principle that has been tested in practice, and has demonstrated that both innovation and affordability of medicines can be jointly achieved. The R&D to develop the Meningitis A vaccine was covered by a grant from the Gates Foundation and supported by publicly-financed technologies. The final vaccine is sold near the cost of production – about 40 cents per dose – which makes it affordable for governments across the meningitis belt in sub-Saharan Africa. Another example is the combination drug ASAQ for malaria, developed by the Drugs for Neglected Diseases initiative and Sanofi. The development costs were paid by grants and in-kind contributions, and the product is sold by several competing manufacturers near the cost of production of $1 for the adult formulation and 50 cents for children. Delinkage should be applied to a much wider range of diseases, drugs and funding streams.

Research is risky, new drugs are too expensive, and industry focuses far too much of its effort on drugs of minimal medical significance. The prize fund solves all these problems by disconnecting the incentives for generating breakthroughs from the price that individual patients or their insurers must pay. Delinking R&D from patient payments will create a new system for financing medical progress in the 21st century.

The balance is lost: Current IP-related incentives are not producing the health technologies required by society and act as a barrier for access to the products that it does produce. The current biomedical innovation model, based on patent monopolies, relies on high prices of resulting medical technologies. This incentive model steers research efforts towards markets that guarantee high prices and speedy recovery of assumed investment. For example, despite the urgent need for new antibiotics, no new class of truly valuable antibiotics has been introduced on the market since the 1980s.

People’s health should come before the profit-driven motivations of the pharmaceutical industry. We therefore urgently need to explore and implement alternative models to finance R&D so critical health needs are prioritised and medicines are suitable and affordable. Today, medicine prices are set based on the maximum amount that we will pay to care for our sick—a way that bears no relation to the cost of R&D or production, which remains unknown due to industry secrecy. ‘Delinking’ the cost of R&D from the price of the medicine is essential to create incentives for needs-driven R&D and rational use of results. It also allows for structural affordable access to medicines because this would replace the traditional incentive expectations of high monopoly medicine prices through patents.

Three complementary strategies are proposed (with short-, medium- and long-term effects), which can be implemented simultaneously (Lamata et al. 2015). These strategies can contribute to development of the 2030 Sustainable Development Agenda, and the human right to health. 1) Reducing prices, bringing them close to actual production cost, by strengthening government negotiating power… 2) Promoting the approval of mandatory licenses where applicable… 3) Delinking research financing from prices…

With the prize system, we use the power of competitive markets to ensure that, once a drug is discovered, it is made available at the lowest possible price. Competition insures that the knowledge is used as widely as possible (in contrast, with monopolies, prices are raised to restrict the benefits that accrue from the knowledge.) Moreover, with the prize system, rewards can better reflect the social contribution of the innovation—the true marginal contribution (as opposed to the current system, where research efforts are directed at maximizing rents, often achieved by taking rents away from others).

De-linkage is a novel way of incentivizing health-driven biomedical innovation it could be universally affordable.  The present patent monopoly system is often oriented much more by high-level financial markets than by the search for the cures patients need.  Skyrocketing medicine prices demand a new approach that combines economic wisdom and public health concerns. De-linkage allows affordable access to life-saving treatments that today have abusive prices while prioritizing the scientific ethic of cooperation, transparency and the advancement of health treatments. It rewards the real therapeutic value of new drugs developed by the pharmaceutical sector while respecting the economic sustainability of public health systems, health-care providers and patients.

Delinking the cost of R&D from the prices of medicines and health technologies is in accordance with a human rights approach to health, ensuring access and affordability and delivering these technologies to people in need. Otherwise, innovation without a public health prospective will continue to express a barrier to reach the populations that are denied access!

Due to resistance, three things are simultaneously necessary for antibiotics: Access, Stewardship, and Innovation. Access alone would drive resistance; stewardship alone would hinder access and delay innovation; innovation alone is wasteful unless we make plans to preserve antibiotics and get them to the people who need them most. Antibiotic delinkage proposals are the best way to achieve all three of these aims simultaneously.

While we recognise that patents have an important role in innovation, we recommend that the UNHLP encourages the development and implementation of a wider variety of innovation financing models that do not rely on creating additional market exclusivities (through patents or otherwise). Such models should be based on “delinkage” principles, and thus the premise that costs and risks associated with R&D should be rewarded, other than through the price of the product.