Transcript Incentives for TB Diagnostics

Incentives for Tb
Diagnostics and Drugs
Aidan Hollis
Department of Economics
University of Calgary
Diagnostics
Can prizes be useful at all?
 I am skeptical. Possibly the prize mechanism,
as used by Innocentive, for solutions to very
specific technical puzzles, might be useful.
 Overall prize for technical solution is not
implementable because the problem is simply
too multi-faceted.
Drugs Overview
Drugs
 What is required is new drugs which treat
Multi-drug resistant strains
 Which mechanism will be effective?
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Patent exclusivity
Prizes
Grants
Drugs
B. Cash for Therapeutic Impact
 Health Impact Fund
 The proposed Health Impact Fund is an optional
mechanism that rewards pharmaceutical
innovators based on the incremental health
impact of their products, if they agree to sell
those products at designated low prices. The
proposed Fund is to be financed mainly by
governments.
 No impact on patent rights
 Fixed annual payment divided according to
assessed health impact (QALYs) per drug over
10 years.
Health Impact Fund
Drugs
 Proposed budget perhaps $5bn annually.
 Not specific to Tb
 However, to the extent that Tb drugs could
achieve significant global health impact, a
well-financed fund would increase incentives
for private drug and vaccine development.
 Operates alongside normal patent exclusivity:
firms choose to obtain payments from HIF or
to exploit their patent rights.
 Similar to a global drug insurance mechanism
with value-based pricing
Grants
Drugs
 Currently important, and likely to remain so.
 Key questions: access and decision problem.
 What mechanisms will enable wide access and
low prices?
 Decision-making is problematic
Funding through push or pull?
Drugs
 How do we compare prize mechanisms and
grants?
 Prize mechanisms impose risk on the firm, but
with higher potential reward
 Grants impose risk on the funder.
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In either case, much money will be spent on
failures.
 The question is: who should choose which
projects should be funded?
Funding through push or pull?
Drugs
 Is the grantor better at picking projects than the
firm’s internal processes?
 Upside of grantor project selection:
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Grantor sees the whole portfolio
 Downside of grantor project selection:
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Highly political (compare e.g. to HIF)
Grantor experts not motivated financially to make
good choices
Grantor experts may try to exclude outsiders
Antitrust considerations
Corporate philanthropy
Drugs
 We should not expect for-profit
pharmaceutical firms to fund development on
a non-profit basis
 No-loss-no-profit pricing is implausible for
drug companies, since if firm fails to develop
a drug, price is zero. If firm does develop
(with low probability) do it only recover its
own costs? If so, this is simply corporate
philanthropy, which is not a sustainable
approach to financing.
Quick summary
Drugs
 For diagnostics, grants tied to reasonable
licensing regimes seems a reasonable
solution
 For drugs, a variety of approaches is certainly
likely to be optimal.
 For more on Health Impact Fund see
www.incentivesforglobalhealth.org