In recent years, drug companies and their shareholders have faced tremendous pressure from public-health advocates to provide better access to medical treatments for citizens in poor countries.
Most recently, coordinated by the Bill and Melinda Gates Foundation, 13 of the largest drug companies agreed to donate more medicines to treat neglected diseases and to work together to find new treatments for many neglected tropical diseases.
The targeted diseases affect an astonishing 20% of the world’s population in poor countries and include lymphatic filariasis, river blindness, schistosomiasis and Chagas disease.
The companies also agreed to cooperate to develop new therapies. For example, Abbott, Johnson & Johnson and Pfizer will join forces under the direction of the public-private partnership Drugs for Neglected Diseases Initiative (DNDi). All 13 companies have agreed to share with DNDi confidential information on the details of treatments that have gone through initial testing but not found a commercial use.
The goal is to identify more effective drugs for neglected tropical diseases. While companies have donated drugs and money in the past, the opening up of compound libraries should help accelerate research.
Projects like DNDi are far more promising ways to enlist the assistance of drug companies than curtailing drug patents or pressuring companies to donate large quantities of medicines free of charge, tactics heavily favored by groups like Doctors Without Borders.
Demanding altruism from drug companies, however, still creates its own problems. If companies shift too much R&D away from their primary markets (wealthy countries) investors will punish them by shifting their dollars into other, potentially more lucrative sectors (like software).
Also, if rich countries (and rich citizens) of the world want to help those less fortunate, pressuring shareholders of drug firms to pay for their altruism is asking for a free lunch. According to that logic, why not require toy companies to pay for your kids’ Christmas presents?
Any company, including those developing health-care treatments, needs profits to attract investors. That’s why few medicines are developed for diseases afflicting patients in poor countries, who cannot pay for them. The poor would fare much better if a company’s bottom line benefited directly from research into neglected diseases.
Congress took a step toward creating such incentives in 2007, when it passed legislation creating a priority review voucher system for companies that developed drugs for neglected diseases. The voucher obligated the FDA to review another drug â€” presumably a potential "blockbuster" sold in wealthy countries â€” faster, offering companies more valuable patent time on market.
Unfortunately, only one company has applied for the voucher since 2007, and the drug has yet to be approved by the FDA. The agency has recently indicated that no other companies are expected to redeem priority vouchers in 2012 and ’13.
But the central principle of rewarding rather than punishing neglected-disease innovators is a good one. Market exclusivity for orphan drugs (that treat very small populations) and short patent extensions for research into pediatric treatments has spurred tremendous research and innovation in those areas.
Policymakers should consider similar market-based mechanisms â€” including R&D or flat corporate tax breaks and short patent extensions â€” for companies that successfully develop a drug or vaccine for a neglected disease recognized by the FDA.
The patent extensions and tax credits should also be trade-able, which would benefit small companies or non-profits who sold them to larger firms, seeding additional research into neglected diseases.
The key, however, is that these rewards should be made automatic, eliminating the uncertainty that has plagued the FDA voucher system.
The world’s rich nations should create incentives for health care firms to help the poor. Making the climate harder for drug companies to innovate â€” for example, by attacking the patent system â€” will only discourage such investment. Linking profits and public health has worked miracles for wealthy nations, and is the best medicine for treating neglected diseases.
This piece originally appeared in Investor's Business Daily