A TEDTalk was uploaded in December 2011 titled Medicine for the 99 Percent – It’s still on the front page of the most recently uploaded TEDTalks as of this publication. Thomas Pogge is Director of the Global Justice Program and a philosophy professor at Yale.
He argues in this TEDTalk for the development and support of the Health Impact Fund, a global fund available to any innovator of a new drug. The ostensible goal of the fund is to bring access to high impact drugs to all of the world’s population at an affordable cost. It’s not subsidizing drug costs or aiding in the distribution of drugs, just incentivizing innovators to make a global commitment to cheap and accessible drugs.
Let me explain a bit more about how he introduces his argument and how it works, then I’ll go into why this guy’s presenting a straw-man at best. He opens by saying medicines are cheap to produce and much cheaper than the alternatives (“hospitalization… operations… emergency rooms… the morgue”), and we need to be thankful to “pharmacologists” who research “these things and develop them” and to the pharmaceutical industry for “supporting these activities.”
He is disturbed, however, that high mark-up of medicines puts most medicines out of the price range of the impoverished. An ideal pharmaceutical industry, if we could recreate it all over again, would allow access to all important medicines (which, he reminds us again, are cheap to produce). It would incorporate innovative activities to aim for the greatest health impact, not necessarily the greatest profit impact. And it would be an efficient system that wastes very little money on overhead and red tape.
So he proposes the institution of just such a model called the Health Impact Fund. It would be an incentive system for innovators of new medicines to adopt this new ideal industry model and help combat global disease at the same time. Here’s how it works, according to him. When an innovator makes a new medicine, they could choose one of two paths. They can choose the ‘traditional’ path of patent protection and high mark-ups.
Or they can register the new drug with the HIF. There would be no mark-up of the medicine allowed. In fact, you would have to auction the manufacture of the compound to generic companies where the lowest bidder gets to manufacture the drug. The innovator buys the drug from the manufacturer at cost and sells the drug at cost – thus making no money off the manufacture of the drug. Instead, the HIF measures the health impact of ALL HIF registered drugs in quality-adjusted life years and awards the innovator a percentage of that years Reward Pool based on the percentage their drug contributed to the combined health impact. If your drug achieves 8% of the global health impact of all registered HIF drugs that year, you are awarded 8% of the Reward Pool.
Your drug would be awarded money in this way each year for 10 years, then your drug goes generic and is no longer in the HIF.
Don’t take my word for it, though. You really should watch the video for yourself:
I guess let’s start with what he gets right. Drugs are pretty cheap to manufacture – he reminds us of this 3 different times in the intro of his talk. Drugs that cost dollars per pill might be manufactured for pennies per pill. He also says pharmaceutical companies are bound to shareholders and can’t just give drugs away charitably at a loss. Also, the pharmaceutical industry is dependent on mark-ups for sustaining “innovation efforts.”
And that’s about it. After he introduces the ideal pharmaceutical industry, he describes the current state of the pharmaceutical industry. Problem #1 is the very high mark-up of patent-protected drugs (even though they’re Very Cheap to produce!) In the next breath, he goes on to say that the reason for the high mark up is, and I’m not making this up – it’s around 2:20 into the video – that rich people can pay a lot of money, the pharmaceutical company has a monopoly on sales, and so they “price for the rich; they forget about the poor.”
Right. That’s exactly how it happens. Thomas was very good in his talk about not mentioning two very important words in his whole talk: Research and Development. He never talks about them. He cleverly uses ‘innovation’ a lot to get around the more common R&D. the real reason drugs are so expensive during patent years is two fold, and the reasons compound on each other. One, R&D is hugely expensive. The mark-up over manufacturing cost is to recoup the cost of the last 12 years of R&D – where the company made NO money off of the drug. Add on to that the fact that only 2 of 10 drugs actually recoup their R&D costs. 8 of 10 drugs lose money for the company – even with the mark-up over manufacture. That’s the reason for the large mark-up.
Update 1/5: Here’s a chart I made and showed my OChem students when we talked about drug discovery as one of our IYC2011 mini lectures last year. No money gets made on the sale of the drug until after all this takes place. Other sources for good information on this topic from innovation.org and Novartis:
Next, he decries the 10/90 split in pharma ‘innovation.’ Only 10% of the $ is spent on diseases accounting for 90% of global disease, while 90% of the $ is spent on diseases accounting for 10% of global disease. I’m not sure where he got those numbers, or whether they’re true or not. But he’s certain painting a picture of the heartless drug company who doesn’t care about developing countries and their plights.
Later in the talk he mentions that 1/3 of all deaths each day are due to diseases of poverty in the developing world (respiratory infection, diarrhea, TB, malaria, HIV/AIDS, maternity/neonatal, measles, meningitis, hepatitis). For many of these, there are already non-patent front-line treatments, cures, and/or vaccines. None of the current drugs used for these diseases would be eligible for the HIF program, because they’re not new.
In March 2011 (so before the TEDTalk was recorded) PhRMA President and CEO John Castellani spoke to the Department of State Symposium on just this issue. Here’s a partial list of initiatives the pharmaceutical industry is undertaking in this area:
- 54 HIV/AIDS prevention programs
- 16 tuberculosis programs
- 17 anti-malaria programs
- 9 tropical disease programs
- 10 preventable disease programs29 child and maternal health programs and
- 24 chronic disease programs
I don’t know if this matches the 10/90 split or not, but it indicates the industry isn’t doing nothing. Furthermore, he makes it very clear in his talk that the new drugs registered in this program only get rewarded if they are better than current treatment. If you switch a patient from current treatment to your new treatment, but it’s not any better, you get 0% of the Reward Pool (because your drug contributed 0% to the net health impact). This, in my opinion, is a major disincentive to innovators.
Finally, he complains about the efficiency of the current pharmaceutical industry. The industry wastes money, he claims. The ways it wastes money he mentions, in order, are:
- Money to lobbyists (to extend patent lives, etc)
- Money spent on ‘gaming’ (a term I’m not familiar with where a drug company pays a generic company to delay entry into the market)
- Money spent taking out patents in all jurisdictions
- Money spent on litigation (drug co. vs. generic, drug co. vs. drug co.)
- Money spent on ‘deadweight losses’ (which he’s not going to explain, because it’s “too complicated.” Maybe he means R&D projects started and subsequently abandoned in tox studies or clinical trials?)
- Money spent on wasteful marketing (DTC and marketing to physicians)
I’m not really sure how counterfeiting is a cost to the drug company. He describes counterfeiting in developing countries this way: “more than 50% of what’s sold are counterfeit. Because the drug is so expensive, I can offer you a cheaper version, but of course it’s not the real thing. It’s either diluted or it’s completely inert.” And somehow this is money wasted by the drug company? And again, no mention of R&D at all in the money spent.
But the biggest beef I have with this talk is when he talks about how the health impact is to be assessed – how the Reward Pool will be split up. This begins at ~13:20, but the part that makes me mad is ~13:50. In talking about the assessment, he will draw on data from “clinical trials, pragmatic or practical trials, sampling of product use in different environments and demographic groups, audited sales data, and correlation w/ global burden of disease.” He likens it to exit poling. And then he goes on to say this is in contrast to the current system. His quote, “Sometimes there is a reward based on performance, but it’s the performance based on clinical trials – in the laboratory if you like, and not the performance in the real world.”
What!? If you watch him, I think he slips up here. I think he meant to only say “it’s the performance based in the laboratory.” I think he slipped, said clinical trials – which is absolutely true, but doesn’t make his point – and backtracked by equating ‘clinical trials’ with ‘in the laboratory. In my mind, he’s clearly trying to portray cavalier drug companies who test their products in some test tubes in the lab, maybe a rat or two, and go straight to price gouging in the market and never do any human testing. It’s completely inaccurate, and the insinuation is completely dishonest, and it makes me really mad.