Innovation

Incentivising Diseases?


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In the recent post on India’s first post TRIPS era compulsory license, a comment by Hersh Sewek brought up a very relevant question of how, if at all, this affects the innovation eco-system in India. Shamnad pointed out that very few papers have been written about the effects of such licenses on incentives to innovate. Indeed, there’s little concrete information on the amount of incentives required to bring about an increase in innovation. Let’s zoom out of compulsory licenses and look more generally at the incentives that the current drug development regime does give.

In the field of public health, it is not only the rate of innovation which matters, but also the type of innovation. For instance, the creation of a baldness creams will certainly be appreciated and sold world over and the company which makes this product will doubtlessly have huge profits. However, is it better to have Research & Development costs directed towards baldness creams or towards a cure for say, tuberculosis? The current drug development regime – patent law – doesn’t discriminate between either of these, giving innovators equal incentives in both cases. In other words, the primary innovation system that we are relying on does not determine how socially valuable a drug is. In nearly any other area, the markets can be successfully used to determine to see which products the public values more – however, no body chooses the diseases they are burdened with. Further, they rely on 3rd parties (doctors) who are constantly bombarded by pharmaceuticals to sell more of their products for advice on which drugs to treat themselves. Throw in insurance claims on one hand and poverty seeped patients on the other and suddently the traditional market based incentive structure provides very little useful indicators of accorded value that society places on a product.

Aside from the obvious follow on effect of not having the more socially valuable drugs, Margaret Chan, director general of WHO, recently stated that another potentially devastating situation that may be fast approaching us. Several existing antibiotics may quickly become useless in treating infections. She said

“A post-antibiotic era means, in effect, an end to modern medicine as we know it. Things as common as strep throat or a child’s scratched knee could once again kill.”

She continued: “Antimicrobial resistance is on the rise in Europe, and elsewhere in the world. We are losing our first-line antimicrobials. (See more here)

Why is this happening? Because most antibiotics are in danger of being rendered useless. Continual usage of low dosages of antibiotics, both indirectly through meat as well as directly through our own medicines, has resulted in pathogens developing resistance to existing antibiotics. She justifies how dramatic her potential scenario sounds by pointing out that ‘the pipeline is virtually dry’, referring to the drug development pipeline.

As mentioned above, we are following a system that incentivises the development of any drug that brings in high revenues. Common low risk – high revenue strategies include production of drugs which have been modified just enough to get an extension on the patent term or focusing on lifestyle drugs (treatments for baldness, impotence, wrinkles, etc) which are typically not as capital-intensive. This leaves more necessary and important treatments left unexplored. Several criticisms of the patent system have been raised more and more frequently, however, not enough importance is being put on developing more useful and more efficient alternatives to it. Coming back to what I started with – even if compulsory licenses are not damaging any incentives to pharmaceutical companies – they are but a small bandaid to a much larger wound.

I’m not trying to claim that the patent system can be done away with completely, but the severe deficiencies that are being caused by it must be remedied as soon as possible. There must be more focus on determining and increasing the incentives for providing more important and socially relevant drugs. Drug companies, thankfully, seem to finally be showing some more social responsibility – and I know I’m being generous when I say that – but it may be too little, too late.

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3 comments.

  1. AvatarHasan

    Thanks for raising an important issue. On the impact of compulsory licenses on innovation you can see the latest paper contributed by Margaret K. Kyle et al (http://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00214) basically arguing that there are no negative implications of such licenses in developing countries. We all know that MNCs R&D decisions are not guided by public health needs in poor countries like India so any IP related policy in these countries will not affect MNCs strategic decisions. On overall R&D prioritizing and relevance of patent led model as a key incentive please see ethical and legal arguments which Thomas Pogge et al mentioned in their basic document on Health Impact Fund: http://www.yale.edu/macmillan/igh/hif.html. This is perhaps the best and most succinct critique of patents as inadequate model for pharmaceutical R&D. You may not agree with their solution but I think on problem identification side they did a marvelous job.

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  2. AvatarAkshat Rathi

    You say, “Shamnad pointed out that very few papers have been written about the effects of such licenses on incentives to innovate. Indeed, there’s little concrete information on the amount of incentives required to bring about an increase in innovation.”

    Could you share with me links to what research has been done?

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  3. AvatarSwaraj Paul Barooah

    Deepest apologies for the super late response to these comments. They hadn’t come to my inbox and I didn’t notice them till just now when I was going through some older posts.

    @ Hasan, Thanks for the link to Kyle’s work. I will check it out. I agree that Pogge et al did a great job with problem identification. In this context, I also greatly appreciated Talha Syed & Terry Fisher’s work here http://lawreview.law.ucdavis.edu/issues/40/3/developing-drugs-for-developing-word/DavisVol40No3_Fisher.pdf

    @Akshat Rathi, One such paper is http://www.law.berkeley.edu/journals/btlj/articles/vol18/Chien.web.pdf

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