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SECTION 1. Why do we need a reformed pharmaceutical R&D system?
from COVID-19 and the Reform of the Biomedical R&D System: A Proposal for a Preferred Supplier Model
by ISGlobal
SECTION 1:
Why Do We Need to Reform the Pharmaceutical R&D System?
One of the first steps to understanding the outcomes and challenges of the current health and R&D systems, and assessing its potential for reform, is by recognising the complex and non-linear relationships that determine its performance.3–5 In the current pharmaceutical R&D system, the way the different actors interact, and in particular the relationship between public institutions and pharmaceutical companies, may be undermining the system’s primary objective: to meet public health needs and ensure equitable access to safe, effective and quality health related technologies.4,6,7 The poor outcomes being achieved with the current system could be explained as a consequence of the complex interactions between the incentives inherent in the model, the distribution of roles, risks and rewards across the system’s stakeholders, and the links between the R&D system and other sectors, such as international trade and financial markets:
01. Unequal distribution of risks and rewards.8,9 The failure to recognise the
public sector’s role as a risk-taker and as a first-hand investor in biomedical R&D has led to an unequal distribution of risks and benefits in the innovation process.9 As a result, the rewards are reaped primarily by the Intellectual Property (IP) holders, while the value generated by the cumulative and multistakeholder nature of innovation and research is overlooked.
02. Patents as the main driver of innovation.10–13 Whenever the IP protection
system is misused or abused, patents have been widely studied as an incentive to innovation but also as barriers to access.8 From the point of view of access, patent-granted monopolies can lead to unaffordable prices for health systems in countries of all income levels. From the point of view of research and innovation, patents favour secrecy and competition to be first, the very opposite of the cumulative and collective development of science and innovation. Finally, from the point of view of public health, patent-based systems disincentivise investment in unprofitable areas which however, should be a priority from the public health point of view, such as epidemic preparedness, antimicrobial resistance and neglected tropical diseases. 03. Lack of a public health-oriented vision.6,14,15 Reliance on patent-based
incentive mechanisms has led to a shift in the pharmaceutical industry away from a public health-oriented vision and towards a financialised structure. In this scenario, the business model is more focused on managing intangible assets, such as IP rights (patents), and increasing prices in therapeutic areas that can be highly profitable (maximising shareholder value through payouts and share buybacks) than on increasing the effectiveness and impact of biomedical R&D in public health terms.
04. Lack of transparency. The allocation of risks and rewards in the R&D process is also hindered by the difficulty of obtaining data on the real R&D investments i made by both, public and private institutions, on the actual cost of developing and manufacturing biomedical products and even on the real final price This lack of transparency can also hinder the ability of public institutions to consider attaching conditions to public funding, or to have have a say to regulate and negotiate prices.12,13 These four aspects of the system and some of the outcomes of their interaction are summarised in Table 1. This analysis shows that, rather than being isolated blocks, they constitute a set of interconnected factors that influence each other, creating a number of barriers to access and preventing the creation of a sustainable biomedical R&D ecosystem.
TABLE 1. The interactions between different aspects of the biomedical R&D system give rise to potential inefficiencies and barriers to access
PATENT-BASED INCENTIVES
DISTRIBUTION OF RISKS AND REWARDS
LACK OF TRANSPARENCY DISTRIBUTION OF RISKS AND REWARDS
Rewards concentrate on IP holders, neglecting the value generated by other stakeholders, who are not being rewarded accordingly. The race to be first to patent an innovation discourages collaboration between researchers. The system focuses on the development of me-too drugs and incremental advances rather than on meeting public health needs. Patent-granted monopolies may lead to unaffordable prices and the misuse and abuse of IP strategies blocking generic competition.
LACK OF TRANSPARENCY NARROW, MARKETORIENTED VISION
Lack of transparency about R&D investments from public and private sources obscures the risks taken by each of the stakeholder in the R&D process. Lack of transparency about real costs of R&D and manufacturing process reduces the leverage of governments to negotiate prices. Funding provided by publicsector organisations is not reflected in the final prices of biomedical products. Large companies that focus on final stages of development and marketing may harm the technical capabilities of innovation system. Assetization of IP rights and increases in share buybacks syphons out the value generated throughout the innovation chain to maximise shareholder value, to the expense of other players.
Lack of collaboration and transparency increases costs and reduces efficiency in the R&D process.
COVID-19 has become a stress test for the system, highlighting many of the vulnerabilities described above. The following sections will show the outcomes of these weaknesses: the allocation of risks and benefits is unlikely to reflect current R&D funding flows; the lack of transparency limits accountability of COVID-19-related investments and obscures how much funding is coming from the private sector; and global access is not ensured despite the governance mechanisms proposed to address some of these vulnerabilities.
