On Monday, June 26th, GAiA Co-Director Quentin Palfrey presented on practical strategies to expand global access to medicines and promote research and development for diseases that primarily affect the world’s most under-resourced populations. Palfrey began the discussion by highlighting global disparities in access to medicines and outlining the three primary obstacles GAiA seeks to address to reduce these disparities: insufficient incentives for research and development, lower-income individuals being priced out of the market, and polarization and paralysis around access to medicines solutions. In response to these obstacles, Palfrey detailed three practical strategies used successfully by pharmaceutical companies to increase access to medicines for the global poor: differential pricing, non-exclusive licensing agreements, and patent pooling. These strategies create win-win-win scenarios for all stakeholders by increasing access to life-saving medicines for low-income individuals, allowing humanitarian entities to make a greater impact with limited budgets, and providing pharmaceutical companies the opportunity to greatly increase access to medicines with the potential to break even or make a modest profit.
The first strategy Palfrey recommends is differential pricing: the practice of setting different prices for different groups of potential buyers of the same product. This allows medicines to reach more people by adjusting the prices of products to the purchasing power of buyers. Charging different prices in different countries, based on factors such as income-level or market value is commonly known as “inter-country differential pricing,” whereas charging different prices to different populations within the same country is referred to as “intra-country differential pricing.”
Palfrey explained that while both differential pricing approaches increase access to medicines, intra-country differential pricing is more advantageous in the long-term as it allows for greater distinction between income levels, rather than grouping price categories on the country level. This is especially true for middle-income countries with populations of disparate incomes. Intra-country differential pricing does, however, bring potential risks: middlemen may resell the lower-cost product and undercut the market for the higher-priced product (physical arbitrage), and bulk purchasers like governments and healthcare providers may not be willing to pay a higher price if they know about the lower price (information arbitrage). Strategies to reduce these risks include good supply chain management, selectively choosing appropriate distributors, and establishing confidential rebates for poor populations.
The second strategy that Palfrey highlights is non-exclusive licensing of patented drugs to generic drug manufacturers. Licensing to multiple manufacturers creates competition, which generates downward pressure on the price of the drug being distributed. Thus, market forces naturally drive down prices over time. This type of program can be sustained by small royalties paid by licensees to the patent owner. Thus, this type of program is scalable, and can even produce a modest profit. Foundations which normally pay a “no-profit-no-loss” price for drugs may save money by allowing competition between multiple manufacturers to bring down drug prices. This creates a situation in which all stakeholders benefit: more people get access to lifesaving medicines, the patent-holding company has a cheaper and more impactful CSR program, and global health funders get more bang for their buck.
The third strategy Palfrey discussed addresses the problem of incentivizing drug research and development for diseases which primarily affect the global poor. Palfrey outlined how de-siloing drug research using patent pools might address this problem. Typically, pharmaceutical companies conduct their own research and development, and do not share information between each other. This leads to inefficiency in the development of new therapies, as researchers in different companies cannot build on each others’ progress. Information about “false starts” may also be useful. Palfrey highlighted the case of Viagra, which came about as a result of Pfizer’s failed attempt at creating a medicine focused on cardiovascular mechanisms.
The risky nature of releasing proprietary information with the potential for commercial value inhibits research from being shared between innovative companies. These problems have humanitarian implications. During the ebola epidemic, research efforts were only coordinated across companies after the outbreak became a global threat. Sharing research information through mechanisms such as the World Intellectual Property Organization’s Re:Search database may have allowed for a vaccine or treatment to have been developed much sooner. These research partnerships do not have to involve making research public. Research can be legally de-risked when it is submitted to research consortia through nondisclosure agreements, making it easier for companies to collaborate towards developing treatments for diseases that primarily affect the global poor.
Finally, Palfrey spoke about the potential for technological game changers to change access to medicines problems in the future. One of these involves miniature spectrometers, which can determine the chemical composition of drugs, and could be used to enforce differential pricing mechanisms by combatting physical arbitrage. 3D printing of drugs was also highlighted as a mechanism which could change the ways that drugs are distributed, reducing the cost of distribution and manufacturing. This may disrupt manufacturing and distribution chains, making spatial mismatches 3D printing could also act as a mechanism to facilitate differential pricing by allowing suppliers to more easily price drugs on the basis of income and location, similar to how websites like Expedia charge different prices for travel packages based on characteristics such as location. This could simultaneously create problems with the regulation of drugs, as counterfeiting may become easier.
Technological innovation, therefore, has the potential to alter the access to medicines problem for better or for worse, and will require careful oversight and regulation to ensure positive benefits. Both strengthening the supply chain with technological innovations and encouraging pharmaceutical firms to adopt the partial solutions listed above could ultimately save millions of lives.
Quentin Palfrey is the Co-Founder and current Co-Director of Global Access in Action. This session’s talk was moderated by GAiA Fellow Ashveena Gajeelee. A full recording of the event can be found below.