Push and Pull: Innovative Financing Mechanisms as Catalysts for Scientific Breakthroughs
Investments in research and development (R&D) are leading to tremendous scientific breakthroughs in health. Just in the last few years, scientists have made tremendous advancements. For several cancers, novel treatments have diminished deathly prognoses. New surgical techniques have reduced recovery time and leave scars smaller than a penny. Just within the last decade, the cost of DNA sequencing has declined so much that personalized medicine is on the cusp of becoming quotidian.
Such progress has been varied, however, and the benefits have not been distributed evenly. In low-income countries, there is still a long way to go. More than a billion people still suffer from diseases so ancient that they’re known as biblical. Why is there such a disparity? Funding is one factor. While medical innovation in the developed world receives ample resources and money, medical innovation in low and middle-income countries is left to pull together whatever limited financial support remains.
Neglected tropical diseases (NTDs) are one area where investment is needed in order to amend this disparity. Although NTDs affect 1 in 6 people, they receive less than 0.5 percent of global pharmaceutical R&D investment and are often viewed as unprofitable. As a result, pharmaceutical and biotechnology companies rarely fund the expensive research and development (R&D) needed for NTD treatment and prevention. Globally, this has engendered a significant research funding gap that prevents access to life-saving medicines for the world’s bottom billion.
Recognizing this reality, experts on the UN High Level Panel on Access to Medicines released recommendations for closing this funding gap with innovative financing mechanisms (IFMs), which are used to delink the cost of R&D from the final price of a product. These mechanisms have promising potential to accelerate medical innovations for underserved countries by aligning incentives and providing additional revenue for R&D.
Most IFMs can best be understood through a “push” and “pull” product development framework. “Pulls” foster demand for an undeveloped product. For instance, high-income individuals or countries agreeing to purchase a yet-undeveloped vaccine would act as a strong pull mechanism, encouraging the vaccine’s development. Some of the most common IFM pulls include priority review vouchers (PRVs), advanced market commitments (AMCs), and prize systems. These innovative financing mechanisms all offer a reward for treatment discoveries – albeit, different types of rewards. PRVs reward a voucher that can be used for expedited FDA drug approval. An AMC offers a guaranteed procurement of the final product. A prize system offers financial rewards.
On the other hand, “push” mechanisms help lower the cost of R&D, typically through technological improvements or subsidization, such as a grant. The Sabin Vaccine Institute’s product development partnership (PDP) is another example of a push mechanism. Through its PDP, Sabin funds and coordinates academia and private pharmaceutical companies to do R&D that they would otherwise not have an incentive for. Other examples of IFM pushes include air ticket levies and financial transaction tax (FTT). Current air ticket levies fund health programs using a $1 levy on airline ticket purchases. FTTs would fund R&D using small levies on particular monetary transactions, such as those used for speculative investments.
There is a panoply of clever IFMs that can push or pull medical advancements into low-income countries. In accordance with its mission to reduce needless human suffering from vaccine-preventable and neglected tropical diseases, Sabin is exploring the impact of these mechanisms through its PDP and by contributing to the policy discussion on AMCs and PRVs. All mechanisms have intrinsic trade-offs, and some are more efficient, effective or agreeable than others. It is clear that the status quo needs to change, but the question remains which mechanisms will best facilitate health equity around the world.
In the following weeks, Sabin will be posting articles examining IFMs in more depth.