As the debate continues over access to medicines in poor countries and the World Health Organization’s Expert Working Group readies a May report on R&D financing and intellectual property, Aidan Hollis, an economics professor at the University of Calgary, is pushing his Health Impact Fund. The plan leaves patent exclusivity intact, which has provoked some skepticism (see here). We spoke with him briefly and learned this…

Pharmalot: What is the Health Impact Fund?
Hollis: The fund is a proposal for a new way to pay for innovative drugs that would essentially have a large pool of money to be paid out every year. It’s a reward fund. And companies could get a share of this reward fund by registering their drug with the HIF and selling product at cost of production…Prize funds have been kicking around a long time…There are access problems, so if you can have prices close to the cost of production and pay for the cost of innovation separately, that would be more efficient from an economic prospective. But economists have always struggled with getting the right amount to pay for innovation. The patent system has been our solution to this – by and large.

Pharmalot: Where did the idea come from?
Hollis: I first heard of this particular idea from Jamie Love, who’s proposed a kind of mandatory system for the US through Senator Sanders’ bill. I started writing about this six years ago. It has nothing paritcularly to do with the Sanders bill, though, and it varies in some ways…Strikingly, it’s supposed to be an optional system…..A little while later, I teamed with Thomas Pogge, a philosopher at yale, who’d been thinking along the same lines….

Pharmalot: Where do things stand now?
Hollis: Over the last few years, we’ve been trying to really think carefully and build with a team of people what the proposal could look like in practice. My role is vp of the Non-Governmental Organization which is trying to organize this…..We’re trying to raise political awareness, trying to get more buy in from pharmaceutical companies and to undertake more analysis of what health impact measurement would look like….The big goal is to create better incentives to make more medicines while also making them more accessible to everyone in the world…

Pharmalot: What kind of discussions have you had with drugmakers?
Hollis: All the way along, we’ve tried to talk with pharma companies since we think if we propose something that’s implausible from their perspective, then it probably isn’t going to go anywhere. So it has to make sense. We’ve invited pharma people, industry associations and that’s at various levels. We’ve had lots of talks with pharma people. The response has been a little bit vague. The HIF is not perceived as anti-pharma proposition because its optional. But I think the issue is pharma companies are loathe to push too far along until they actually see there’s real money and a sort of mechanism for organization it all they feel comfortable with.

Pharmalot: How have the companies reacted?
Hollis: We haven’t convinced any firms to come out and say this is the mechanism we can support straight out. On other hand, they haven’t said it’s a bad idea which will never work. What they’re giving up is pricing flexibility – they won’t make money on mark up of the product, only the reward component. They’ll just make additional profits if a drug is being used and use increases and improves health.

Pharmalot: How do you gauge that?
Hollis: Over the course of 10 years. So every year, what would happen is the fund accesses the health impact of the product, based on the average health impact per patient times number of patients globally. The kind of analysis would have to be similar to cost effectiveness studies, but would have to be ongoing. You have to think retrospectively about the kinds of outcomes being obtained. At the time drug obtains marketing authorization, this is how many QALYs it produces. So you look over time at how many QALYs it’s producing. That would be the measurement used to determine additional payments from the fund each year.

Pharmalot: And how much is needed?
Hollis: The kind of money we think is reasonable for this fund is $6 billion a year, so this isn’t going to take on blockbusters. You wouldn’t expect firms to say I’ve got a Lipitor to put into the HIF, not unless it has a lot more money to dispense each year….

Pharmalot: So which kinds of drugs are likely to be registered?
Hollis: A variety of possibilities – one of them would be drugs for neglected diseases. The problem there is that consumers are relatively poor, so if you could get a drug that actually earned $500 million a year from a neglected disease, that’s not too bad. It doesn’t pay for production, though, just for research and marketing expenses, but the reward is new uses for existing products. It’s not really tied to exclusivity and we’ve proposed a shorter time period, five years. If a firm was able to obtain approval for new labeling for an existing drug, it could obtain rewards based on use of the drug. It would be based on the health impact of that new use -5 versus 10 years – the cost of showing new indication has to be less than developing cost of developing a product and showing innovation. That’s another instance of profitability under patent system that’s impaired because you can’t rely on exclusivity to ensure the firm makes money. Those are the two most obvious cases…

Pharmalot: What will it take to get pharma companies on board?
Hollis: They basically need to see it’s a plausible way to make money and be convinced governments are willing to fund the HIF over a long period. I think having money there would be most important thing…We’re working on it and governments are still just learning about it. The Expert Working Group of the WHO did classify it as one of a number promising proposals. But we’re still connecting with governments, pharma companies and also trying to organize some trials of measurement of health impact.