Director-General

New business models for medical innovation

Dr Margaret Chan
Director-General of the World Health Organization

Opening remarks at a joint WHO/WIPO/WTO technical symposium on medical innovation: changing business models
Geneva, Switzerland

5 July 2013

Dr Francis Gurry, Mr Pascal Lamy, distinguished experts, ladies and gentlemen,

I have always enjoyed these joint symposia. Hearing the views of experts on trade and intellectual property enriches the perspective of public health.

This meeting is especially important to me because of its personal dimension. This is the last time that Pascal Lamy will be part of our group. We will miss him, of course, but we will benefit for a long time from the legacy he created.

It is a credit to his leadership that concern about trade issues has been deepened to include far more than rules for the international exchange of goods and services.

As he has stated on several occasions, world trade is no longer a distinct, narrowly defined area of policy. Trade policy intersects with climate change policies, food security policies, energy policies and, of course, health policies.

Pascal humanized the politics of world trade. In his view, the multilateral trading system is designed to enhance, and not reduce, human welfare. It must not be allowed to stand in the way of efforts to promote or protect human welfare.

We have seen, too, how the multilateral system for intellectual property can promote human welfare. Last week, WIPO generated a great deal of news, and good will, with agreement on a new treaty that will significantly expand access to books for the world’s 314 million people who are blind or visually impaired.

As Francis told the media, the treaty strikes a good balance between the interests of copyright holders and the need of the visually impaired to have access to books in Braille, large print, or audio format.

Blind music legend Stevie Wonder pushed hard for successful negotiations, calling for an end to the deprivation of information that, as he said, “keeps the visually impaired in the dark.” He then travelled to Marrakesh, where the treaty was negotiated, to celebrate with participants.

Finding new business models for medical innovation would also be something to celebrate.

Ladies and gentlemen,

WHO and its Member States have long been concerned about the issues that are being addressed during this meeting. The Consultative Expert Working Group on Research and Development: Financing and Coordination, or CEWG, explored issues that were identified as a priority well over two decades ago.

The central problem is easily stated. The current system of incentives and rewards for product innovation is driven by market forces, and not by global health priorities. For diseases of the poor, the need for a new product may be huge, but the market fails because of limited capacity to pay.

The result is a great mismatch between products that can have a major impact on global health and what is actually on the market or in the pipeline. This is a mismatch between products that turn the biggest profit and products that save the most lives in poor countries.

And there are other problems.

Current procedures for drug discovery and the development of new medicines are inefficient. Companies and universities jealously guard their data. Sharing is rare, and much work is duplicated.

Governments are struggling to align the need to create incentives for innovation with the need to control health expenditures.

In the pharmaceutical industry, innovation has declined in a market shaped by cost-containment measures, stringent regulatory requirements, and complex diseases that are poorly understood.

New patents are issued, sometimes for “me-too” drugs, sometimes through the evergreening of existing products. But the discovery of new entities with breakthrough therapeutic potential continues to decline.

The health and medical professions everywhere are running out of first-line antibiotics and, in several cases, second-line antibiotics as well. Few replacements are in the pipeline. This trend strongly suggests that the world is moving towards a post-antibiotic era in which common infections will once again kill.

The problem of progressively higher and higher prices is another universal concern that points to the need to change business models. It also raises some fundamental ethical issues.

Should the price of a new medicine reflect the value or worth of the medicine to shareholders, or to society? Are essential medicines a public good?

Should the need for innovation and appropriate incentives be driven by a spirit of social solidarity? Or should the price of a new medicine be based on what the market is willing to pay?

This leads quickly to the argument that no price can be placed on a human life. If human life has value, no price for saving a life can be judged too high.

This argument, in turn, leads quickly to the reality. The costs of many new medical products are becoming unsustainable for even the wealthiest countries in the world.

Last year, the US Food and Drug Administration approved 12 drugs for various cancer indications. Of these 12, 11 were priced above US$ 100 000 per patient per year. This price is unaffordable, for most patients, most health budgets, and most insurance companies.

These are problems for all countries, not just the developing world. I can assure you, after more than two decades of efforts, there are no easy solutions.

Everyone agrees that discovery and innovation must be rewarded. Most also agree on the need to deconstruct the costs of R&D and divorce these costs from the eventual price of the product.

Ways of doing so are being explored. But divorce always costs money. New sources of financing must also be found.

In recent negotiations, WHO Member States have shown little appetite for mandatory financial contributions to a global R&D fund. Instead, calls are being made to make better use of what already exists. Countries are re-examining existing systems that shape the market and could be adjusted to operate as incentives for innovation.

Mechanisms such as direct grants to companies, milestone prizes and end prizes, and patent pools likewise continue to be explored.

The CEWG report gave us an inventory of promising ways to promote innovation. An updated report on Priority Medicines for Europe and the World, to be launched next week, also discusses the promotion of innovation.

Public-private partnerships for product development are increasingly accepted as a viable way to bring badly needed new products to market. The results speak for themselves. You will be hearing about one such partnership, the Meningitis Vaccine Project, later today.

Price and reimbursement policies offer another entry point for creating incentives. More countries are using health technology assessments when making decisions about pricing and reimbursement.

Drug regulatory authorities have expressed their willingness to be involved in the stimulation of innovation. Some argue for adaptive approaches to market authorization, whereby the single transition from non-approval to approval is replaced by a series of approval stages as new evidence emerges and is subsequently evaluated.

Better use of existing electronic health records may be more valuable in obtaining the much needed data on safety and effectiveness of medicines than more clinical trials and stricter regulations.

My final example continues the spirit of optimism in our quest for new models that, to use Pascal’s words, “enhance human welfare.”

Last year’s Access to Medicines Index, which issues report cards on the performance of pharmaceutical companies, was upbeat. Access to medicines is improving.

More companies are producing more products for developing countries. We can all welcome this trend

Thank you.

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