Our health care and pharmaceutical industries have an incentive problem. Profits drive our capitalist economy. This is not limited to Wall Street, where high returns on risky investments and a degree of carelessness — among other things — drove the 2008 financial crisis. This profit motive is in everything from media to medicine, and it’s intrinsic to our capitalist economy.
Pharmaceutical companies are among the worst offenders. They have massive incentives to pursue and sell drugs that people will take every day for the rest of their (hopefully long) lives. Just as razor companies want people to keep buying razor blades, pharmaceutical companies want people to keep buying drugs. Unfortunately, in the current economic climate, finding a cure for a disease is a terrible investment, regardless of its public health impact. Too many millions of dollars pour into research and development, clinical trials and production for a once-use drug. It would, frankly, leave a company penniless. Only an exorbitant price (and customers willing and able to pay over and over again), would be able to return a company’s investment.
The National Institutes of Health runs the Orphan Products Clinical Trials Grant program (OOPD), which seeks to mitigate the gap between the need to cure diseases and the need for private companies to make returns on their investments. As a way to fix this problem, OOPD offers funding benefits for companies that discover new treatments for “rare” diseases (defined as diseases affecting fewer than 200,000 Americans) that would otherwise not find funding.
This has turned into an extremely viable business model. Alexion, a New Haven biopharmaceutical company founded in 1992, is a perfect example. Alexion has over 2,400 employees worldwide. In 2007, the FDA approved Soliris, Alexion’s centerpiece drug for two rare blood diseases (paroxysmal nocturnal hemoglobinuria and atypical hemolytic-uremic syndrome). Soliris is considered the most expensive drug in the world, costing a whopping $409,500 annually for the average patient and yielding $2.59 billion in total net sales in 2015 alone.
Soliris is the first and only drug available for these rare, genetic blood disorders. And this monopoly on a cure allows and incentivizes Alexion to charge as much as it can to maximize its returns. The drug cost billions of dollars in development but only serves a community of only 8,000 Americans. And these drugs are almost always covered by insurance.
High profile academics already support a similar program to the NIH’s program called the Health Impact Fund, which wants to incentivize drug companies to work on drugs that primarily affect low-income countries, such as vaccines for infectious diseases that concentrate in Africa and Asia. These diseases impact millions of people. The HIF, currently only a theoretical fund, proposes to draw on funds from governments (adjusted for national gross domestic product) as well as private individuals. Going further, the HIF would pay companies based on calculated public health impact rather than on high prices and sales.
The NIH should consider expanding upon the Orphan Products Grant program and work with the model of the HIF but in addition to incentives for drugs with high public health benefit, also incentives for drugs for diseases with currently available “treatments” but not cures. Otherwise, companies with economically viable products like insulin pumps or blood testing devices have no incentive to innovate and leave profitable, functional products obsolete. These theoretical NIH grants would have to be near billions per attained “cure” drug because the top pharmaceutical companies like Pfizer, Gilead, Roche, Novartis, Sanofi, Merck, Amgen, Bristol-Myers Squibb and Eli Lilly each spend over $3 billion for R&D annually. However, with the national annual spending on healthcare at $3.35 trillion, spending in the billions to eradicate a costly disease entirely is a wise investment.
And with an NIH annual budget of $30 billion in 2015 and the U.S. federal government spending at $3.69 trillion in 2015, our government would be able to supply these cure grants to pharmaceutical companies to compensate their R&D and production costs and keep prices manageable for the fortunate one-time users of the treatment. Just the promise of a cure grant so massive would spur new research projects and accelerate progress toward life-changing cures rather than just stopgap treatments.
Our future doctors, scientists, entrepreneurs, government officials and investors need to consider the public good and potential to alleviate human suffering of their projects, not just easy potential profit that does not require discovery and innovation. Alexion shows how a company can be incubated out of a university (founded by former Yale physician, Leonard Bell) and bring cures to unserved patient populations and keep jobs near universities. Alexion has 1,000 of its 3,000 employees located in New Haven.
Stephen Lewis is a junior in Branford College. Contact him at firstname.lastname@example.org .