The Health Impact Fund in a few sentences.

The Health Impact Fund provides a complementary system for the development of pharmaceutical innovations - especially ones intended for poor patients who cannot afford expensive medicines.

How does it work?
Financed by states, charitable foundations or international taxes, the Health Impact Fund would give pharmaceutical innovators the option of registering any new product for annual reward payments.

Control of prices to support access:
The price of registered products is limited to the costs of manufacture and distribution, and therefore affordable even for poor patients. The price of registered medicines is delinked from their R&D cost.

Competitive reward payments based on performance:
Reward payments for pharmaceutical innovators depend solely on the annual health gains achieved by their registered medicines. The more such a new medicine improves or lengthens human lives, the more money the innovator earns.

Background

Pharmaceutical research is currently funded from patent-protected markups.
The development of new medicines is very expensive. To cover these R&D costs, states offer 20-year patents. Under the protection of such temporary monopolies, pharmaceutical firms can sell their new products at very high prices. This system has two adverse effects:

Little research into diseases of poor people:
In the current system, diseases concentrated among poor people are unattractive for pharmaceutical research. This is so because poor patients cannot afford to buy expensive medicines. Their diseases are therefore neglected. Pharmaceutical innovators are more likely to seek remedies against hair loss than remedies against deadly diseases of poverty, such as dengue, leishmaniasis or Ebola.

High prices limit access to new drugs:
New medicines are generally unaffordable for the poor. Even when new medicines are developed, for example against hepatitis C, they are almost always sold at profit-maximizing monopoly prices which far exceed what most patients can afford. The same also holds for medicines against global diseases such as cancer.

The Health Impact Fund provides a complementary system that strengthens world health.
With the Health Impact Fund, pharmaceutical companies obtain an additional option that, through new incentives, mitigates these two adverse effects.

The Essence

Health gains as the standard.
The purpose of medicines is to improve and preserve health. The Health Impact Fund aligns corporate incentives to engage in research, development and marketing with precisely this social objective: the more a registered medicine lengthens or improves human lives, the higher are the reward payments that its innovator receives from the Health Impact Fund. In this calculus, the health of all human beings is weighted equally, regardless of whether they are rich or poor.

Covering the costs of pharmaceutical firms.
With the publicly funded reward payments that the Health Impact Fund disburses for registered medicines, innovators can cover their costs and earn a competitive rate of return. On average. As with the current system, innovators bear a risk. Research may result in a therapeutically valuable medicine that helps many patients. If it does not, the innovator may earn little for its efforts or nothing at all.

Delinking a medicine's price from its R&D costs.
Registered medicines must be sold at a price that does not exceed the costs of manufacture and distribution. Such medicines are therefore affordable even to very poor patients.