What is the Health Impact Fund?

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

The Health Impact Fund will be financed by states and charitable foundations. It would give pharmaceutical innovators the option of registering any new product for annual reward payments.

When a medicine is registered with the Health Impact Fund, its price is delinked from its R&D costs. Even poor patients can afford such drugs because their price is limited to the costs of manufacture and distribution. One way of determining this price ceiling is through an organized competition among generic manufacturers.

Such competition might take the form of a tender in which manufacturers compete to produce the needed supply of the registered product in behalf of the registrant. Alternatively, suitable generic manufacturers might receive cost-free licenses to produce and supply the registered product while competing with one another in the market. Where neither of these options works to ensure a reliable and affordable supply, the Health Impact Fund would set a price ceiling based on engineering estimates of manufacturing and distribution costs.

For much more information on price determination, see document

Reward payments
The reward payments received by 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 goes to its innovator.

An important feature of the Health Impact Fund is that each of its annual reward pools is fixed in advance. This helps the Fund and its funders to manage their budgets. Each pool is split according to the health gains that registered products have achieved in the relevant year. Thus firms are competing to improve human health. Each registered product participates in the pay-outs for a period of ten years, which resembles the duration of exclusivity that firms now enjoy under patents. At the end of this reward period, the innovator would be required to license its registered product for generic production, regardless of any unexpired patents.