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Forum for Health Economics & Policy

Editor-in-Chief: Goldman, Dana

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CiteScore 2016: 0.30

SCImago Journal Rank (SJR) 2016: 0.140
Source Normalized Impact per Paper (SNIP) 2016: 0.098

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1558-9544
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Should Global Health be Tailored Toward the Rich? Altruism and Efficient R&D for Neglected Diseases

Anupam B. Jena
  • Corresponding author
  • Department of Health Care Policy, Harvard Medical School; and Massachusetts General Hospital; and National Bureau of Economic Research
  • Email
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
/ Stéphane Mechoulan / Tomas J. Philipson
  • Irving B. Harris Graduate School of Public Policy Studies, University of Chicago; and National Bureau of Economic Research
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
Published Online: 2013-03-20 | DOI: https://doi.org/10.1515/fhep-2012-0036

Abstract

We analyze the problem of incentivizing research and development (R&D) into developing world disease from an economic efficiency perspective. We view the problem as how to best promote R&D into goods with positive external effects in the sense that medicines that directly affect the health of the poor also indirectly affect the utility of the altruistic “rich.” We demonstrate why existing policy proposals – such as price concessions by manufacturers – adversely impact the poor by placing the burden of R&D only on innovators rather than all altruists in the rich world. We offer policy solutions that are based on economic efficiency and therefore rely on a broad sense of how the world values the treatment of developing world disease. We estimate that global altruism toward those with malaria is, at a minimum, valued between $835 million and $2.4 billion annually and for HIV/AIDS, between $9.1 billion and $26.6 billion annually. We argue that future policies toward neglected diseases need to better incorporate how efficient R&D meets the need of this global altruism.

Keywords: AIDS; HIV

References

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  • Grabowski, Henry, Keith E. Maskus and Jerome H. Reichman (2005) “Increasing R&D Incentives for Neglected Diseases: Lessons from the Orphan Drug Act.” In: International Public Goods and Transfer of Technology under a Globalized Intellectual Property Regime. Cambridge, UK: Cambridge University Press.Google Scholar

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About the article

Corresponding author: Anupam B. Jena, Department of Health Care Policy, Harvard Medical School; and Massachusetts General Hospital; and National Bureau of Economic Research, e-mail:


Published Online: 2013-03-20

Published in Print: 2013-01-01


As discussed in Section 4, existing research discusses the general issue of global public goods but does not address the joint allocation problem of efficiently incentivizing R&D and efficiently providing goods with positive external consumption externalities.

The textbook example of a Pigouvian instrument is the Pigouvian tax applied to a polluter so that its marginal cost lines up with the marginal cost to society.

Arguably though, the initial use for a new drug may not be its more important or valuable use. Hence, there needs to be a mechanism to incentivize continuing R&D after initial approval for marketing.

In a more general context, Grossman and Lai (2002) discuss the optimality of streamlining IP protection across countries.

The threat of compulsory licensing after a drug is developed is such that nations would pay less with compulsory licensing than what their citizens would actually be willing to pay without it. Perversely, direct willingness to pay in poor nations is effectively suppressed.

Rather, it is those companies (and the patients who consume their therapies) who do not bid enough to win the priority voucher who ultimately pay, mainly through slower expected review times from mobilization of FDA towards the winner.

Although the analysis of Peloza and Steel (2005) is mainly US-focused and does not distinguish between types of giving (e.g., domestic vs. foreign giving, health vs. religious giving), we interpret the reported elasticity as broadly reflecting how responsive altruistic giving is to the price of donation.


Citation Information: Forum for Health Economics and Policy, ISSN (Online) 1558-9544, ISSN (Print) 2194-6191, DOI: https://doi.org/10.1515/fhep-2012-0036.

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