It is widely accepted that the allocation of limited resources for the development and conduct of science must be governed by public interest. Within the broader field of science policy, biomedical research is considered one of the more relevant tools for saving and improving the lives of people around the globe. However, global public interest does not always underlie the motivations for deciding what issues are investigated and what triggers or stops scientific research. Today, in numerous settings, biomedical research relies partially on private funding, which has brought moral and economic problems to the table. In this article, I will present some of the more blatant moral dilemmas, the challenges that the current market approach poses, and the prospective reforms that have been envisioned for public interest protection worldwide.

In order to reform the biomedical research landscape that suffers from epistemological, moral and economic problems, we must first acknowledge the massive expenses associated with developing a new drug. To start, a free market is out of the question. Due to drug reverse engineering and free competition, the resulting low prices will not cover the enormous production costs, leading to a severe underproduction. The incentive to explore the treatment of “non-profitable” diseases is also absent in a free market system. As a solution, to stimulate production and fulfil necessary social benefits, patent solutions have been implemented all around the world granting companies a temporary monopoly.

However, solutions based on these temporary monopolies are resulting in economic inefficiencies, bad science, and unfair health outcomes at national and international levels. Stiglitz & Jayadev (2010) [1] point out the inefficiencies that the current model for biomedical research displays. First of all, at the profit-maximising price that the monopolist charges, there are many transactions that would benefit both the consumer and producer that do not occur. Secondly, as research is also partially publicly funded, the public pays double. This is because in addition to their contribution through taxations they also end up facing distorted monopoly prices. Lastly and more importantly, by directing research under the rule of market returns, we are condemning those diseases that prevail in poorer environments or weaker markets. Thus, from an economic perspective, there is an argument in favour of advocating for a new Research & Development market structure or productive system aimed at broadening the social benefit of the outputs.

The outlook of patents not only creates economic inefficiencies, but it also harms the way science is developed. This is through conditioning the drugs that are investigated, biasing results due to conflict of interest, or preventing the publication of results when results are not favourable to those sponsoring the research. A 2003 analysis by the American Medical Association [2] concluded that there is consistent and strong evidence that indicates “that industry-sponsored research tends to draw pro-industry conclusions”. This epistemic failure can lead to severe adverse health outcomes when companies neglect to investigate or avoid publishing results that show harmful side effects.

But perhaps the strongest argument in favour of a transformation of the R&D production framework is a solely moral one. If we believe that the goal of research should be to improve the health and well-being of all, then we must acknowledge that the current system is incapable of achieving this. The high prices derived from the rent-seeking behaviour that monopolistic practices allow are completely unaffordable for underserved communities. Moreover, profit maximization does not guide research towards diseases that affect the poor, instead, it is very much the opposite. 90% of deaths that could have been prevented occur in developing countries, where not even 10% of global health spending is deployed [3].

From socialisation to social value-based pricing innovation

 It is clear how a fully public system would eliminate bias towards particular private interests and how it would help set priorities to equally tackle the global disease burden. What is less clear, however, is how to develop this project at a global scale. It is precisely in the poorest countries, which lack the necessary welfare infrastructure, where this transformation will be harder to accomplish without a transfer of resources and funds. The richest countries perhaps have the necessary levels of economic growth and welfare state development to start building the foundations of such a transformation. However, a global scenario that brings a socialised system in Western Democracies, and a patents regime for the rest of the world, still neglects the poor population facing the majority of the disease burden.

Therefore, it is necessary to contemplate the possibility of maintaining a global market, as long as we redirect private incentives. Not all new drugs are equally innovative or valuable, and currently, their value is determined by their price at a monopoly-dominated market. Alternatively, we could redefine the value of these products by rewarding innovation according to the social value they provide to the global population. To do this, Pogge (2005) [4] proposes the creation of a Health Impact Fund, which will be used to reward companies according to the social impact derived from the drugs they produced. Whereas the patent system could remain for the market of non-essential drugs, the R&D of essential drugs would be regulated by this initiative instead. This will transform the current incentives radically, lowering prices close to the marginal cost of production and fostering investigation on neglected diseases affecting mainly underserved communities. In addition, this initiative will reward companies enough, so their production remains profitable. In order for this approach to be successful, the Health Impact Fund would have to be designed and agreed upon at a global level. Additionally, the economic contributions to the Fund would have to be conceived progressively, so that richer countries shoulder the greater costs.

Despite its moral attractiveness and plausibility, this initiative would require further concretion on its economic and political feasibility. The balance between costs and benefits would be the decisive factor to determine the success of this new allocation of incentives. High-income countries will likely demand a beneficial rationale if they are expected to bear most of the costs. Luckily, this initiative could bring compelling arguments to rich countries, as their taxpayers, despite contributing in a greater way to the reserves of the Health Impact Fund, could benefit from a substantial cut on drug prices.

The current system has proven to be economically inefficient, scientifically biased and morally impermissible. Transformative initiatives such as the one envisioned by Pogge (2005) [5] have the potential to recondition the incentives that market actors face and contribute towards our global justice goals. Policy-makers have the enormous challenge of designing an economically and politically feasible framework to foster more and better biomedical research.

This article was inspired by Dr Johanna Thoma’s lecture on The Funding of Biomedical Research, part of the Philosophy and Public Policy course at London School of Economics and Political Science.

Ignacio Bañares Sánchez is a second year MPA student, originally from Spain. He studied in Madrid and Chicago and holds a Bachelor’s and Master’s degree in Industrial and Energy Engineering. His academic background previous to LSE is focused on sustainability and energy challenges. He worked as an Engineer and Economic Analyst at Accenture and the European Central Bank. After the discovery of a late vocation, he started his studies in Public and Economic Policy at the London School of Economics.


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