PUBLIC FUNDING OF PHARMACEUTICAL R&D
v1.0 researched and written by Marcela Vieira, edited by Suerie Moon, last updated April 2019
The literature on public funding for pharmaceutical research and development (R&D) is considerable* and has been increasing in the past decade. This review focuses on public funding; a full picture of total expenditures on health R&D is beyond the scope of this review, as are commercial sector expenditures.
Pharmaceutical/medicine/health/biomedical and public funding/financing, public sector, contribution, research and development
SYNTHESIS OF THE LITERATURE
The identified literature focused mainly on 3 topics: i) mapping public funding of pharmaceutical R&D, ii) analyzing how public funding compares to public health needs, and iii) documenting the contributions of public funding to drug development. Despite an increase in the number of studies aiming to document the role of public funding in drug development in recent years, the information available is fragmented, incomplete and difficult to find. Some studies estimated spending on broader health research and more targeted pharmaceutical research jointly, as these can be difficult to disentangle; in such cases, this review uses the broader term “health research” to refer to the findings.
i) MAPPING PUBLIC FUNDING OF PHARMACEUTICAL/HEALTH R&D
Several studies and data sources provide information on public funding of overall health R&D or with focus by disease area, both globally and at national or regional level. Most of the studies with a focus at the national level are related to the United States and the United Kingdom, the two largest public funders of health R&D, and only a few provide information about other regions and countries.
Global estimates: WHO’s Global Observatory on Health R&D centralizes data sources on health R&D activities, including grants for health research by major funders (World RePORT) and funding flows for health R&D by country (expressed as gross domestic expenditure on R&D (GERD) and GERD in the health and medical sciences (health GERD)). Røttingen et al. (2013) mapped global investments in health R&D from all sectors in 2009 and found a total of US$240 billion spent, out of which 89% (US$214 billion) was invested in high-income countries. Of this total, 60% came from the commercial sector, 30% from the public sector, and about 10% from other sources (including the philanthropic sector).
Viergever and Hendriks (2016) identified 55 major public and philanthropic funders of health research globally that together spent $93 billion, of which 40% ($37 billion) was spent by the 10 largest funding organizations. The largest funder was the United States National Institutes of Health ($26.1 billion), followed by the European Commission ($3.7 billion), and the United Kingdom Medical Research Council ($1.3 billion). The largest philanthropic funder was the Wellcome Trust ($909.1 million), and the largest multilateral funder was the World Health Organization ($135.0 million).
Estimates by disease area: Policy Cures Research’s G-FINDER project has conducted since 2008 an annual survey mapping global public, private, and philanthropic R&D expenditures for neglected diseases, defined as: “those predominantly affecting developing countries, for which products are needed but there is an insufficient commercial incentive to stimulate R&D”. The last survey conducted in 2017 included R&D investments in 33 diseases from 197 organizations, amounting to a total of $3.5 billion of which $2.3 billion (65%) came from the public sector, $692m (19%) from philanthropic funders and $554m (16%) from the private sector.
The Resource Tracking for HIV Prevention R&D Working Group (RTWG) has tracked R&D investments for biomedical HIV prevention options since 2000. In 2017, total investment was $1.13 billion, with the US public sector contributing $830 million (73.5%) and the philanthropic sector $164 million (14.5%).
The Treatment Action Group (TAG, 2018) mapped trends in global research funding for tuberculosis (TB) from 2005–2017, tracking how much public, private, philanthropic, and multilateral institutions spend across six areas of research: basic science, diagnostics, drugs vaccines, operational research, and infrastructure/unspecified projects. Findings show total global investment in TB research over the 13 years adds up to $7.8 billion. In 2017, 66% ($510 million) came from public sources, 19% ($145 million) from philanthropies, 11% ($85 million) from private industry, and 4% ($32 million) from multilateral entities. Tomlinson and Low (2019) mapped research funding for tuberculosis in South Africa from domestic and foreign sources. They found that the South African government invested more than most countries in TB research as a percentage of GDP or GERD, even though it was low in absolute terms and still much lower than its share of the global TB burden.
Simpkin et al. (2017) identified the major international, European Union, US and UK public and philanthropic funding programs for antibiotic R&D. The study found that most funding was available for basic science and preclinical research, while there was limited late-stage funding of clinical development, and almost no funding for the transition of products from early clinical phases to commercialization.
Estimates by country: In the US, a US Government Accountability Office (GAO, 2017) study on the drug industry covering global spending on R&D by the private and public sectors from 2008 to 2014 found that in 2014 company-reported R&D spending amounted to $89 billion while US federal government spending was around $28 billion. Most of the companies’ spending was directed to drug development and most of the federal spending was directed to basic research. Research America (2018) mapped investments in health R&D from all sectors in the US from 2013 to 2017 and found that in 2017 the total amount was $182.3 billion, with the private sector accounting for 67% of total spending, followed by the federal government at 22%. GHTC and Policy Cures Research (2017) analyzed US government funding for global health R&D and the health impact and economic returns from these investments, including their contributions to the development of new health technologies. They found that the US government invested $14 billion in R&D for global health between 2007 and 2015, helping advance 42 new technologies approved since 2000 and supporting 128 promising products in late-stage development.
In the UK, Cooksey (2006) provided an overview of UK health research funding and highlighted gaps to ensure UK health priorities are considered through all types of research and in the translation of health research to practice, concluding with a set of recommendations to address these gaps. The UK Clinical Research Collaboration (2015, 2012 and 2006) published three reports on health research in the UK, providing an overview of health research activity across all areas of health and disease funded by the largest government and philanthropic health-related research funders. Results show that in 2014, 64 public and philanthropic funding organizations spent £3bn (£2bn directly on research projects and £1bn on infrastructure), out of an estimated total of £8.5bn spent on health R&D in the UK. Sussex et al. (2016) estimated the effect of government and philanthropic biomedical and health research expenditure in the UK on subsequent private pharmaceutical sector R&D expenditure and found that a 1% increase in public sector expenditure is associated with a 0.81% increase in private sector expenditure.
A few studies provide information related to other countries in Europe. Salud Por Derecho (2019) analyzed public funding of biomedical R&D in Spain and the transfer of knowledge from the public to the private sector. The findings show that expenditures in health R&D in Spain in 2014 amounted to a total of 2.5 billion euros and were overall higher in the public and philanthropic sector (62%) than in the private sector (38%). Van Hecke and Gils (2019) provided an overview of publicly funded biomedical research in Belgium, which amounted to 575 million euros in 2015 in direct funds, most of which was directed to Belgium universities, with industry receiving 59 million euros. The authors also provided information about tax incentives for the industry, which amounted to 872 million euros in 2016, and also included the reimbursement of purchase of medicines by the public health system as a public contribution to pharmaceutical R&D, which represented a total of 4.32 billion euros in 2017. Viergever and Hendriks (2014) provided information on funding programs issued by the Netherlands Organisation for Health Research and Development (ZonMw), amounting to an average of 215 million euros annually. They highlighted that the allocation of public funds is targeted to areas where new knowledge or products are needed, especially when these areas are not considered profitable for the private sector.
In Asia, Dondona et al. (2017) estimated the total annual funding available for health research in India in 2011-12 at US$ 1.42 billion, including 0.02% from the public sector and 79% by the Indian pharmaceutical industry. Dara and Sangamwar (2014) provided a landscape of patents related to various drug therapeutic targets and anticancer technologies from 10 Indian publicly-funded research organizations over a period of 13 years (1990 - 2013). Qiu et al. (2014) investigated public funding and private investment into Chinese pharmaceutical R&D from 2002-2010, finding that the vast majority of R&D investment was from private sources and public funding was invested in less developed provinces. Chen et al. (2015) provided data regarding rare disease biomedical research in China related to 366 projects (involving 32 rare diseases) funded by the National Natural Science Foundation of China (NSFC) from 1999 to 2007, with annual funding of about 10 million RMB. The authors compared the data to government-funded biomedical research programs for rare diseases in the USA, EU, and Japan, showing that the expenditures in China represented about 10% of similar funding in the USA. Hsieh and Löfgren (2009) conducted an analysis of biopharmaceutical innovation and industrial development in South Korea, Singapore, and Taiwan and found that “governments employ a range of industrial policies to promote the biopharmaceutical industry, including public investment in biomedical hubs, research funding, and R&D tax credits.” The authors concluded that “the most important feature of the biopharmaceutical industry in these countries is the dominant role of the public sector.”
In Africa, Kebede (2014) conducted a survey to map the expenditures on health research by 847 research institutions in 42 sub-Saharan African countries for the biennium 2005–2006, which amounted to a total of US$ 302 million. Most were external funders, followed by government ministries, non-profit institutions, and industry.
ii) ANALYZING HOW PUBLIC FUNDING OF HEALTH R&D COMPARES TO PUBLIC HEALTH NEEDS
The allocation of public funding in comparison to the disease burden has been a long-standing issue in the literature, with most of the identified papers focusing their analysis in the US, especially in relation to NIH funding, and a few in the UK. It should be noted that there are discussions about other criteria to take into consideration when discussing the allocation of public research funds, such as complementarity with funding by others, but it falls beyond the scope of this review.
At global level, the above-mentioned study by Røttingen et al. (2013) also analyzed total health R&D investments across diseases and how it aligns to the global disease burden, concluding that only about 1% of all health R&D investments were allocated to neglected diseases in 2010.
In the US, Sampat et al. (2013) conducted an analysis of the allocation of NIH funding across diseases, highlighting that previous empirical studies had been significantly hindered by data constraints. The NIH had recognized these shortcomings and in 2008 created a data system in response. The authors analyzed data from this new system to assess the relationship between NIH funding and deaths and hospitalizations in the US associated with 107 diseases, and found a strong relationship. Hanna (2015) analyzed the NIH allocation of public research funding among 29 diseases and concluded that NIH's allocation of research funding is disproportionate to the disease burden in the US, with results showing that infectious diseases are overfunded, and lifestyle/environmental health conditions are underfunded. Another study by Karimkhani et al. (2014) analyzed grants from the National Institute of Arthritis and Musculoskeletal and Skin Diseases (NIAMS) for 15 skin conditions and how they compared to global disease burden, concluding that grant funding was well-matched for 5 of the 15 studied skin diseases, while 2 skin diseases were over-represented and 7 were under-represented.
In the UK, Head et al. (2016) conducted a systematic analysis of research funding for infectious diseases from public and philanthropic organizations between 1997 and 2013 and compared the investments with global mortality, disability-adjusted life years (DALYs) and years lived with disability (YLD), finding that acute hepatitis C, leishmaniosis and African trypanosomiasis received comparatively high levels of funding while pneumonia, shigellosis, pertussis, cholera, and syphilis were poorly funded. Ward et al. (2013) compared the national burden of disease with R&D funding from public and philanthropic sectors in the UK, and concluded that disease areas representing the biggest burden were generally associated with the most funding and research output.
Beyond the US and the UK, the above-mentioned study by Dondona et al. (2017) concluded that public funding for health research in India was extremely small and had considerable mismatches with the major causes of disease burden in the country. Kinge et al. (2014) analyzed the correlation between the Norwegian investment in health research and the burden of disease, using both Norwegian and global burden of disease estimates and concluded that Norwegian research investments appeared aligned with the Norwegian disease burden, while the correlation with the global disease burden was much lower.
In Latin America, Martinez et al. (2012) analyzed the funding between 2003 and 2010 of Mexico’s national health research agency (National Council on Science and Technology - CONACYT), and compared it with two indicators of the national disease burden - number of deaths and DALYs - to conclude that they were weakly correlated with the funding for health research. Maceira et al. (2010) described the national public health research systems in five Latin American countries (Argentina, Bolivia, Chile, Paraguay, and Uruguay), highlighting that none of them had explicit mechanisms for prioritization of health research. The authors concluded that problems such as nutrition, environment, violence and accidents received little attention in most countries, despite accounting for a significant amount of the health burden. Paraje (2010) assessed the allocation of public funds for health research in Chile between 2002 and 2006 and concluded that the funding allocation was not prioritizing the disease burden in the country.
iii) DOCUMENTING THE CONTRIBUTIONS OF PUBLIC FUNDING TO DRUG DEVELOPMENT AND CONDITIONS ATTACHED TO PUBLIC FUNDING
Another main topic discussed in the identified literature is the contribution of public funding to drug development. Most of the identified papers focused their analysis in the US and the UK, with few but an increasing number of studies covering other countries.
Generally, Mazzucato and Semieniuk (2017) questioned common perceptions related to the role of the public sector in innovation by discussing evidence from different fields of the economy. They showed that public funding is strongly present across the entire innovation chain, not only in basic research. They also argued that public actors take an “entrepreneurial and lead investor role… willing and able to take on extreme risks,” including in funding early-stage start-ups, questioning the perception that it is private venture capital that takes most of the risk. In the health sector, the authors discussed the evidence related to US NIH funding for health R&D and how it has enabled the biotechnology revolution and the development of most innovative drugs approved by the FDA over the years.
With a focus on the US, Cleary et al. (2018) examined the contribution of NIH funding to drug development and found that it contributed to every one of the 210 new molecular entities (NMEs) approved by the FDA from 2010-2016, concluding that the NIH contribution to research associated with new drug approvals is greater than previously appreciated. Blume-Kohout (2012) investigated the relationship between expenditures from the NIH and pharmaceutical innovation from 1975 to 2006 and found that a 10% increase in targeted, disease-specific NIH funding produced a 4.5% increase in the number of related drugs entering clinical testing (phase I trials), but found no evidence that it increased the number of related treatments investigated in late-stage (phase III) trials.
Azoulay et al. (2019) measured the commercial output associated with publicly funded research, analyzing information contained in patents in the US. The authors used the information to explicitly link NIH grants with the publications they supported and the patents that cited those publications. They measured the impact of NIH research funding on patenting by biopharmaceutical companies from 1980 to 2012 and concluded that NIH funding spurred the development of private-sector patents: a $10 million boost in NIH funding led to a net increase of 2.7 patents. Results also showed that “half of the patents resulting from NIH funding were for disease applications distinct from the one that funded the initial research,” adding information about the “cross-disease spillover effects of NIH funding.” The authors then conclude that “by looking only within the same disease area when measuring impact, the prior literature in this area appears to have missed almost half of the total impact of basic research funding.”
Sampat and Lichtenberg (2011) analyzed the role of public and private sectors in pharmaceutical innovation and provided empirical data on the contribution of the US federal government to drug development “linking data on drug approval, patents, and consumers’ drug spending to information on publications and patents emanating from public-sector research.” Overall, the authors found that direct government funding was more important in the development of "priority-review" drugs (described as the most innovative new drugs) than for "standard-review" drugs. The study also showed that government funding also played an indirect role by funding basic underlying research in almost half of the drugs approved and in almost two-thirds of priority-review drugs.
In addition, several studies analyzed the role of public funding related to the development of medicines identified as particularly important. Chakravarthy et al. (2016) investigated the public- and private-sector contributions in the US to the research and development of the 25 “most transformational” drugs in the past 25 years and found that only 4 drugs were almost completely researched and developed by the private sector. For the others, there were contributions from both sectors, with one sector or the other dominating particular phases of the R&D continuum; for example, 54% of basic science milestones were achieved predominantly by the public sector and 27% by the private sector. Kesselheim et al. (2015) studied the developmental histories of 26 drugs or drug classes approved by the US FDA between 1984 and 2009 that were judged to be transformative (defined as pharmaceuticals that are both innovative and have groundbreaking effects on patient care) and found that many were based on discoveries made by academic researchers who were supported by federal government funding; others were jointly developed in both publicly funded and commercial institutions; and the fewest number of drugs had originated solely within pharmaceutical industry research programs.
The NIH (2000) analyzed the effectiveness of its funding of biomedical research for product development; it investigated 5 top-selling drugs and concluded that NIH-funded research played a critical role in the development of each of them, complementing industry investments. Reichert and Milne (2002) performed an assessment of the relationship between private and public sector expenditures in the discovery and development of 21 "impact" drugs in the US and concluded that due to mixed methods and incomplete data, previous attempts to measure the relative contribution of the public and private sectors to the R&D of therapeutically important drugs were flawed. Cockburn and Henderson (1996) examined the relationship between public and private funding for drug development in the US using data from authorship of publications related to the development of 21 drugs. Their findings showed a “significant reciprocal interaction” between authors from public and private institutions and the authors conclude by rejecting a “simple ‘linear’ dichotomous model in which the public sector performs basic research and the private sector exploits it.” Cockburn and Henderson (2001) also evaluated the impact of US public funding of health R&D on the pharmaceutical industry by analyzing data from academic studies showing that “public sector science creates new knowledge and new tools, and produces large numbers of highly trained researchers, all of which are a direct and important input to private sector research.” The authors concluded that “measured quite narrowly in terms of its effect on private sector R&D, the rate of return to public funding of biomedical sciences may be as high as 30% per year.”
With a focus on applied research, Stevens et al. (2011) analyzed the direct role of the public sector in the applied-research phase of drugs and vaccines over the past 40 years and identified 153 new FDA-approved drugs, vaccines, or new indications for existing drugs that were discovered through research carried out by public-sector researchers, more than half of which were used in the treatment or prevention of cancer or infectious diseases. The authors concluded that drugs discovered by public sector researchers were expected to have a disproportionately large therapeutic effect and that public-sector research had a more immediate effect on improving public health than was previously realized.
Focusing on a specific medicine, the Treatment Action Group (TAG, 2018) mapped public and philanthropic funding in the development of bedaquiline (a TB treatment). While the total amount invested in R&D for bedaquiline was not disclosed by the originator company Janssen, the study listed public and philanthropic investments that contributed to the clinical development and uptake of the medicine, as well as financial incentives from which Janssen benefited to develop the drug. Garber et al. (1992) investigated the US federal public and private roles in the development of alglucerase therapy for Gaucher disease, a rare disease, and concluded that the government supported or performed much of the research that made it possible to develop the treatment, while removing much of the risk for pharmaceutical companies.
In the EU, Lincker et al. (2014) investigated the profile and geographical origin of the organizations involved in the recent development of new medicines in the European Union (EU). They analyzed data from 94 medicinal products approved containing a new active substance (NAS) between 2010 and 2012 and found that large or intermediate-sized pharmaceutical companies accounted for 49% of the products (large, 28%; intermediate-sized, 21%), SMEs for 27%, academic/public bodies/PPPs accounted for 17%, and private–private collaborations accounted for 7%. The respective figures for orphan products revealed a higher proportion (61%) of SMEs as originators, with large or intermediate-sized pharmaceutical companies accounting for 22%, and academic/public bodies/PPPs accounting for 11%. With regard to the region where the innovative research resulting in these products occurred, 45% of the originators were based in North America and 37% in Europe. International projects, the majority of which were transatlantic collaborations, accounted for 8%, and other countries (Japan, China, Israel, and Australia) accounted for the remaining 10%. There were no apparent major differences in the geographical origin of orphan versus non-orphan products.
In the UK, Head et al. (2015) conducted a systematic analysis of public funding for infectious disease research studies in the UK from 1997–2010, amounting to a total investment of £2.6 billion, of which £76.9 million (3.0%) was directed towards viral hepatitis, the focus of the study. Preclinical research received £50.3 million (65.4%), whilst implementation and operational research received £19.4 million (25.3%). Stopaids and Global Justice Now (2017) analyzed UK government health R&D spending and the contribution to the development of many medicines, arguing that the public is paying twice: first through the substantial funding of health R&D which amounted to £2.3 billion in 2015, and second through the purchase of the medicines by the public health system (NHS), which spent more than £1bn in 2016 alone on medicines developed with significant reliance on UK public research funding. The study detailed the UK public funding of specific medicines, i.e. abiraterone (an effective drug for treating advanced prostate cancer) and the whole class of monoclonal antibodies (MABs), including alemtuzumab, adalimumab, and infliximab.
A few studies addressed the issue of conditions attached to public funding of health R&D. The main condition identified in the literature is related to the dissemination of the findings in open access publications. McElfish et al. (2018) presented an overview of the policies and requirements of 11 major health research agencies in the US regarding dissemination of results to academic and lay communities and the participants of the research. They found that several agencies have policies for academic dissemination but only a few have the same for dissemination to research participants and the lay communities. Tschider (2014) analyzed the implementation of the condition of “open access publication” of the results of publicly funded research in US NIH funding agreements and found that principal investigators have partially complied with this depository requirement, and the NIH have signaled an intent to enforce grant agreement terms and conditions by stopping funding deposits and engaging in legal action. Bakker et al. (2017) also analyzed the condition of “open access publication” present in public funding of health research in Canada focusing on compliance and barriers to open access publishing (mainly costs of publishing) using as a case study the research for multiple sclerosis.
The above-mentioned report by Tomlinson and Low (2019) also focused on the access conditions placed on products resulting from publicly funded research in South Africa. The authors concluded that “while funding agreements typically include provisions on access and affordability, these provisions are not always clear and may turn out to be hard to enforce.” The above-mentioned article by Van Hecke and Gils (2019) analyzed the conditions applied to public funding in Belgium and found that there are few conditions set, the main being with regard to open access publications and no conditions with regard to availability and affordable pricing of medicines. The above-mentioned report by Stopaids and Global Justice Now (2017) also analyzed the conditions on UK public funding for R&D and concluded there is an absence of safeguards to ensure the accessibility and affordability of medicines that derive from publicly funded R&D.
A KEI (2018) briefing note analyzed provisions in the US related to obligations for federal contractors, including: i) requirement to disclose inventions discovered with federal funding; ii) requirement of local production, that is, that the invention be manufactured substantially in the United States; iii) requirement of practical application of the invention, specifically that “its benefits are available to the public on reasonable terms”, iv) March-In Rights and the Royalty-Free Right. Treasure et al. (2014) analyzed petitions presented to the NIH to exercise its march-in rights related to products developed with government funding since 1980, especially to address exceedingly high prices or inadequate supply of interventions whose development was based heavily on government funding, particularly pharmaceutical products and medical devices. They found that in the 33 years since the passage of Bayh-Dole, such march-in rights petitions to the NIH had been seriously considered for only 4 products and were rejected each time.
The UCL Institute for Innovation and Public Purpose (2018) published a policy report with a section on “Achieving public return through conditionality”, in which the authors mentioned a few examples of conditions that could be attached to public funding to achieve a more just sharing of the rewards, such as “reinvesting a greater share of profits from innovative products to support future R&D; a commitment to share knowledge and fully disclose data related to R&D, including expenditures and data from failed clinical trials; the possibility of the public retaining a golden share from intellectual property rights (and on occasion equity of profits); and a requirement that manufacturers supply treatments on reasonable terms.” So et al. (2008) analyzed 30 years of experience in the US with the implementation and shortcomings of the Bayh-Dole Act of 1980 to make a series of recommendations to other countries seeking to implement similar legislation, highlighting the need to adopt policies and safeguards serving the public interest that could be attached to government-supported research. Among the options, they suggested: i) transparency in the patenting and licensing of publicly funded research; ii) no exclusive licensing unless necessary for commercialization; iii) government authority to issue additional licenses; iv) government use rights and v) ensuring consumer access to end products.
Conditionality was also raised in several United Nations reports. The report of the WHO Fair Pricing Forum (2017) suggested that governments should attach conditions to research funding so that public funding is explicitly taken into account in pricing discussions and the results are made publicly available. The final report of the United Nations Secretary General’s High-level Panel on Access to Medicines (2016) mentioned explicitly that data sharing and data access should be conditions on public funding and recommended the adoption of other conditions to promote availability and affordability. The final report of the WHO Consultative Expert Working Group on Research and Development: Financing and Coordination - CEWG (2012) suggested that funders or research organizations adopt licensing conditions that permit non-exclusive licensing or prescribe a low target price for a product, especially where the public sector has funded most of the R&D. The WHO Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property (2011) recommended promoting public access to the results of government-funded research by publication in open access databases and further dissemination of publicly- or donor-funded inventions and know-how.
Information on national policies for innovation and public R&D investment, particularly in advanced economies with established R&D activity
More information on public spending in health R&D beyond the US and EU
Information on any conditions attached to public funding of R&D (e.g. relating to affordability or availability of end products), including in laws, policies or contracts, and compliance with or enforcement of such conditions
CITED PAPERS WITH ABSTRACTS
Abbott, Frederick. 2016. “Excessive Pharmaceutical Prices and Competition Law: Doctrinal Development to Protect Public Health.” UC Irvine Law Review 6 (3): 281."Abstract: Public health budgets and individual patients around the world struggle with high prices for pharmaceutical products. Difficulties are not limited to low income countries. Prices for newly introduced therapies to treat hepatitis C, cancer, joint disease and other medical conditions have entered the stratosphere. In the United States, state pharmaceutical acquisition budgets are at the breaking point -- or have passed it -- and treatment is effectively rationed. Competition/antitrust law has rarely been used to address “excessive pricing” of pharmaceutical products. This is a worldwide phenomenon. In the United States, the federal courts have refused to apply excessive pricing as an antitrust doctrine, either with respect to pharmaceutical products or more generally. Courts in some other countries have been more receptive to considering the doctrine, but application in specific cases has been sporadic, including with respect to pharmaceuticals. This remains a paradox of sorts. Competition law experts acknowledge that one of the principal objectives of competition policy is to protect consumers against the charging of excessive prices. The currently preferred alternative is to address the “structural problems” that allow the charging of excessive prices. That is, “fixing the market” so that the underlying defect by which excessive prices are enabled is remedied. There is a fundamental problem with the “fixing the market” approach when addressing products protected by legislatively authorized market exclusivity mechanisms such as patents and regulatory marketing exclusivity. That is, mechanical aspects of the market are not broken in the conventional antitrust sense. Rather, the market has been designed without adequate control mechanisms or “limiters” that act to constrain exploitive behavior. Political institutions, such as legislatures, that might step in are constrained by political economy (e.g., lobbying), and do not respond as they should. Competition law and policy should develop robust doctrine to address excessive pricing in markets lacking adequate control mechanisms. This article will focus specifically on the pharmaceutical sector because of its unique structure and social importance. This focus is not intended to exclude the possibility that development of excessive pricing doctrine would be useful in other contexts. This article is divided into two parts. The first addresses competition policy and why it is appropriate to develop the doctrine of excessive pricing to address distortions in the pharmaceutical sector. The second addresses the technical aspect of how courts or administrative authorities may determine when prices are excessive, and potential remedies. The policy prescription of this article is twofold: first, the United States should incorporate excessive pricing doctrine in its antitrust arsenal, and; second, other countries should maintain the status quo with respect to multilateral competition rules that allow them flexibility to develop and refine doctrine, including excessive pricing doctrine, that is best suited to their circumstances and interests. Link: https://scholarship.law.uci.edu/ucilr/vol6/iss3/3/
Heller, Peter S. “The Prospects of Creating ‘Fiscal Space’ for the Health Sector.” Health Policy and Planning 21, no. 2 (March 1, 2006): 75–79. https://doi.org/10.1093/heapol/czj013."Abstract: Not Available Link: https://academic.oup.com/heapol/article/21/2/75/554947
Lexchin, Joel. 2015. “Drug Pricing in Canada.” In Pharmaceutical Prices in the 21st Century, 25–41. Adis, Cham. https://doi.org/10.1007/978-3-319-12169-7_2."Abstract: Not available Link: https://link.springer.com/chapter/10.1007/978-3-319-12169-7_2
Love, James. 2012. “Affidavit: Natco Pharma Limited versus Bayer Corporation.” https://www.keionline.org/sites/default/files/aff-jameslove_13Feb2012_as_Filed.pdf."Abstract: Not available Link: https://www.keionline.org/sites/default/files/aff-jameslove_13Feb2012_as_Filed.pdf
Ottersen, Trygve, Riku Elovainio, David B. Evans, David McCoy, Di Mcintyre, Filip Meheus, Suerie Moon, Gorik Ooms, and John-Arne Røttingen. 2017. “Towards a Coherent Global Framework for Health Financing: Recommendations and Recent Developments.” Health Economics, Policy, and Law 12 (2): 285–96. https://doi.org/10.1017/S1744133116000505."Abstract: The articles in this special issue have demonstrated how unprecedented transitions have come with both challenges and opportunities for health financing. Against the background of these challenges and opportunities, the Working Group on Health Financing at the Chatham House Centre on Global Health Security laid out, in 2014, a set of policy responses encapsulated in 20 recommendations for how to make progress towards a coherent global framework for health financing. These recommendations pertain to domestic financing of national health systems, global public goods for health, external financing for national health systems and the cross-cutting issues of accountability and agreement on a new global framework. Since the Working Group concluded its work, multiple events have reinforced the group’s recommendations. Among these are the agreement on the Addis Ababa Action Agenda, the adoption of the Sustainable Development Goals, the outbreak of Ebola in West Africa and the release of the Panama Papers. These events also represent new stepping stones towards a new global framework. Link: https://www.cambridge.org/core/journals/health-economics-policy-and-law/article/towards-a-coherent-global-framework-for-health-financing-recommendations-and-recent-developments/32B84686FD13D7CB340643D798832095
Wirtz, Veronika J., Hans V. Hogerzeil, Andrew L. Gray, Maryam Bigdeli, Cornelis P. de Joncheere, Margaret A. Ewen, Martha Gyansa-Lutterodt, et al. 2017. “Essential Medicines for Universal Health Coverage.” The Lancet 389 (10067): 403–76. https://doi.org/10.1016/S0140-6736(16)31599-9."Abstract: Not available Link: https://www.thelancet.com/action/showPdf?pii=S0140-6736%2816%2931599-9
World Health Organization. n.d. “Essential Medicines.” WHO. http://www.who.int/medicines/services/essmedicines_def/en/.Abstract: Not available Link: http://www.who.int/medicines/services/essmedicines_def/en/
Xu, Ke, David B Evans, Kei Kawabata, Riadh Zeramdini, Jan Klavus, and Christopher J L Murray. 2003. “Household Catastrophic Health Expenditure: A Multicountry Analysis.” The Lancet 362. http://www.who.int/health_financing/documents/lancet-catastrophic_expenditure.pdf."Abstract: Not available Link: http://www.who.int/health_financing/documents/lancet-catastrophic_expenditure.pdf
* For the purposes of this review, we have established three categories to describe the state of the literature: thin, considerable, and rich.
- Thin: There are relatively few papers and/or there are not many recent papers and/or there are clear gaps
- Considerable: There are several papers and/or there are a handful of recent papers and/or there are some clear gaps
- Rich: There is a wealth of papers on the topic and/or papers continue to be published that address this issue area and/or there are less obvious gaps
Scope: While many of these issues can touch a variety of sectors, this review focuses on medicines. The term medicines is used to cover the category of health technologies, including drugs, biologics (including vaccines), and diagnostic devices.
Disclaimer: The research syntheses aim to provide a concise, comprehensive overview of the current state of research on a specific topic. They seek to cover the main studies in the academic and grey literature, but are not systematic reviews capturing all published studies on a topic. As with any research synthesis, they also reflect the judgments of the researchers. The length and detail vary by topic. Each synthesis will undergo open peer review, and be updated periodically based on feedback received on important missing studies and/or new research. Selected topics focus on national and international-level policies, while recognizing that other determinants of access operate at sub-national level. Work is ongoing on additional topics. We welcome suggestions on the current syntheses and/or on new topics to cover.