Delinkage

Some of our work on delinkage is now here: http://delinkage.org


De-linkage can be defined in the negative, by saying that the R&D funding should not be tied to the price of the product.

Progressive de-linkage means that governments implement reforms over time that sequentially and progressively move prices closer and closer to affordable generic prices, and reform incentives so they no longer rely upon high prices.

Some links to KEI work on delinkage:

Four submissions for which KEI was the lead author to the UN Secretary General’s High Level Panel (HLP) on Access to Medicine. /node/2431

  • “The Need for Global Negotiations on Agreements to Fund R&D within the Context of a Progressive De-linking of R&D Costs from Product Prices”. Supported by 12 organizations; 1 individual; 3 Members of European Parliament.
  • “Increasing the Transparency of Markets for Drugs, Vaccines, Diagnostics and other Medical Technologies”. Supported by 17 organizations; 2 individuals; 3 Members of European Parliament.
  • “The Role of R&D Subsidies for Clinical Trials in Progressive Delinkage of R&D Costs from Product Prices”
  • “Trade Agreements and the Supply of Public Goods”

Page on Proposal for a WTO Agreement on the Supply of Public goods: /wtoandpublicgoods

Page on Innovation inducement prizes: /prizes

February 2016. James Love. “Discussion paper: An economic perspective on delinking the cost of R&D from the price of medicines.” UNITAID. February 2016.

September 19, 2014. James Love, Alternatives to the Patent System that are used to Support R&D Efforts, Including both Push and Pull Mechanisms, with a Special Focus on Innovation-Inducement Prizes and Open Source Development Models, World Intellectual Property Organization, CDIP/14/INF/12.

For more information, send a note to mailto:delinkage@keionline.org

Annex: Section 2.3 from UNITAID discussion paper: An economic perspective on delinking the cost of R&D from the price of medicines.

2.3 Delinkage

The term “delinkage” is used for a set of options that aspire to change fundamentally the paradigm for financing innovation. The term can best be understood as partly technical – the separation of R&D costs from product prices – and partly polemical – a demand that the R&D system be reformed to accommodate universal access to knowledge goods, to induce openness and sharing of knowledge in general, and to make investments in R&D more cost-effective and responsive to the needs of patients and society.

Because there is considerable freedom to design systems that delink the financing of R&D from the price of the product, it is a challenge to describe “the” delinkage approach. Ideally, delinkage would eliminate the monopoly to supply products and would provide a diverse set of alternative mechanisms to finance innovation. Products would be available at prices approaching marginal costs, while policy-makers would be free to spend as much or as little as they prefer on innovation and would have flexibility to design the funding mechanisms.

In delinkage approaches, it is still necessary to identify a source of money to pay for innovation. Sources may include budgets for medicines or health care, general tax revenue, a “Robin Hood tax” on financial transactions, or a Pigouvian tax on activities that impose social costs (such as use of a medicine that generates drug resistance).

If medicines are purchased or reimbursed by third parties, these entities could shift budget allocations from paying high prices for patented medicines to funding grants or rewards for innovation, typically at a lower cost. If medicine purchases are paid by consumers directly out-of-pocket, new financing mechanisms would be required.

The freedom for governments and buyers to determine the amount to spend and the nature of alternative mechanisms to fund innovation has created anxiety among medicine developers and companies that sell branded products. The two main reasons for their concern are: 1) a lack of confidence that buyers will allocate sufficient resources to R&D, and 2) a recognition that the comparative advantage for some companies lies in the marketing of products. Some experts and patients share concerns about the first issue.

Potential advantages of a delinkage approach include pricing closer to marginal costs, the inclusion of more patients in treatment, broader access to new medicines, including for uses that have differential benefits, more cost-effective and flexible targeting of R&D incentives and other subsidies, and lower total costs.

Mechanisms to implement delinkage

As mentioned above, delinkage can be implemented in different ways. One of the delinkage options is public funding of research, which should include all stages from discovery to late-stage and post-approval clinical testing. While public-sector R&D funding is typically managed at national level through institutions such as the USA’s NIH, it could also be managed as a pooled resource at the plurilateral or multilateral level, or even through decentralized “competitive intermediaries”.7

Delinkage options also include the use of prizes to induce innovation. Innovationinducement prizes can be designed in different ways, as illustrated in Annex 1 and 2. As shown in Annex 1, there is significant flexibility in shaping prizes – and other delinkage approaches can be devised. For instance, developing countries could potentially eliminate monopolies on HIV/AIDS medicines in favour of a delinkage approach that includes the use of innovation-inducement prizes.

The HIV/AIDS market in developing countries is large in terms of utilization and in terms of patients who need treatment, but it is relatively small in terms of global sales compared to countries with incomes higher than US$ 20 000 per capita. In 2012, sales of HIV therapeutics were estimated at US$ 14.3 billion in just eight countries: Canada, France, Germany, Italy, Japan, Spain, the United Kingdom and the USA [22]. In the same year, UNITAID estimated antiretroviral sales in all low- and middleincome countries to be US$ 1.5 billion [23].

Given the substantial market for antiretrovirals in high-income countries, any proposal for delinkage regarding HIV medicines in developing-country markets can be seen largely as an access initiative, with innovation being a second benefit. For treatments for hepatitis C, the primary appeal of delinkage may also be to expand access, even in high-income countries. For cancer and other “Type I” diseases, delinkage can be implemented in order to expand access, but also to promote better and more cost-effective innovation, with somewhat different innovation objectives in high-income and low-income countries. For various Type III diseases,8 delinkage could have a first order impact on innovation and the lower product prices are consistent with efforts to promote access in resource poor settings.

Footnotes

7. A similar competitive approach to rewarding upstream medical research is envisioned in S. 626, 113th Congress, Sec. 12, Competitive Intermediaries for Funding Interim Technologies. See also [48]. S. 626 provides a practical illustration how the decision making for innovation inducement prizes for upstream research can be decentralized in systems that have competitive tensions among the institutions making the awards. Competitive intermediaries can also manage grant programs, and indeed, the existence of several institutions that manage grant programs can already be described as one of competitive intermediaries.

8. Type I diseases are defined as diseases that are “incident in both rich and poor countries, with large numbers of vulnerable are population in each”. Examples include influenza and diabetes. Type II diseases “are incident in both rich and poor countries, but with a substantial proportion of the cases in the poor countries”; HIV/AIDS is an example. Type III diseases “are those that are overwhelmingly or exclusively incident in the developing countries, such as African sleeping sickness …” [49].

References

[22] HIV therapeutics in major developed markets to 2019 – limited pipeline efficacy improvement, patent expirations and stringent healthcare spending to suppress market growth. GBI Research; 2014 (report code: GBIHC328MR).

[23] HIV medicines technology and market landscape. Geneva:UNITAID; 2014.

[48] Love J, Hubbard T. Paying for public goods. In: Ghosh RA, editor. Code: Collaborative ownership and the digital economy. Cambridge (MA): MIT Press; 2005:207-229.

[49] Commission on Intellectual Property Rights, Innovation and Public Health. Public health, innovation and intellectual property rights. Geneva: World Health Organization; 2006.

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