Description: A compulsory fund to replace the patent system which rewards innovators on the basis of the health impact they create.
Start date: Proposed to -
Status: Ongoing.
Meta-point: this summary shall refer to the act in its final form unless otherwise stated.
The Medical Innovation Prize Fund has been proposed in a series of acts by Senator Bernie Sanders in the US.
It is a comprehensive scheme designed to replace the patent system. It would establish a government fund which would reward innovators according to the health impact achieved by their innovations. Under this system, patents would only function to secure eligibility for funding, and would not confer exclusive rights.
The funds would be spent on a combination of:
End product prizes for the development of particular products
Allocations of funds to priority research via grants
Open source dividend prizes rewarding the open sharing of knowledge
Prizes for interim research
Drugs would be eligible for the fund for a period of 10 years. Where a drug formed the basis of a follow-on drug, it would receive an appropriate portion of the associated reward (for more information, see below).
The system would be administered by a board of trustees and six expert advisory boards (for more information, see below). There would also be a system of competitive intermediaries, who would compete for funding and allocate some of the rewards. Funds would come from the treasury at the rate of 0.55% GDP annually.
Sponsors of the fund claim that it is compliant with the Trade-Related Aspects of Intellectual Property Rights (TRIPS).6
S. 1138 in 2011 was an act proposing a fund for HIV/AIDS specifically (so no HIV/AIDS drugs could be patented).7
The sponsors of the 2011 act estimated that the scheme would reduce the cost of drugs in the US by more than \$250 billion.8
The six expert advisory boards would be for:
Economic evaluation of therapeutic benefits.
Business models and incentive structures for innovation.
Research and development priorities.
Orphan diseases.
Financial control and auditing.
Open source biomedical science.
The following minimum spending levels for the fund were suggested:
5% on open source dividend prizes
4% for neglected global diseases (via funding of prior research)
10% for orphan drugs (via funding of prior research)
4% for global infectious diseases and other global health priorities (via funding of prior research)
The acts all ended up being referred to committees.
The acts are not specific on what adjudicatory mechanisms there would be in the case of litigation relating to the fund.
To evaluate remuneration levels, MIPF proposes using:
“The number of patients who would benefit from the drug”
“The incremental therapeutic benefit of the drug”
“The degree to which the drug, biological product, or manufacturing process involved addresses priority health care needs, including:”
“current and emerging global infectious diseases”
“severe illnesses with small client populations”
“neglected diseases that primarily afflict the poor in developing countries”
“Improved efficiency of manufacturing processes for drugs or biological processes.”
“The extent to which knowledge, data, materials and technology that are openly shared have contributed to the successful development of new products or improved processes for manufacturing products”
“In the case of antibiotics or other products for which drug resistance is a significant public health problem, the expected life cycle benefits of the antibiotic or other product”
“In the case of products used in stockpiles for potential threats to the public health, the risk adjusted benefits of stockpiling the products”9
Scope: MIPF would cover all disease areas and all R&D within the US.
Access: MIPF would lower the cost of drugs and incentivise distribution, as remuneration would be based on health impact.
Innovation: Incentives would be directly linked to health impact, as well as to other factors. A large amount of money would be provided, and it would not compete with patents as a funding source, but there would be no market adjustment in the scale of the incentive.
Efficiency: MIPF would cost 0.55% of US GDP, which is very expensive - but could save even more.10 The system of competitive intermediaries also creates competition in the methodology for allocating funds. The fund would be market-based on the demand side, as it would create competition in manufacture and sale. There would be no supply-side market mechanism however.
Governability: MIPF would require a body to administer the fund and many advisory committees. There is no inbuilt adjustment mechanism for setting remuneration levels, so this would be challenging. The selection process would be at risk from political interference.
Political Feasibility: It is not clear whether this would be TRIPS compliant. As it is comprehensive and compulsory, it would be hard to implement.
MIPF is similar to Medical Research and Development Treaty (MRDT). These proposals both envisaged a commitment by government to a certain level of funding.11 Differences are:
MRDT would be international, MIPF national.
MRDT was neutral on how the money be spent, whereas MIPF proposes a central prize fund.
While both proposals would coexist with TRIPS, under MRDT signatory countries would no longer be bounds by TRIPS regulations.
MIPF is similar to the Health Impact Fund (HIF). Like HIF, MIPF is a fund which remunerates innovators based on health impact. MIPF and HIF also envisage a fixed period of 10 years’ participation in the fund. Differences are that:
MIPF relates to the US only, whereas HIF is international.
MIPF is compulsory, HIF is optional.
HIF envisages using one measure, Quality-Adjusted Life Years (QALYs), to allocate remuneration rights. MIPF proposes a composite of many measures, including openness of information.
The above leads to the question: are QALYs too narrow a measure, or is it the most comprehensive measure and the least open to political abuse?
It is also worth noting that under the HIF model, openness is an obligatory condition for remuneration, rather than a variable that is used to determine the scale of the remuneration.
The Australian Democrats Prize Proposal is similar to MIPF, but optional and international in scope.12
The Fund for research in Neglected Tropical Diseases (FRiND) and the PDP+ Fund differ from MIPF in that they target only neglected diseases, and remuneration would be tied only to the extent that access to the drugs were promoted.13
The Cancer Innovation Fund is disease specific, unlike MIPF.
The Donor Prize Fund would be disease neutral, like MIPF. Unlike MIPF, it would be optional, and funded by a set percentage of donor outlay, rather than government funding. Remuneration would be tied to openness of information only, rather than a composite measure including health impact.14
Developing Economies\’ Fund for Essential New Drugs’ (DEFEND) annual payments proportionate to social value and burden of disease are reminiscent of remuneration rights. The difference is that remuneration rights replace patent rights completely, while these license payments only compensate for the drug licenses in developing countries, leaving the patents in developed countries intact.
Targeted at: the US Senate and House of Representatives
Stakeholders on board: Bernie Sanders
The main document: “The Medical Innovation Prize Fund: A New Paradigm for Supporting Sustainable Innovation and Access to New Drugs: De-Linking Markets for Products from Markets for Innovation,” 2011. https://www.keionline.org/sites/default/files/big_prize_fund_overview_26may2011_letter.pdf.
A brief summary: Hollis, Aidan, and Thomas Pogge. The Health Impact Fund: Making New Medicines Accessible for All. Incentives for Global Health, 2008. http://healthimpactfund.org/wp-content/uploads/2015/12/hif_book.pdf.
A detailed criticism: Wei, Marlynn. “Should Prizes Replace Patents - A Critique of the Medical Innovation Prize Act of 2005.” Boston University Journal of Science & Technology Law 13 (2007): 25.
The laws:
Sanders, Bernard. “Text - H.R.417 - 109th Congress (2005-2006): Medical Innovation Prize Act of 2005.” Webpage, 2005. https://www.congress.gov/bill/109th-congress/house-bill/417/text.
———. “Text - S.627 - 113th Congress (2013-2014): Medical Innovation Prize Fund Act.” Webpage, 2013. https://www.congress.gov/bill/113th-congress/senate-bill/627/text.
———. “Text - S.1137 - 112th Congress (2011-2012): Medical Innovation Prize Fund Act.” Webpage, 2012. https://www.congress.gov/bill/112th-congress/senate-bill/1137/text.
———. “Text - S.1138 - 112th Congress (2011-2012): Prize Fund for HIV/AIDS Act.” Webpage, 2012. https://www.congress.gov/bill/112th-congress/senate-bill/1138/text.
———. “Text - S.2210 - 110th Congress (2007-2008): Medical Innovation Prize Act of 2007.” Webpage, 2007. https://www.congress.gov/bill/110th-congress/senate-bill/2210/text.
———. “Text - S.495 - 115th Congress (2017-2018): Medical Innovation Prize Fund Act.” Webpage, 2017. https://www.congress.gov/bill/115th-congress/senate-bill/495/text.
Sanders 2005 speech: “Congressional Record.” Legislation. Accessed June 25, 2017. https://www.congress.gov/congressional-record/2005/2/2/extensions-of-remarks-section/article/E149-3.
