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COMPAS Lecture, Ohio State University

Thomas PoggeLeitner Professor of Philosophy and International

Affairs, Yale

World Poverty

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World Poverty Today

Among 7+ billion human beings, about

868 million are chronically undernourished (FAO 2012),

2000 million lack access to essential medicines (www.fic.nih.gov/about/plan/exec_summary.htm),

783 million lack safe drinking water (MDG Report 2012, p. 52),

1600 million lack adequate shelter (UN Special Rapporteur 2005),

1600 million lack electricity (UN Habitat, “Urban Energy”),

2500 million lack adequate sanitation (MDG Report 2012, p. 5),

796 million adults are illiterate (www.uis.unesco.org),

218 million children (aged 5 to 17) do wage work outside their household — often under slavery-like and hazardous conditions: as soldiers, prostitutes or domestic servants, or in agriculture, construction, textile or carpet production. ILO: The End of Child Labour, Within Reach, 2006, pp. 9, 11, 17-18.

   

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At Least a Third of Human Deaths

— some 18 (out of 57) million per year or 50,000 daily — are due to poverty-related causes, in thousands:

diarrhea (2163) and malnutrition (487),

perinatal (3180) and maternal conditions (527),

childhood diseases (847 — half measles),

tuberculosis (1464), meningitis (340), hepatitis (159),

malaria (889) and other tropical diseases (152),

respiratory infections (4259 — mainly pneumonia),

HIV/AIDS (2040), sexually transmitted diseases (128).

WHO: World Health Organization, Global Burden of Disease: 2004 Update, Geneva 2008, Table A1, pp. 54-59.

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Millions of Deaths

Korea and Vietnam 1951-54, 1965-74

Congo Free State 1886-1908

Russian Civil War 1917-22

World War One 1914-18

Stalin's Repression 1924-53

Mao's Great Leap Forward 1959-62

World War Two 1939-45

Worldwide Poverty Deaths 1990-2013

0 50 100 150 200 250 300 350 400

5.5

7.5

9

17

20

30

60

416

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Global Household Income DistributionSegments 1988 2008 Change in %

Poorest Tenth 0.337 0.251 -25.3%Second Tenth 0.514 0.414 -19.5%Third Tenth 0.668 0.587 -12.0%

Fourth Tenth 0.850 0.840 -1.2%Fifth Tenth 1.154 1.244 +7.7%Sixth Tenth 1.689 1.993 +18.0%

Seventh Tenth 2.902 3.442 +18.6%Eighth Tenth 6.056 6.340 +4.7%

80-95th Percentile

42.958

39.137

-8.9%

Richest 5 Per Cent

42.872

45.751

+6.7%

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Key Facts

In just 20 years, the richest five percent of human beings have

gained about as much (3%) as the poorer half had left at the end of

this period.

The ratio of average incomes of the richest five percent and the

poorest fifth rose from 202:1 to 275:1 in this 1988-2008 period.

Had the poorest 30% held steady, its 2008 share of global

household income would have been 21% higher (1.52% instead of

1.25%).

Had it been allowed to gain the 2.9% of global household income

that was in fact gained by the richest five percent, the poorer half

would have nearly doubled its share — sufficient to end severe

poverty.

… has two interlinked components:

Innovation — creation, invention, discovery; and

Diffusion — dissemination, uptake.

Insofar as either component is stifled, humanity’s progress is impeded.

Human Progress

We have learned that the speed and quality of innovation can be substantially raised by granting innovators temporary monopolies (patents, copyrights) that enable them to profit by charging high mark-ups.

But such temporary monopolies facilitate innovation at the expense of diffusion.

The Dilemma

Rules Governing the Development and

Distribution of New MedicinesAt present, pharmaceutical

innovation is rewarded through

product (vs. process) patents of

minimally 20-year duration, which

the World Trade Organization — under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement — requires its member states to grant.

(1) The Present System Does Poorly in regard to Access

Universal access is gravely

undermined, even in affluent countries, by large mark-ups and, after the patent period, by inadequate incentives for the competent provision of generics to patients who are poor or hard-to-reach.

Profit-Maximizing

Pricing

(2) The Present System Does Poorly in regard

to Targeting

Focused innovation is distorted by

huge economic inequalities, which steer innovators away from diseases predominantly affecting the poor and also excessively reward the development of new “me-too” and maintenance drugs.

(3) The Present System Does Poorly in regard to

Cost-Effectiveness

Overall efficiency is greatly

diminished by lobbying and gaming,

by patenting and litigation, by

wasteful marketing and

counterfeiting, as well as by huge

deadweight losses.

The Health Impact Fund

www.HealthImpactFund.or

gThe HIF is a complement to

TRIPS, offering

• voluntary registration of any

new medicine

• for participation in ten

consecutive fixed annual reward pools

• each of which is divided among registered products according to

their health impact (in QALYs)

around the world.

The Health Impact Fund

www.HealthImpactFund.or

g• Savings from lower drug prices help

governments fund the HIF at initially

$6 billion annually (0.01% of ΣGDP).

• Registrant may keep intellectual property rights, but must sell the new medicine at

the lowest feasible average cost of manufacture and distribution and grant cost-free licenses after the reward period.

• This price ceiling is generally to be determined by a tender, which generic manufacturers in developing countries are favored to win.

Advisory Board Kenneth J. Arrow Nobel Prize in Economics; Professor Emeritus, Stanford University

Noam Chomsky Institute Professor Emeritus, MIT

John J. DeGioia President, Georgetown University

Ruth Faden Director, Berman Institute of Bioethics, Johns Hopkins University

Paul Farmer Harvard Medical School; co-founder, Partners in Health

Robert Gallo Institute of Human Virology

Paul Martin Former Prime Minister of Canada

David Haslam Chair, UK National Institute of Health and Clinical Excellence

Christopher Murray Director, University of Washington Institute for Health Metrics and Evaluation

Baroness Onora O’Neill House of Lords; former British Academy President & Newnham College Principal

Sir Gustav Nossal Former Director, Hall Institute of Medical Research, University of Melbourne

James Orbinski Former International President, Médecins Sans Frontières

Sir Michael Rawlins Former Chair, UK National Institute of Health and Clinical Excellence

Karin Roth Member of the German Parliament

Amartya Sen Nobel Prize in Economics; Professor, Harvard University

Peter Singer Professor, Princeton University

Judith Whitworth Chair, WHO Advisory Committee on Health Research

Heidemarie Wieczorek-Zeul Former German Minister of Economic Cooperation and Development

Richard Wilder Associate General Counsel, Bill and Melinda Gates Foundation

(1) The HIF Avoids High Prices

All HIF-registered products are

available at or below cost from day one. Poor people get better access to important new medicines: through their own funds or through national governments, NGOs or international agencies.

(2) The HIF Ends the Neglect of the

Diseases of Poverty

The HIF adds powerful targeting incentives to develop new medicines with the greatest health impact — regardless of the socio-economic composition of the patient population.

In regard to these diseases, research firms in the developing world are at peak competitiveness: no head start by “Big Pharma,” easy availability of patients (trials), highly committed work force, supportive political and social environment.

(3) The HIF Boosts Cost-Effectiveness

By reducing costs and losses due to:

• Patenting in many jurisdictions

• Litigation

• Marketing

• Counterfeiting

• Gaming

• Lobbying

• Deadweight losses

Bonus: The HIF Alleviates Last-Mile Problems in Drug

Delivery

By combining substantial rewards with low product prices, the HIF encourages efforts toward:

1 Efficacy (freshness, transportation, storage)

2 Targeting of patients who can benefit the most

3 Affordability (price below ceiling to boost reach)

4 Careful prescribing with proper instructions

5 Promotion of high compliance and adherence.

Willing governments contribute 0.03% of GNIthrough long-maturity or perpetual bonds withinterest pegged to inflation or GNI/capita.

Alternatively, a dedicated international tax, for instance on financial transactions or pollution, whose future revenue stream could be securitized. Such taxes would also moderate speculative excesses in financial markets / slow climate change.

Financing the HIF

Either way, the HIF could create a diversified endowment, managed to generate a stable income stream that would cover a substantial and growing portion of the annual reward pools.

The endowment could accept contributions also from international and non-governmental organizations, foundations, corporations, individuals, and estates — following the example of private universities.

Financing the HIF

A crucial challenge is the uniform measurement of health impact across diverse medicines and cultures. This is especially difficult with drugs for infectious diseases where health impact depends on population effects which in turn are influenced by the extent to which resistance to the drug can be avoided.

In partnership with Janssen (part of J&J), we hope to do a pilot involving their Sirturo (bedaquiline), the first new drug against tuberculosis is over 40 years.

Piloting the HIF

Innovators: moral and reputational gains, large new markets, new R&D opportunities.

Patients: broader arsenal, greater affordability, much stronger health-care focus on results, population effects of including the poor.

Governments/taxpayers: reduced need for expensive care, reduced human and economic burdens of disease, North-South partnership for an important global public good.

The HIF Would Benefit All

Parties