Encouraging pharmaceutical innovation to meet the needs of both developed and developing countries

Purpose - Current pharmaceutical global pricing strategies functionally exclude developing countries from the market for drugs to treat many diseases. The purpose of this paper is to evaluate some of the proposed patent reward models to determine their feasibility in the current environment. Design/methodology/approach - A review of a variety of proposals including special financing or tax arrangements, public‐private partnerships, and government‐funded patent purchases are briefly reviewed. A more in‐depth examination of the recently proposed health impact fund (HIF) is undertaken. Findings - In brief, the HIF requires developed countries to donate to a fund that finances the release of pharmaceutical patents. The pharmaceutical companies would be reimbursed over a ten‐year period from the government donation pool based on the medicine's health impact. The expected consequence of this policy would be affordable medicines for developed and developing countries. This examination highlights deficiencies in the current HIF strategy and offers a number of suggestions mostly focused on a more balanced sharing of the inherent risks in pharmaceutical product development to improve the strategies viability. Practical implications - Although among the proposed strategies, the HIF offers the most promise, the suggested changes would result in a program viewed more favourably by the pharmaceutical industry and participating countries. Originality/value - Although it is recognized that pricing challenges are limiting the availability to essential medications in developing countries, current strategies often ignore many of the market dynamics for pharmaceuticals. This critique, focused on the HIF strategy, is presented in an effort to improve the likely success of the most promising of these strategies.