Center for Global Health R&D Policy Assessment

Results for Development guest blogger Kaitlin Christenson describes the R4D event "The Role of Prizes in Global Health R&D," a webinar and meeting held October 20th in Washington DC. The event brought together over 30 participants from North America, Europe, and Africa, including U.S. government officials, academics, NGOs, and private companies and foundations, to discuss R4D’s preliminary results from its study on prizes.

Do prizes offer enough incentive to drive global health product development?

On Wednesday, I participated in a well attended and engaging discussion during which Results for Development Institute (R4D) presented some of their initial analysis of this very question. The discussion was part of an ongoing project at R4D to explore the pros and cons of different incentives under consideration right now to spur the development of new products for global health.

Why incentives? While undeniable progress has been made against some of the greatest global health scourges of our time, we still lack many of the essential tools needed to control and eventually eradicate these diseases and others. We need greater investment in R&D for global health diseases, especially by the biopharmaceutical industry.

R4D analyzed a few key existing proposals for one such incentive, prize mechanisms. They explored the Bangladesh, Barbados, Bolivia, and Suriname (BBBS) proposal and the X-Prize Foundation mechanism for their utility in advancing new diagnostic products for TB. We need new tools because of the enormous toll TB exacts—1.8 million people died from TB in 2008—and because current diagnostic tests are insufficiently accurate, slow to deliver results, and impractical to use in low-resource settings.

R4D highlighted some of the potential benefits of prizes—they can foster innovation by attracting a larger pool of innovators to a problem, allow funders to only pay for successful R&D, and can attract publicity for a critical problem. They flagged some disadvantages too: namely that the elements of desired product profiles must be identified far in advance, funders may end up paying for a product that is ultimately not in demand, and cooperation among various stakeholders may be reduced.

Though there is encouraging potential for prizes to drive innovation for new global health products, R4D identified some key elements to realize that potential:

• The prize amount must be high enough to attract a sufficient number of stakeholders but no so large that it exceeds the market value of the new product. While an amount of $5-20 million (the amount proposed by the X-Prize Foundation) might be too small by itself, other factors, such as the potential for publicity and recognition, might increase attractiveness to private firms.
• It is critical to consider access issues when designing the structure of a prize mechanism. Two approaches to be considered are: a pre-specified cost ceiling for manufacturing a new product, which would likely not be a deterrent to private industry, and some type of licensing option. Some firms could oppose a licensing requirement on principle, but others might consider a restrictive licensing approach, whereby they would grant licenses for certain markets or regions and for specific applications.

Following the R4D presentation, the discussion was quite wide ranging and interesting. Some participants noted that a significant burden for many smaller biotech firms and other stakeholders with low initial capital is the cost of investing in R&D in the first place. In this case, a stronger incentive might be push funding, through which funding comes up front and is guaranteed regardless of outcome. Another challenge might be that designation of a specific milestone implies selection of a certain scientific path, thus may indirectly stifle scientific innovation.

We also talked about the issue of opportunity costs – for instance, what would private firms otherwise have been working on absent an incentive prize? If companies shifted their work away from other global health R&D to focus on one specific product (such as a TB diagnostic), could this compromise the development of other desperately needed global health products?

It was good to hear from the initial results of R4D’s analysis that prizes can be an important mechanism to stimulate R&D for global health. We need to keep in mind, however, that the global health pipeline includes a variety of products for diverse diseases at various stages of development. Clearly, no single mechanism can advance the development of all of them. We at the Global Health Technologies Coalition believe a suite of incentives and financing mechanisms is needed to fill the multiple gaps in the global health product development pipeline.

How will prizes measure up compared to other mechanisms? I’ll be looking forward to reading R4D’s draft report—coming soon with an opportunity for public comments—to learn more.

The November 1 issue of the Lancet Infectious Diseases discusses prize proposals for TB diagnostics and the Center's assessment of prizes and other emerging policy ideas. Click here to read the news article.