Incentivising innovation in life sciences requires a fresh debate

Out-Law Analysis | 26 May 2020 | 10:43 am | 3 min. read

New incentives should be explored to encourage innovation in life sciences, especially in areas where the traditional model of incentives might not be working or sufficiently encouraging the development of medicines that society needs.

Discussion over fresh incentives should form part of a broader debate about which diseases we want to prioritise treatment for as a society, and which people should receive those treatments. Such a debate is necessary since it is not affordable to fund every potential medical research project from the private and public purses.

On such an emotive subject, rational thinking from the widest body of stakeholders possible is needed. It is a challenging project that needs input from governments, parliamentarians, public health officials, healthcare professionals, patient groups, regulators, economists and a diverse range of industry representatives.

The coronavirus crisis provides a spur for this debate to take place, and in particular, whether or not intellectual property (IP) is the best, if not the only, way to incentivise innovation in life sciences – the topic of a recent Industry Forum webinar I moderated involving Daniel Zeichner MP, who chairs the All-Party Parliamentary Group for Life Sciences, and former GSK vice-president for IP David Rosenberg.

The rush to develop a successful vaccine for Covid-19 is on. It involves hundreds of companies across multiple jurisdictions and extensive collaboration across the industry, with only two or three products likely to make it to mass market.

Industry is demonstrating strong leadership, innovation and purpose in moving forward with new diagnostics, treatments and vaccines, and in exploring the potential for existing medicines to be used to mitigate the effects of Covid-19 too. Regulators around the world are going to great lengths to assist by fast-tracking procedures where they can. However, many of the research projects, being undertaken at significant cost, will end in failure. This cost of failure is the main reason why pharmaceutical manufacturers need to be substantially incentivised to carry out R&D and be able to obtain a fair return on their investments when they do discover new treatments.

While the current patent system is broadly successful in providing a balance between monopoly rights and competition in pharmaceutical markets, and IP has been the enabler of much successful innovation, the model is often criticised and there are also some areas of medicine where additional or different incentives could be needed. The well-publicised threat of antimicrobial resistance (AMR) stemming from an overuse of existing antibiotics and shortage of new antibiotic medicines is an example where a new approach might work better.

New IP or fiscal incentives and regulatory exclusivities could be beneficial in certain cases.  In the context of IP, the European Commission was engaged in a pharmaceutical incentives review, where a change to the scope of supplementary protection certifications (SPCs) and a broadening of the Bolar exemption, for example, were options being considered.  Tax credits and other fiscal incentives, grants, rewards and prizes are some of the financial mechanisms that have been suggested as worth exploring. At the moment, as well as general regulatory incentives based on data and market exclusivities, there are specific regulatory incentives to encourage the development of medicines for rare diseases and for the paediatric population. A review would help to identify if there are others areas which would benefit from targeted regulatory incentives.

Several solutions to the challenge of effectively incentivising innovation have been mooted but more debate is needed. Is an approach that requires a move away from the linkage between what pharmaceutical companies spend on R&D and the cost of those medicines to buyers viable and sustainable? Do we need new pricing and reimbursement models? How do we incentivise the effective use of AI and 'big data'? How do we ultimately decide what medicines should be developed? These are just some of the many issues which should all be up for discussion to determine whether the current system works well enough or can be improved upon.

What is clear is that these are issues that cannot be considered in isolation. They are part of bigger questions for society, and this time of public health emergency has only served to emphasise the need for rational debate on the topic sooner rather than later. 

Nicole Jadeja is an expert in IP law and life sciences at Pinsent Masons, the law firm behind Out-Law. Pinsent Masons is actively engaging in the debate on incentivising innovation in life sciences and plans further events throughout the year. Please contact Nicole Jadeja if you would like to hear more.