Main

Explaining the Ministry of Tribal Affairs’ initiative- Bhagwan Birsa Munda Prize for Development of Drug for Sickle Cell Disease, Arnav Kaman discusses the prize model of incentivising innovation. Arnav is a 3rd Year Law student from Rajiv Gandhi National University of Law, Punjab. He’s interested in Narratives and the Law. His previous post can be accessed here.

By Arnav Kaman

In the eyes of the patent system for pharmaceutical innovations, all disease are not equal. To be more precise, not all health concerns are equally profitable for pharmaceutical companies. Especially, concerns that might disproportionally affect individuals in Least Developed Countries or Developing countries. Markets with less purchasing power are unlikely to become a profitable investment and thus do not attract pharmaceuticals to invest capital into innovation. This distortion in research direction is a core feature of the patent system, not a bug. Yet if the Intellectual Property regime cannot be relied upon, how might these health challenges be addressed?

On World Sickle Cell Day, the Ministry of Tribal Affairs announced the Bhagwan Birsa Munda Prize for Development of Drug for Sickle Cell Disease (The SCD Prize for short). As the name suggests, the Ministry in collaboration with AIIMS Delhi will undertake a competition for drug development for Sickle Cell Disease (SCD). The prizes will be from 1 crore to 10, and the selected proposal would be funded up to 10 crores for further drug development. The government has thrown its ring into an alternate form of innovation to tackle SCD: The Prize system.

While considering the need for a prize it is important to contextualise what makes SCD a unique affliction that the Intellectual Property system may be unable to comprehensively address. SCD is an inherited blood condition that affects haemoglobin in the blood and can cause serious health problems and decrease quality of life. At the moment, as the ministry noted, there is only one drug available on the markets for managing SCD. Hydroxyurea Oral Suspension indigenously manufactured and patented by Akums Drugs and Pharmaceuticals only last year. The MD of Akums claimed that “the existing imported Hydroxyurea solution, which requires refrigeration between 2°C and 8°C, costs Rs77,000 ($928.9) in the Indian market” whereas Akums’ formulation is room temperature stable and it would be sold to the government at 600 rupees at only 1 percent of the global price. Even with the presence of one drug, the government, in its mission to rid India of SCD by 2047, instituted a prize to stimulate further innovation, as they note that “There is currently no option to select a drug from a spectrum of drugs options for management of a patient, depending on his/her body conditions and severity of the disease”. There are two unique characteristics of SCD that have spurred this decision to choose prizes over patents.

Firstly, Hydroxyurea is not a panacea for all kind of SCDs. SCD can exacerbate and affect individuals differently in combination with other health complications, such as, in the case of pregnancies. Pregnant women with SCD are far more likely to die during maternity  and SCD can cause serious complications, but Hydroxyurea is not recommendable for pregnant women. Continued development and research for drugs suitable for pregnant women is sorely needed and the government hopes that development of alternate drugs will be able to address it. Furthermore, having more options available for different groups suffering SCD will be more targeted and likely lower costs in the market.

Secondly, it is important to keep in mind who SCDs affect. SCDs are a genetic mutation inherited from ones ancestry and it is most commonly found in people with African, Arabian and Indian ancestries. After Africa, the second biggest population of people with SCD is found in India, and more specifically it is found to be disproportionally affecting tribal populations of the country. Tribal populations are likely to find it difficult to afford Hydroxyurea even if it is sold at a lower price when there is essentially a monopoly in the market. But the larger problem of course is because of their low purchasing power, it is unlikely that pharmaceuticals invest in such areas. Ultimately it is a combination of both factors that has led the government to choose the prize system over sole faith in the patent regime.

This question of prizes over patents is part of a larger debate about a government led innovation against market centric innovation. Two of the most prominent figures of this debate in the 1960s were Kenneth Arrow and Harold Demsetz (see here for a breakdown of the debate). Arrow argued that an innovation economy that was government financed was the most efficient in creating intellectual goods such as drugs as it solved the problems of deadweight loss Demsetz countered claiming that governments face a huge information problem in determining where research should be directed and how much should be invested etc. On the other hand, in the intellectual property rights regime, the market will signal if there are any demands for a good that private parties will respond to.

Of course, relying on market signals means that the directions of research innovation might be more focused on profit accrual rather than social welfare. Consider SCD with its disproportionate effect and its complications, it is clear why there is no great innovation without external incentives (in fact, most ground breaking SCD research have been awarded prizes, see here and here) Pharmaceutical companies simply do not have enough incentive relying on the “free market”. Thus, the government decides to establish sufficient incentive, the prize, and provides the necessary signal for innovation and competition.

Rather than incentivising innovators by authorising them the right to exclusion via patent, governments will pay successful developers for their socially valuable good (see here for a comprehensive analysis). While the specific arrangements of the SCD prize are not clear, it is likely that after the government pays a prize to the selected proposal and funds it for further development, there will either be, no patent at all, or the patent will exist with the government. Thus, they will be able to provide it to affected individuals at lower costs and address a diversity of problems.

Admittedly, the Prize system has many flaws in its own right. Success or failure depend on a number of variables. Prize money is too less? Not enough competition for substantial innovation. Prize money is too high? Too much competition leading to wasteful resources (The problem of racing is present with IPR as well). The prize money itself, of course, must be raised through a form of taxation on the citizens. (see here for a critique on prizes). Yet the ability of the prize system to change the direction of innovation itself is hugely powerful in tackling certain health concerns of the country.While the patent system of pharmaceuticals is inherently flawed (see here for other concerns) it is the domineering system that occupies our innovation economics and by no means can prize systems replace it entirely. For all its flaws we must remember Fritz Machlup’s famous words (An Economic Review of the Patent System, 1958): ‘If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it.’ Rather alternatives such as prizes system can supplement the intellectual property regime by filling in the necessary gaps. As Kapczynski argues, in the field of IP we should pay more attention to the alternatives rather than IP itself. The government has certainly turned to these alternatives and as we await the results of the competition, one can only hope that success here not only brings great relief to victims of SCDs but also to the victims suffering the affliction of IP in the country.