Drugs cost too much. There is a better way to fund medical innovation

Drugs are expensive. Very expensive, and becoming ever more so, it seems. Prices for new medicines have been steadily rising for the past few decades. It costs a great deal to bring new drugs to market, the explanation goes, and without high prices, the pipeline of new medicines will run dry.

This argument is unsustainable, especially when even the world's most developed economies and healthcare systems are struggling to afford vital medicines. To keep paying more for drugs simply cannot be the answer. Bad health affects everyone. We should be urgently seeking new mechanisms of funding medical innovation that do not compromise on access.

There is a strong moral and social obligation for exploring alternatives. Millions of people globally do not have access to the medicines they need to survive. In the US, millions of adults skip prescribed medications due to the high cost. The same is true in Canada, where the public healthcare system does not usually extend to cover prescription medicines, and in Europe, especially in poorer members of the EU.

The situation is worse in less developed countries. Many pay out of pocket for drugs, and the hefty price tags can run many times the annual average income. Two widely used drugs for treating hepatitis C cost the equivalent of one or more years' average earnings in 12 out of 30 countries, revealed a recent study by the World Health Organization. Millions are dying because they cannot afford the medicine they need to stay alive.

When some members of society lack medicine, there are consequences beyond the individual directly affected. The increased morbidity caused by a lack of access to medication places an extraordinary strain on healthcare systems, exacerbating the drain on their resources from ever more expensive drugs. In addition, unhealthy populations are far less economically productive than healthy ones. Beyond social justice, there are clear economic reasons to find new models of funding medical innovation that do not restrict access to medicine.

The current state of affairs is making the world a more dangerous place. Healthcare systems that are strained by increased morbidity, and by a critical lack of money and medicine, are less likely to be able to contain outbreaks when they occur. Poor global health increases global instability. Failing to ensure everyone has access to necessary medication can have profound knock-on consequences and worsen existing crises.

Moreover, the high sale price of drugs skews incentives for innovation towards wealthy consumers. This means that vital medicines for certain ailments are not accessible when needed on a global scale. For instance, the Ebola virus had been known about for decades before the recent outbreak, and yet virtually no treatments were available. The whole world is unprepared and at risk.

The explanation that pharmaceutical companies offer for high drug prices is compelling. It costs a great deal of money to bring a drug to market, they argue. This is why so many reluctantly accept the current state of affairs, in which innovation justifies restricted access. Though it is true that drugs do cost a lot to bring to market, there is a remarkable lack of consensus on exactly how much.

This is compounded by a systemic lack of transparency. It is often not known how much is spent on what, and how reliant private-sector developments are on publicly funded research. Often, medicines that are developed with significant help from public funds do not reflect that support in prices, and there is no guarantee under the monopoly rights patent system that they should.

Moreover, a great deal of money that could be earmarked for research is spent on marketing instead. Indeed, in some large drug companies, expenditure on marketing outweighs that on research.

This model is unsustainable. So long as we continue to reward innovation through a single channel - buying the drug - access to new medicines will be limited. Ultimately, the problem is about how we pay for medicine. Today, we only pay by purchasing the end product. This means that the costs of manufacture (which is cheap) and innovation (which is expensive) are rolled into one. This puts access and innovation in conflict.

If we were to change how we fund medicines, there could be no conflict. Incentives for innovation and access to affordable drugs could co-exist. We can fund research and production separately. There is no excuse for not exploring the wide systemic changes needed to make that happen.

And we have ideas. For example, at the iMed Project we've been developing innovative two-part payment models for funding medicines that would maintain incentives for innovators while making treatment at cost of manufacture.

Today’s model is unsustainable, unhealthy and utterly unnecessary. We can have new medicines and wide access to them. We should be working towards this as a matter of urgency.