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Neglected Tropical Diseases: New Opportunities
Business Monitor International, May 2009, Pages: 14
This report examines the affect such plans will have on neglected tropical diseases. As tropical diseases are largely prevalent in areas where individuals are unable to afford to pay for costly drugs, the development of these have long been neglected by drug-makers, who have viewed such drugs as unprofitable options.
Diseases can be classified as neglected when the cost of innovation, clinical trials and marketing are considered to be far more than the potential revenues. With no cost benefit, firms have not previously seen this area as a wise investment. Tropical diseases fall into this category, as the large numbers of people affected are predominately of extremely low income, thereby making any expensive interest in developing effective treatments unattractive to drug-makers. BMI believes that this could change in the medium term as global initiatives are being established to reward innovation based on a qualitative measure of how much better off patients are as a result of treatment. Furthermore, government-funded ventures with drug-makers through such pooled funds will secure payments for future patents, ensuring diseases that can be eliminated are addressed with urgency rather than being neglected.
At present, drug-makers that manufacture treatments for neglected tropical diseases operate through charitable organisations and donate limited supplies of their product. We believe that within the emerging markets, drug donations are no longer the way to lower disease burdens in developing countries. Unreliable, inconsistent and sporadic, donations offer no incentives for the local pharmaceutical industry to develop its own drugs or for the local communities in question to take responsibility for preventative techniques. Therefore, a funding body that will reward innovators will invite interest from drug-makers looking to diversify their product pipelines and attain new patents. The HIF, a derivation of the Incentives for Global Health (IGH) is a non-profit organisation that aims to provide incentives for drug-makers to innovate and market drugs in emerging markets. The critical feature of the HIF is that rewards for novel treatments are based on the human impact of the medicine and not the ability of the patients to pay.
Another crucial shift in recent years is that of more people reaching middle-class status around the world, though the numbers in the low income bracket still comprise a substantial portion of the global population. While affordability remains low, there are more people in the lowest income segments who are now also able to pay for medicines, albeit at extremely low costs. Using our Country Risk population and GDP per capita figures for the 149 countries covered by BMI, we have assessed the demographic situation in 2008 and forecast to 2013. Using per-capita GDP figures (US$), we have assigned four income brackets and determined the total global population within each bracket. In 2008, there were 1.9bn living under the low income threshold. By 2013 this will be 606mn. We note that although the remaining income brackets will all experience an increase in numbers by 2013, 1.3bn more people will be classified as on a lower-middle income, giving a total of 4bn. We highlight the lower-middle income group as particularly significant – this is the income group to have the largest increase in size during our forecast, and crucially, this is the lowest per-capita GDP selection that can generally afford to pay for basic medicines. Countries in this group include Africa and India – two major emerging markets that drug-makers are currently entering for growth.
The composition of countries in the lower middle income group should also be of interest to multinational firms targeting neglected tropical diseases. Africa is a varied continent with a spectrum of tropical diseases and a large number of patients. The combination of HIF incentives, various other non-governmental organisations that seek to fund R&D in this field and increasing GDP per capita for the lower middle income people in 2013 mean that drug-makers marketing medicines for tropical diseases can expect to charge very low prices. From the firms’ perspective, this is preferable to bulk donations and is likely to encourage other pharmaceutical firms to consider developing existing treatments for tropical diseases.
Moreover, endemic poverty is a composite problem, to which the devastating effects of tropical diseases are a significant contributing factor. Ultimately, eradicating long-term disabilities by preventing such illnesses will lift a significant number of people out of this situation and contribute toward a higher per-capita income that can then be spent on other medicines. Drug-makers that can reach the most isolated regions – ensuring their tropical disease pharmaceuticals achieve maximum impact – can later leverage on their supply chain to promote other products. With per-capita income rising in Africa, this is an opportunity that has immense potential for future revenues. We believe that with the financial incentives offered by the HIF and the changing demographical and socioeconomic status of the majority of patients, neglected diseases will now be a more attractive investment option than before.
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