Introduction

A number of studies point to the fact that new medicines have been a key factor underlying the substantial gains in longevity and quality of life realized by individuals over the last half century. A recent survey by David Cutler and Mark McClellan analyzed the degree of medical progress in a number of major diseases. They found pharmaceutical innovations have provided significant net benefits to patients across a wide spectrum of conditions, such as heart disease, cancer, and depression. These are diseases that are common to both developed and developing countries (i.e. “global diseases”). However, a review of the existing literature indicates relatively fewer R&D investment programs and medical advances devoted to diseases that are specific to and concentrated in developing countries. This would include infectious and tropical diseases, such as malaria, tuberculosis and leprosy, which afflict millions of individuals.

The basic challenge to stimulating more research and development on new medicines for these neglected diseases is how to overcome the barriers posed by the low income and ability to pay for health care that exists in developing countries. Insufficient revenues on the demand side of the market are combined with high fixed costs of R&D on the supply side. From a policy perspective, one needs to design government interventions that will alter the economic incentives that prevail in this situation.

The U.S. Orphan Drug Act of 1983 provides an instructive model in this case.