Fisher & Syed on Tradable Obligations to Enhance Health

Pre­fa­tory Note

The pur­pose of this post is to in­form read­ers of a global health policy pro­posal that I sus­pect many will find ex­cit­ing. Since the origi­nal text is freely available, I only briefly de­scribe it here so read­ers can quickly as­cer­tain whether it in­ter­ests them.

Fisher & Syed on “Trad­able Obli­ga­tions to En­hance Health”

In their forth­com­ing book In­fec­tion, law pro­fes­sors William Fisher (Har­vard)* and Talha Syed (Berkeley) ex­plore “The Health Cri­sis in the Devel­op­ing World and What We Should Do About It.” Ob­vi­ously, EAs gen­er­ally need lit­tle in­tro­duc­tion to this prob­lem. As law pro­fes­sors, their “goal is to de­ter­mine how the laws and in­sti­tu­tions that we have his­tor­i­cally em­ployed to foster the cre­ation of new phar­ma­ceu­ti­cal prod­ucts and then to chan­nel the dis­tri­bu­tion of those prod­ucts might be ad­justed so as both to gen­er­ate more vac­cines and drugs that ad­dress ne­glected dis­eases and then to make those vac­cines and drugs available to the peo­ple who need them.” (In­tro­duc­tion, p. 22).

Some of the pro­pos­als they con­sider—and ul­ti­mately find un­satis­fy­ing—in­clude manda­tory re­search (ch. 6, pp. 3–5), price reg­u­la­tion, (id. pp. 5–7), manda­tory li­cens­ing (id. pp. 7–10), and for­eign filing li­censes (id. pp. 11–13).

Their main pro­posal—and the sub­ject of this post—is es­sen­tially a trad­able DALY quota sys­tem:

Each phar­ma­ceu­ti­cal firm would be re­quired to achieve, each year, a ra­tio, which we will call the so­cial-re­spon­si­bil­ity in­dex (SRI). The nu­mer­a­tor of this in­dex would be the to­tal num­ber of Dis­abil­ity Ad­justed Life Years (DALYs) saved as a re­sult of the dis­tri­bu­tion and con­sump­tion of the firm’s prod­ucts dur­ing the year. The de­nom­i­na­tor would be a mea­sure of the firm’s size, pre­sump­tively its global gross rev­enues dur­ing the year.

Like [green­house gas] emis­sion per­mits [as in cap-and-trade schemes], the DALYs in this regime would be both trade­able and bank­able. Thus, a firm that, in a given year, failed to earn enough DALYs to meet its tar­get could pur­chase DALYs from a firm that had a sur­plus. For ex­am­ple, a firm spe­cial­iz­ing in so-called “lifestyle” prod­ucts (such as erec­tile-dys­func­tion drugs, sales of which are lu­cra­tive but re­sult in only mod­est health benefits) could buy DALYs from a firm spe­cial­iz­ing in vac­cines or drugs effi­ca­cious in pre­vent­ing or treat­ing more se­ri­ous dis­eases or con­di­tions. Alter­na­tively, a firm that, in a given year, earned more that enough DALYs to satisfy its obli­ga­tions, in­stead of sel­l­ing the sur­plus could ap­ply it to the firm’s ac­count for the fol­low­ing year.

Like the [Cor­po­rate Aver­age Fuel Econ­omy] stan­dards, our pro­posed regime would per­mit each firm to de­cide how it could most effi­ciently com­ply with its obli­ga­tion. A firm at risk of miss­ing its tar­get would have (at least) the fol­low­ing op­tions:

  1. It could re­duce the prices charged in de­vel­op­ing coun­tries for drugs already in its port­fo­lio, thereby in­creas­ing the num­ber of per­sons able to af­ford the drugs and earn­ing more DALYs.

  2. It could al­ter the for­mu­la­tions of drugs already in its port­fo­lio so that they could be dis­tributed more eas­ily in de­vel­op­ing coun­tries – for ex­am­ple, by mak­ing them more heat re­sis­tant and thus eas­ier to dis­tribute in ar­eas with­out re­li­able “cold chains.”

  3. It could in­crease its in­vest­ment in re­search pro­jects that promise to gen­er­ate drugs with large health benefits (for ex­am­ple, vac­cines for in­fec­tious dis­eases).

  4. It could al­ter its busi­ness-ac­qui­si­tion poli­cies to ac­quire more “startup” biotech­nol­ogy com­pa­nies that have de­vel­oped prod­ucts that offer large health benefits.

  5. It could col­lab­o­rate with gov­ern­ments or NGOs in de­vel­op­ing coun­tries to im­prove the dis­tri­bu­tion sys­tems for its drugs, thereby get­ting them into more mouths.

  6. It could, as men­tioned above, buy DALYs from other firms bet­ter po­si­tioned to im­prove pub­lic health.

  7. Fi­nally, it could re­duce the prices of some or all of its prod­ucts, thereby low­er­ing the de­nom­i­na­tor of its ra­tio. (For ob­vi­ous rea­sons, this is the op­tion the firm is least likely to adopt.)

I sus­pect many EAs, like me, will find this pro­posal com­pel­ling be­cause it com­bines both the power of mar­kets and the reg­u­la­tory power of de­vel­oped gov­ern­ments to effect sys­temic changes in global health­care de­liv­ery.

If you’d like to read more, this pro­posal is de­vel­oped from page 14 on­wards in Chap­ter 6 of In­fec­tion. Ac­cess to most of In­fec­tion is available for free here.

*For trans­parency, I know about this pro­posal be­cause I took Prof. Fisher’s Pa­tent course at Har­vard Law School.