Thailand Law Journal 2009 Spring Issue 1 Volume 12

A. Framing the Decision-Making Environment

In order to succeed, every PPP must ensure that its answers to the following questions are congruent: [FN103]

        (i) What are my aspirations and goals?
        (ii) What disease am I seeking to overcome?
        (iii) How can I achieve my objectives?

However, in order to even begin thinking about cooperative strategy, information must be gathered regarding the environment in which the organization seeks to earn a return and the risks and costs associated with alternative product or service strategies. Since such information is essential for all organizations, it is imperative that all PPPs assess the supply and demand landscape for the diseases to which attention is being directed. In many cases, comprehensive disease strategies are being undertaken which have been multilaterally endorsed. For example, the Roll Back Malaria initiative and Stop TB Partnership were both conceived as partnerships which would coordinate comprehensive disease control strategies for malaria and TB. [FN104] In such cases, the endorsement by the coordinating initiative of the PPP situates the PPP optimally to evaluate the disease landscape. In any event, defining the problem at hand in public and private failure terminology goes a long way toward developing an organizational strategy.

A good example of the publicly-coordinated development of a PPP for which broad endorsement was attained and a comprehensive account of the economic and financial landscape was generated is the TB Alliance. When established in 2000, it was endorsed as a drug development offshoot of the Stop TB Partnership, which also addresses comprehensive treatment and development of new diagnostics and vaccines. [FN105] Stop TB laid out three criteria to be met by a new drug: [FN106]

        (i) Shorten the total duration of effective treatment
        (ii) Improvement of the treatment of multi-drug resistant TB, which cannot be treated using isoniazid or rifampicin
        (iii) Provide a more effective treatment for latent TB infection

In February 2000, the TB Alliance was established in Cape Town with a preliminary mandate targeted at laying out a scientific blueprint for TB drug development and documenting the economic environment surrounding the development of a potential drug. In concert, these two documents amount to a relatively comprehensive risk-return profile of “the problem” confronting the organization. Once these documents were generated, the TB Alliance had situated itself to answer its organizational strategy questions. As well, it received public endorsement from the Director-General of the WHO and president of the International Federation of Pharmaceutical Manufacturers Association (IFPMA), encouraging public and private organizations alike to recognize the validity of the Alliance as a facilitator of TB drug innovation. [FN107]

The economics report generated determined that a $612-670 million market for a new TB drug would exist by 2010. [FN108] Furthermore, the costs of developing a drug were estimated to be between $115-240 million, assuming no opportunity cost of capital and in-kind contributions from the private sector. [FN109] The strength of these numbers rests on the accuracy of both the scientific blueprint and the Alliance's market calculations. If the numbers are correct, then the strategy undertaken, which includes a high degree of private participation in the U.S., Europe, and India and a flexible intellectual property policy, is appropriate. It is beyond the scope of this paper to challenge the contents of the reports. However, the organization's stepwise approach to an organizational strategy has the salutary effects of informing the organizational decision-making process and consequently improving the level of confidence which potential partners will have in contracting with the TB Alliance.

The economic and epidemiological dynamics of a disease also provide clues regarding the politics surrounding drug development and the likely success of alternative partner strategies. [FN110] For example, a disease for which both a relatively high-volume rich and poor market exist (e.g. AIDS) will attract the attention of the public and private sectors. However, private conflicts of interest might create an antagonistic environment for partnering, as private participants may, first and foremost, protect their financially-motivated interests (as their organizational imperative requires). Though the overlapping of ultimate outcomes is great, the divergence in motivation between public and private threatens a constructive partnering arrangement.

In contrast, for a disease where no rich market exists but many millions of poor people suffer from a disease (e.g., onchocerciasis), the financial motivations of industry do not enter directly into the partnership equation. Here, eradicating the disease falls entirely within the public domain. Unpredictably, though, this may yield a more promising basis for partnership, where public participants may subsidize private discovery, development, and distribution of a novel drug. The removal of the financial conflict of interest removes the initial impetus for private involvement but facilitates alternative value propositions in the form of goodwill, branding, and knowledge of developing country health environments.

Finally, when a disease is so rare that it afflicts only very few people, the ability to mobilize either public or private sector resources toward eradication of the disease will be lacking. Financial incentives will be negligible, and the public profile of the disease will be so low that a positive private contribution toward its eradication will not have the same allure to a pharmaceutical company as a much more threatening disease. In this type of case, extremely creative models would be required in order to induce participation in any form.

[FN103]. Roger Martin, “Conquer the World and Triumph in Canada” Financial Post (13 May 2002), FP11 available online: http:// www.rotman.utoronto.ca/rogermartin/Conquer_the_world.pdf.

[FN104]. For more information on Roll Back Malaria, see http:// rbm.who.int/partnership. For Stop TB, see http://www.stoptb.org.

[FN105]. Cape Town Declaration, supra note 94.

[FN106]. Facts About the TB Alliance, supra note 93.

[FN107]. Global Alliance for TB Drug Development, Economics of TB Drug Development (October 2001).

[FN108]. Ibid.

[FN109]. Ibid.

[FN110]. The ideas in the next three paragraphs were partially contributed by Dr. Raisa Deber. To see an evaluation of the appropriateness of public and private interaction in the domestic health care delivery context, see Raisa B. Deber, “Delivering Health-Care Services: Public, Not-for-Profit, or Private?” (2002) Commission on the Future of Health Care in Canada, Discussion Paper No. 17.

This article is published with the kind permission of Nathaniel Lipkus. The article originally appeared in Michigan State University Journal of Medicine & Law, Spring 2006 issue.