Olivia Gull, Analyst on the Governance and Responsible Investment Team, examines how pharmaceutical companies are addressing the issue of inequitable access to medicine, specifically in low- and middle-income countries.
- Access to medicine is regarded as one of the priority environmental, social and governance (ESG) issues for the pharmaceutical industry to address.
- Pharmaceutical companies have had to find innovative solutions to the problem, such as income-tailored pricing models and increased public-private partnerships.
- Data is a valuable asset that can help companies determine where to focus research and development (R&D) and help investors understand a company’s approach to providing equitable access.
The COVID-19 pandemic provided the pharmaceutical industry with an opportunity to showcase its social value proposition to the world. Not only has society been able to view the direct link between investments in research and development (R&D) and the production of life-saving drugs, but the world has also witnessed unprecedented global collaboration between the public and private sector to bring these vaccines to market in record time.
With the rise of environmental, social and governance (ESG) investing and increased demand for companies to align their business practices with the United Nations’ (UN) Sustainable Development Goals, the pharmaceutical sector sits in a promising position to improve access to medicine in low- and middle-income countries. As a result, many companies are starting to quantify and document how they are developing innovative treatments for unmet medical needs that can reach as many patients as possible. Data has become a growing asset for companies and investors alike, and the rise of value-based health care has intensified the need to capture patient outcomes and allow for more innovative pricing models based on real-world data.
Addressing the Access Crisis
The pharmaceutical industry, which in recent years suffered from a tarnished public reputation,1 has had the opportunity to rebrand itself. This, however, has been juxtaposed against the stark inequality of the global health care system and the access to medicine crisis. As the COVID-19 vaccine rollout programs commenced last year, billions of people in low- and middle-income countries were at the back of the queue to receive them, and the world witnessed the political gridlock around vaccine nationalism.
The pandemic has also revealed the fragility of the vaccine supply chain and the lack of preparedness to address future pandemics, with only a few companies carrying out the majority of the most urgently needed R&D projects.2 According to the Access to Medicine Foundation, which seeks to change how pharmaceutical companies provide their medicines for the poor, there are currently no projects in the pipeline for 10 of the 16 diseases identified by the World Health Organization as the greatest public health risks.3
However, pharmaceutical companies cannot bring about change in isolation. Numerous factors determine the extent of patient access, including the effectiveness of health care systems, access to insurance, government taxation and procurement policies. One of the main barriers referenced by companies has been lack of health care infrastructure. In addition, many health care systems lack specialized professionals. There are also logistical challenges, particularly in rural areas, as well as patient factors such as misperceptions and stigma around diseases and medicines. Addressing these issues requires buy-in from governments and the pooling of resources, skills, experience and goodwill across multiple stakeholders.
Using Access as an Investment Lens
It is important for investors to understand how different pharma companies are addressing access to medicine within their business strategy, especially as the risk of “Sustainable Development Goal-washing” increases. A company’s approach to addressing access to medicine could be viewed as a proxy for innovation and good governance and may provide investors with a lens with which to view how the company may navigate other emerging challenges.
Quantifying access to medicine and comparing like for like, however, is a difficult task as pharma companies have different product portfolios and business strategies. One tool investors can leverage is the Access to Medicine Index, which ranks 20 of the world’s largest pharmaceutical companies based on how they manage risks and opportunities related to access to medicine in low- and middle-income countries. The index measures a range of value drivers within the pharmaceutical business, including pricing, R&D, governance and compliance, identifying best practice, tracking progress, and showing where critical action is still needed.
Due to the complexity of addressing global access to medicine, the pharma industry has had to find innovative solutions. One area that has seen tremendous growth has been around public-private partnerships, also known as product development partnerships (PDPs). PDPs have provided many international pharma companies with the opportunity to expand their position in challenging markets by partnering with local producers. PDPs have also been commercially attractive opportunities for pharma companies due to the population growth and increasing economic prosperity of many emerging markets.
Many pharma companies have also started to address access issues by developing more innovative pricing strategies. For example, by developing a patient affordability model, Pfizer increased access to its self-administered oncology products in countries like the Philippines, where less than 2% of patients in the private sector could afford to pay the list price.4
Companies are approaching pricing in more flexible and sophisticated ways and providing income-tailored solutions for their products.”
Data as a Valuable Asset
Many innovative pricing models have been made possible due to the increased collection and analysis of data. Companies are investing in digital health technologies and data analytics to collect and analyze real world evidence, track patient outcomes and better understand how patient characteristics affect health outcomes.
Data has become a valuable asset, helping companies determine where to focus R&D, how to position new and existing products, and providing a feedback loop to allow for more holistic innovation across the value chain. In lower income markets, where there is less of a data barrier due to the lack of infrastructure and ingrained hospital IT networks, there is the opportunity to drive rapid data collection at scale and direct health care delivery through mobile communication.
In March 2020, Pfizer was the first biopharmaceutical to issue a sustainability bond, with the proceeds supporting the management of the company’s environmental and social impact. This was shortly followed by Novartis, which issued its first sustainability-linked bond with interest payments tied to the achievement of patient access targets in low- and middle-income countries.5
Capturing data, measuring impact and moving to an outcomes-based funding model not only improves the cost effectiveness of programs and helps companies identify gaps, but also provides the potential for more innovative financing.”
Interrogating Access Strategies
There are several questions investors can ask to better understand which pharma companies are forward thinking with regard to access, including:
- Has the company established access planning frameworks that are being implemented across their product pipelines?
- Are they supporting efforts to build local capacity, educating and training health workers, and collaborating with local stakeholders?
- Are they implementing compliance controls and audits to reduce corruption risk across their business operations?
- Do they have board-level committees that are directly responsible for promoting and rewarding effective access strategies across portfolios?
Access to medicine is improving but there is still a long way to go. According to the Access to Medicine Foundation, R&D still concentrates on too few diseases and on too few countries, benefiting only a fraction of people in need. The COVID-19 pandemic has exposed gaps in the global health system, showing dependency on too few players to combat emerging infectious diseases.
At the same time, the global pandemic has provided the pharmaceutical industry with an opportunity to rebrand itself and build on existing collaborative efforts to tackle areas beyond COVID-19. It is up to the investment community to hold companies accountable to these targets, encourage innovative pricing models and partnerships, monitor how companies are collecting data and measuring their impact, and to challenge companies over whether they are doing enough to ensure their products are reaching as many people as possible.
1“Americans' Views of U.S. Business and Industry Sectors, 2020,” Gallup Poll, August 2020
2Access to Medicine Index 2021, published 26 January 2021.
3Access to Medicine Index 2021, published 26 January 2021.
4Access to Medicine Index 2021, published on 26 January 2021.
5ESG Today, 17 September 2020. “Novartis Launches Healthcare Industry’s First Sustainability-Linked Bond Offering.”
Payors: Groups, organizations or people other than the patient that finance or refund the cost of medicinal products and health services.
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