The Health Impact Fund Proposal: Application in the United States

Journal of Intellectual Property Law Volume 19 | Issue 2 Article 11 March 2012 The Health Impact Fund Proposal: Application in the United States' Era of Comparative Effectiveness Katherine Jeanne Racz Follow this and additional works at: https://digitalcommons.law.uga.edu/jipl Part of the Health Law and Policy Commons, and the Intellectual Property Law Commons Recommended Citation Katherine J. Racz, The Health Impact Fund Proposal: Application in the United States' Era of Comparative Effectiveness, 19 J. Intell. Prop. L. 487 (2012). Available at: https://digitalcommons.law.uga.edu/jipl/vol19/iss2/11 This Notes is brought to you for free and open access by Digital Commons @ Georgia Law. It has been accepted for inclusion in Journal of Intellectual Property Law by an authorized editor of Digital Commons @ Georgia Law. Please share how you have benefited from this access For more information, please contact . Racz: The Health Impact Fund Proposal: Application in the United States THE HEALTH IMPACT FUND PROPOSAL: APPLICATION IN THE UNITED STATES' ERA OF COMPARATIVE EFFECTIVENESS KatherineJeanne Rac* TABLE OF CONTENTS ..................................... ...... 488 I. INTRODUCTION II. B ACK G RO UN D ............................................................................................. A. THE CURRENT U.S. PATENT SYSTEM................................................. B. RECENT AND FORTHCOMING CHANGES: THE PATIENT PROTECTION AND AFFORDABLE CARE ACT IN THE ERA OF COMPARATIVE EFFECTIVENESS........................................................ C. D. III. IV . 1. The PaientProtection and Affordable CareAct.............................. 2. Where We Are Now. Scholarshop Perspecdve................................. THE HEALTH IMPACT FUND .............................................................. 1. H IF Summay ................................................................................. 2. Measuring H ealth Impact................................................................. 3. F unding............................................................................................ 4. R eimbursement................................................................................. HEALTH CARE REFORM IN MASSACHUSETTS.................................. 492 492 496 496 499 501 501 502 504 504 505 A N A LYSIS ...................................................................................................... A. A NEW ERA OF COMPARATIVE EFFECTIVENESS?........................... B. APPLICATION OF THE HIF IN THE UNITED STATES....................... C. OTHER NATIONAL OPTIONS?............................................................ D. STATEWIDE IMPLEMENTATION OF THE HEALTH IMPACT FU N D ...................................................................................................... 507 C O N CLUSIO N ............................................................................................... 514 507 508 512 5 13 * Katherine J. Racz, raised in Savannah, Georgia, attended the University of Georgia where she majored in International Affairs. As a student, Katherine conducted two research studies that explore health care systems, and interned in government offices where she helped to develop health care policy. Katherine entered the University of Georgia School of Law in the fall of 2010, and was later appointed to the Editorial Board of the Joumnal of Intelkctual Pmperly Lny. She will serve as the journals Senior Notes Editor for the Academic Year 2012-2013 and is expected to graduate with a Juris Doctorate in 2013. Katherine hopes to use her law degree to advance public health. 487 Published by Digital Commons @ Georgia Law, 2012 1 Journal of Intellectual Property Law, Vol. 19, Iss. 2 [2012], Art. 11 488 J. INTELL PROP.L [Vol. 19:487 I. INTRODUCTION The United States' traditional patent system for pharmaceuticals, which currently affords pharmaceutical innovators protection of their intellectual property for several years, has been applauded for fostering innovation and incentivizing firms to develop new and beneficial drugs and therapies with the promise of market exclusivity to those firms for their patented drugs. Indeed, U.S. firms, which develop drugs in a largely unregulated market, have been at the forefront of developing cutting-edge therapies for the past several decades.' However, the U.S. patent system is not without deficiency; instead, the coveted exclusivity afforded to drug developers by patent protection often inadvertently creates socially undesirable incentives for those developers. These incentives, when pursued, contribute to the soaring costs of pharmaceuticals and ultimately contribute to the rising and unsustainable cost of public health care in the U.S.2 Specifically, the patent system incentivizes pharmaceutical innovators to (1) create "me-too" 3 drugs (which hardly differ from other firms' drugs that have already gained market approval and have proven to be lucrative) and (2) make incremental changes to their own drugs, which have patents that are nearing expiration, in order to prolong patent protection and thereby preserve market exclusivity. In pursuing these incentives, developing firms ultimately detract from the time and effort they would otherwise spend to develop genuinely innovative therapies in the interest of pursuing these socially suboptimal outcomes. The socially suboptimal side effects of the patent system have contributedand continue to contribute-to the rising and unsustainable costs of pharmaceuticals, which ultimately contribute to the rising and unsustainable costs of health care in the U.S. Few would dispute the need to address these rising costs, which continue to plague the United States' public health care system. According to the Centers for Medicare and Medicaid Services (CMS), overall U.S. health expenditure grew by 3.8% in 2009, totaling $2.5 trillion for the year. 4 This represents 17.9% of the nation's gross domestic product (GDP), and an average of over $8,000 spent per person in 2009.5 1 See infra notes 25-30 and accompanying text. 2 See infra notes 27-33 and accompanying text. 3 AIDAN HOLIS & THOMAS POGGE, INCENTIVES FOR GLOBAL HEALTH, THE HEALTH IMPACT FUND: MAKING NEW MEDICINES AcCESSIBLE FOR ALL 4 (2008). 4 Ctrs. for Medicare & Medicaid Servs., U.S. Dep't of Health & Human Servs., Nat'1 Health Expenditure Data Sheet, https://www.cms.gov/Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/NationalHealthExpendData/Downloads/tables.pdf. 5 Id. https://digitalcommons.law.uga.edu/jipl/vol19/iss2/11 2 Racz: The Health Impact Fund Proposal: Application in the United States 2012] THE HEALTH IMPACT FUND PROPOSAL 489 Further, spending on pharmaceuticals accounted for no small portion of total U.S. health care expenditure. In 2008, the U.S. spent $234.1 billion on prescription drugs, more than double the total amount that the U.S. spent for prescription dr (...truncated)