Open Source Model in Healthcare Can Create Shared Value

Salil Kallianpur, Pharmaceutical Marketing Professional, India

James Gillespie, President, Center for Healthcare Innovation

Last weekend, I [Salil] visited my parents who live in Hyderabad, a city in South India. During the trip, I initiated a conversation with an old lady in the neighborhood named Ghuraan Bi by simply asking how she was doing.  A slight lady in her 60s, the innocuous question seemed to trigger a barrage of emotions.  Ghuraan Bi settled down on the floor and unbundled a small bag in which she stored betel leaves (paan) and betel nuts (supari). This was an indication that she was preparing for a long conversation, and then, she said something that immediately caught my attention. She narrated a story about how she had to loan her home out as collateral to the local money-lender in order to pay for her husband’s medicines. Tears welled up into her eyes as she spoke about how expensive medicines took her home away from her. “Why do medicines have to cost so much?”, she asked! Why, indeed!

It is well known that sections of society are driven below the poverty line due to unbearable costs of healthcare and medicine in India. This is largely because millions of people pay out-of-pocket in the absence of social security guaranteeing health as a fundamental right. Some hold the pharmaceutical industry responsible for this “evil” despite knowing that the cost of medicines is only approximately 15% of overall healthcare costs. This is not to say that cost of medicines should not be reduced. The intention is just the opposite. It is to explore how healthcare can be made more accessible to the people through innovative partnerships, effectively leveraging technology and building innovative distribution models between different stakeholders. It is about thinking how to achieve this by getting the public and private sectors to work together to develop a wide range of innovative tools, partnerships, and approaches to improve healthcare delivery to the underprivileged.

Andrew Witty, Chief Executive Officer of GlaxoSmithKline, in the January 2011 issue of Health Affairs, wrote that pharmaceutical companies are driving crucial research into new medicines in a way that can benefit the life of the poor. The pharmaceutical industry and the public sector are thinking differently than before about how to improve access to medicines and advance research and development. Witty writes that diseases disproportionately affecting developing countries play a large role in stalling economic and social development. Pharmaceutical companies are driving crucial research into new vaccines and medicines; however, although there is an imperative for industry to research new therapies for diseases of the poor, the financial returns are often seen as limited.

What if financial returns do not become the constraining factor? Would companies be more open and willing to create innovative models? Take for instance a not-for-profit arm of the business. In a publicly held company, pressure from investors is likely to deter the Board of Directors and top management from considering any model that does not generate profit or financial return. Such innovation is likely to happen in smaller, privately held start-up companies such as the Institute for One World Health (iOWH), which became the first nonprofit pharmaceutical company in the United States. Since its inception, iOWH has received more than $200 million from the Bill & Melinda Gates Foundation, as well as funds from other philanthropic donors.

It’s a brilliant start! But, the ‘down-side’ is that excellent initiatives such as iOWH are simply not large enough to create an impact of the size that can simultaneously benefit the lives of the two billion people who do not have access to medicines and healthcare across the world. For such large-scale benefit one needs the scale of multinational companies that have both the resources and the capability to create world-wide impact. At the moment, this circle of not-for-profit and pressure for financial return is a vicious one!

In their recent Harvard Business Review article, Michael Porter and Mark Kramer introduce the concept of “shared value” that blurs the profit/non-profit boundary. Shared value, according the article, is defined as practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.

Pharmaceutical companies like GlaxoSmithKline, Pfizer and AstraZeneca have begun tentatively pursuing an “open innovation” strategy, to share their collective pool of intellectual property, resources, and data. This is popularly known as “Open Source Drug Development” (OSDD) which opens research facilities to allow external researchers to work side by side with company scientists. This provides scientists and their institutions with access to compounds, technologies, and expertise that can help facilitate research on treatments for neglected diseases. OSDD also creates access to compound “libraries,” or collections of molecular entities, to support new and much-needed research leads. These compounds may have been cast aside by these companies for their lack of profitability.

Another important aspect in creating inexpensive medicines is transferring the technology for producing drugs and vaccines. This is one of the most innovative and sustainable ways to bridge both the research-and-development and access gaps and to increase the availability of medicines in the developing world. These transfers are at the cutting edge of business practices today. When iOWH, the not-for-profit company, did not have funds for manufacturing facilities to make and distribute a broad spectrum antibiotic that it could take through to commercialization, it partnered with a for-profit company in India, Gland Pharmaceuticals, which agreed to take on those roles for no profit, no loss. The key enabler here was that Gland Pharma is a family-run business with limited or no pressure from investors. However, a game-changer is iOWH’s semi-synthetic version of an antimalaria drug that has entered the commercial scale-up process and is on schedule to be manufactured by Sanofi-Aventis for no profit, no loss, by 2012. This would be a significant way forward for the pharmaceutical industry to emulate going forward.

Imagine the possibilities that would emerge if large pharmaceutical companies could be persuaded to consistently invest a part of their resources to create shared value. If only large companies, government bodies, NGOs, think-tanks and other players in the healthcare delivery chain put aside self-centeredness and got together to think of the larger good they could create for humanity. Now is the time for the healthcare community and the public and private sectors to come together and work together. For these efforts to be successful, it will be necessary to find tailor-made solutions to specific public health problems and to evolve our business practices and models in an effort to improve and do more. The need of the hour is for a body to work proactively to bring these players – both large and small – on a single platform to do just that.

Medicines do not have to be so expensive. That will make Ghuraan Bi and many others very happy!

2 thoughts on “Open Source Model in Healthcare Can Create Shared Value

  1. Medicines are very economical in India, even in advanced countries, even the middle class find the cost of medicines prohibitive.

    In India, the dishonest implementation of public benefit programs like free medicines at Govt. hospitals etc has landed people like Ghulam Bi in a soup.

    One of my family friends had cancer. This lady would write letters to the distribution department of anticancer drug manufacturers, attach a written request from her doctor and a copy of her prescription: she would request them for a gift of near-expiry medicines suited to her!! And she would get the same too!! This lady was not very well off, but her inventiveness was interesting!!

    India, has through DPCO and NPPA benefitted millions of patients. However, controlling medicine prices is not just enough. Ensuring free medicines through Govt. pharmacies to right target audiences should be strengthened. In this regard, the Bowring and Lady Curzon Hospitals, Shivajinagar, Bangalore is doing a great service to AIDS patients. I have seen in Mangalore and South Kanara and Udupi dists. honest distribution of drugs that has benefitted patients.

    I hope the Aadhar project of Mr. Nandan Nilekeni, Chairman UIDAI helps such needy patients.

    It is important to address the needs of the not-so-poor people but are also finding it difficult to make two ends meet, like the lower and middle middle class.

    Any way, there is no easy solution in sight. Today’s issue of Deccan Herald (20.3.2011) too talks about the issue of costly medicare….


    1. Sunil, you are right and that’s why its important to open up the sector to innovative ideas such as development of low/no cost medicines through OSDD and other such platforms. However, for this kind of tech to seep into India, the govt must appear to be friendly and not put in industry-averse measures such as FDI caps and CL enforcement. Only if tech/info rich R&D based cos are encouraged to enter/work (profitably) in India, will access to such info be available to us.


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