The Charter of Fair Medicine
As the number of expensive pharmaceuticals increases, the health care of vulnerable and ill people in the Netherlands comes under pressure. At the moment, there are virtually no models according to which safe, effective and affordable pharmaceuticals can be produced with a transparent price structure. Fair Medicine is unique in this aspect, as it is the only foundation in the Netherlands that develops new models and reports on its activities in a transparent manner.
Society as a whole needs new strategies that result in affordable and accessible medication to a greater extent than existing models. Fair Medicine Foundation works to achieve this goal by facilitating the development of safe, effective and affordable medication.
Fair Medicine primarily chooses to work in areas where market forces are not successful. Fair Medicine uses objective reviews to evaluate whether the intended product lies within the foundation’s social objectives.
With this work method, the foundation is changing the world of pharmaceutical development by:
– Giving the patient a voice in the development process;
– Involving the treating physician and the knowledge institute in the entire process;
– Giving small- and medium-sized businesses opportunities to develop products all the way to market release, with investments that are attainable for these companies;
– Being open about costs and price structures;
– Teaching the parties above to work together in new ways;
– Involving new investors, including social impact investors, in the field of pharmaceutical development. Fair Medicine explicitly looks for investors who support the foundation’s mission.
– The foundation brings parties together to develop new medications in partnerships based on the Fair Medicine Model. To do so, they must abide by the foundation’s core values.
Fair Medicine Chain
All of the parties in the entire chain of development for a product must commit to one another and share and manage the risks in the development processes, as well as strive to a common objective: a safe, effective and affordable product.
Fair Medicine Share
The parties invest together and are transparent about the project’s efforts, investments and progress. The parties must commit to the full duration of the project. The product developed as a result of the project cannot be sold to another bidder.
Fair Medicine Price
Products must be priced at socially acceptable levels: based on the production costs, with a reasonable period to recoup the investment, costs to guarantee stable operations and a profit margin that falls within a predetermined bandwidth (Fair Medicine bases its efforts on 8-15%). The parties must be transparent about their expenses and margins.
Fair Medicine Value
All of the parties who make investments can share proportionally in the product’s profits, and can realise a socially acceptable return on their investment.
The foundation will achieve its core values in its own activities by:
- 1.Being transparent about its activities;
- 2.Transparently reporting on its expenses and income;
- 3.Publishing its work methods and model contracts.
Embedding the core values
The Fair Medicine core values listed above are non-negotiable, but they do need to be translated into concrete agreements with each new partnership. The core values are embedded in various documents, such as:
A partnership agreement, a shareholder agreement, an investment contract and the statutes of the Product B.V. (in this document, the term ‘Product B.V.’ is used to indicate the legal entity or collection of agreements between parties that ensure that the collaborative effort is guided by the Fair Medicine core values).
The Fair Medicine Foundation provides its model contracts to interested parties upon request.
Elaboration of the core values
Fair Medicine Chain
All of the parties in the entire chain of development for a product must commit to one another and share and manage the risks in the development processes, as well as strive to a common objective: an effective and transparently priced product.
The agreements described above will arrange at least the following aspects:
Background; a description of the indication and the product to be developed
Management; Fair Medicine acts as the chairperson of the project team. This allows Fair Medicine to enforce the Foundation’s core values. Management facilitates the transparent communication between the parties, and monitors the time frames and the pre-determined budgets, along with any amendments to the time frames and budgets.
Patient council. Patients act in an advisory role from the very beginning of the coalition.
Change of Control, and Lock-up/withdrawal/exit. The Product and the Product B.V. cannot be sold to a third party. This eliminates the risk of it being bought out.
In the event that the parties encounter a situation that requires the transfer of responsibilities, then they are also required to transfer the conditions of the Fair Medicine Coalition to the new party as well.
Fair Medicine Share
The parties invest together and are transparent about the project’s efforts, investments, progress and delays.
Shareholders are the parties who have committed to the success of the project. The share of each party’s participation in the development (and their resulting share in the profits) are determined in advance according to pre-determined criteria. The Foundation holds an un-dilutable share in each Product B.V., which means that important decisions cannot be made without the Foundation’s assent. These decisions include the following issues:
– amendments to the statutes
– divisions or mergers
– dissolution or liquidation of the Company
– changes to the budget and allocation of tasks to each of the Parties
– issue of new shares to existing shareholders
– Go / No Go decisions as described in the business plan and budget
Budget, planning and financing
At the start of the project, the parties draw up the most comprehensive plan possible. The parties are obliged to perform their part in the plan, and to allocate the necessary resources in a timely manner.
The development plan and development schedule will include go/no go moments, with relevant criteria upon which to base decisions. At these moments, the coalition partners will jointly evaluate whether sufficient progress has been made to justify the next phase of investment.
If the parties cannot reach an agreement, then the contract between the parties will require them to submit to binding arbitration.
Intellectual property contributed by the parties at the start of the project will remain the property of the contributing party. The value of such shall be considered an in-kind investment, and translated into a proportional share in the Project B.V.
New intellectual property will be considered shared property of the coalition parties involved in the development of the product. All of the intellectual property will remain available to the coalition, even if the contributing party leaves the coalition, in order to ensure that the development and sale of the project can proceed uninterrupted.
Fair Medicine Price
Products must be priced at socially acceptable levels, based on the production costs, with a reasonable period to recoup the investment costs to guarantee stable operations in order to ensure that the product remains available to the patients in a sustainable manner. The profit margin will be agreed upon within a predetermined bandwidth. Fair Medicine assumes that a bandwidth of 8-15% is sufficient to make it interesting for the parties to participate or invest in the Fair Medicine model. The parties must be transparent about their expenses and margins.
Manufacturing and commercialisation of the product The coalition will make agreements with the distributing party that is responsible for the production and sale of the product The price will be determined based on a cost + fair margin calculation (see above).
The costs will be reported transparently, and the price will be based on the recoupment of the costs, the investments and a socially responsible profit. The criteria and guidelines for setting prices will be determined in advance. The actual prices will be set at the moment that all of the investments and expenses are known.
Transparency: all parties must utilise a transparent cost structure. Each party must maintain a transparent administration showing the expenses that a party has incurred for the execution of the tasks delegated to that party by the Company. Once per year, each party must provide an overview of the costs incurred to the management and shareholders of the Company. An impartial party will audit the reports, and the annual figures for the Product B.V. will be published.
The price structure of the product must also be reported in a transparent manner.
Fair Medicine Value
All of the parties who make investments can share proportionally in the project’s profits, and can realise a socially acceptable return on their investment.
Other obligations and Miscellaneous
Agreements regarding publicity, confidentiality of data, etc., shall be made in consultation between the parties.
The public debate regarding a fair system for pharmaceutical care is one of the Foundation’s missions. The Foundation strives to create broad social support by supporting the successful introduction of the Fair Medicine Model, as well as the final products.