Large companies are very good at solving extremely complex problems in a globally optimal way.

The bottom half of humanity is living in severe poverty; not all of them are malnourished or severely deprived now, but they are extremely vulnerable to even small upsets in their income or in the prices they face of basic necessities, and when something like this happens, they can be thrown off kilter in terms of a disease of a family member or a change in food prices; anything like that can throw them into destitution.

Think of US slavery in 1850, or the subjection of women. Both of these injustices could have been - and were! - defended by pointing out, quite correctly, that this situation of slaves and women had been improving throughout the preceding century. Slaves, in particular, were worked less hard, beaten and raped less frequently, better fed, and less often ripped apart from their families. So would a celebration of moral progress have been appropriate in 1850? Surely not. Slavery could have been and should have been abolished - then, if not before.

It is irrational to charge high prices for socially valuable innovations as this guarantees that they will be underutilized. It is much better to sell them at cost and then to reward the innovator in some other way. This is not always possible, because in some cases the value of an innovation is in the eye of the beholder; it's very difficult to value how much a new Madonna song is worth, for example. But in the case of medicines, green technologies and seeds in agriculture, such an alternative reward mechanism is fairly straightforward.

Large companies are very good at solving extremely complex problems in a globally optimal way.

Given the total income and wealth available in the world today, we could easily overcome poverty, which would require raising the share of the bottom half from three to roughly five percent. Unfortunately, the trend is going in the opposite direction.

You can think of the Health Impact Fund as a mechanism that would keep the benefits and burdens of pharmaceutical innovation for the affluent roughly as they are while massively reducing the burdens presently imposed upon the poor. This sounds like magic. But it really works because the current system is not Pareto efficient. It's a system that generates hundreds of billions of dollars in litigation costs and deadweight losses that HIF-registered medicines would sidestep. By avoiding these losses, the HIF reform can bring improvements all around - including for pharmaceutical innovators.