investing more money trying to create the medical miracles we’ll wish for when our personal forecast reads mostly cloudy with a chance of death? Fighting disease isn’t just a good investment in our health; it’s also an excellent investment in our economy. Cancer, for example, has a major impact on the American financial system. A recent study showed that some 3.3 million workers are diagnosed with cancer each year, which results in some $7.5 billion in lost productivity.
So how do we incentivize the marketplace to invest more in drug development? As with many aspects of our national fabric, your answer may reflect your political inclinations. Conservatives will look to private industry for answers, while liberals may turn to a government-sponsored solution. Independents might seek salvation in both camps, and libertarians would argue that there’s no need to incentivize anything in a free market. Let’s compare and contrast some different approaches that might serve to increase the number of valuable medicines to see where we stand.
Let’s start with the conservative angle. In our free enterprise system, people with significant financial resources seek out opportunities ordained by the Holy Trinity of capital investment: High yields, rapid returns, and low risk. Investing in early stage biopharmaceuticals is clearly a very risky business. Although it can produce substantial monetary returns (because drug patents lead to monopoly pricing), it is exceedingly difficult to come up with novel drugs that are both demonstrably safe and effective. Only about 8 percent of drugs that enter clinical trials actually wind up being approved by the FDA and marketed. Getting a “rapid return” on invested funds in this sector generally requires an acquisition or IPO event, and IPOs have been tough to come by in recent years. Maybe traditional venture capital funding, as it currently stands, is not the best vehicle for assuring the development of a steady stream of new medicines.
Other private sector options abound. Big Pharma has been investing in a variety of approaches focused on resuscitating their waning fortunes. These include funding their own investment arms as well as establishing a large number of alliances with academic research institutions. They’ve also joined forces recently to form TransCelerate Biopharma, a non-profit organization whose mission is to develop innovative solutions to clinical trial problems faced by all of their members companies. New approaches to tackling dreaded diseases are not just the realm of drug manufacturers. The University of Texas’s MD Anderson Cancer Center estimates that its Moon Shots program to reduce cancer deaths may cost upwards of $3 billion in the first 10 years. Those funds will come from “institutional earnings, philanthropy, competitive research grants and commercialization of new discoveries.” Non-profit charities and disease organizations also remain a force in the voluntary sector, including the Michael J. Fox Foundation for Parkinson’s Research and the Cystic Fibrosis Foundation (who helped pave the way for the new breakthrough CF drug ivacaftor [Kalydeco] in partnership with Vertex Pharmaceuticals).
Let’s turn to the government side of the equation. Federal funding comes from agencies such as the National Institutes of Health, the Defense Advanced Research Projects Agency, and Small Business Innovation Research grants. Most of the money that the federal government spends in this area has traditionally been focused on basic, not applied research, but an increased emphasis is now being placed on translational research programs. Make no mistake: this has been money well spent, for the data generated by the thousands of research grants funded year after year forms the solid foundation upon which most of the applied work that follows has been built. State agencies, such as the California Institute for Regenerative Medicine and the Cancer Prevention and Research Institute of Texas (currently mired in serious charges of political cronyism) have committed billions of dollars to both basic research as well as translational medicine. Traditionally, however, the government has not been the key player in drug development, which resides in the skilled hands of pharma and biotech companies.
John W. Gardner once wrote “The society which scorns excellence in plumbing as a humble activity and tolerates shoddiness in philosophy because it is an exalted activity will have neither good plumbing nor good philosophy: neither its pipes nor its theories will hold water.”
Let me recast this in the light of my current theme:
“The society which scorns investing in drug development (because it is both costly and risky) at the expense of investments in mobile phone and social media applications will produce few novel and helpful medicines: its citizens, however, may be too distracted by their electronics to care.”
So how do we go about incentivizing investments in drug discovery? I’ve suggested a few possibilities in the past, including legislation that provides special tax breaks for long-term biopharma investments as well as government funded cash prizes for cures. Others have suggested selling Biomedical Research Bonds to the public as a way of raising funds. Both the public and private sectors need to be involved in this process. With healthcare taking up an increasingly large portion of the nation’s GDP and contributing to our ever-increasing deficit, the government cannot afford to bear this burden alone. I believe a healthy dialogue between all of the interested parties, especially patient advocacy groups, is likely to come up with a wide spectrum of interesting and actionable proposals. Feel free to share an idea in the comments section below.
