Innovative Approaches to Pharmaceutical Innovation: Alternative R&D Mechanisms

by Adriana Lee Benedict

Earlier this year, the World Health Organization’s Consultative Expert Working Group on Research and Development: Financing and Coordination (CEWG) issued a report calling for, inter alia, increased support for innovative pharmaceutical R&D funding mechanisms.  Although lack of financing has posed a challenge to implementation of alternative approaches to R&D, the increasing pace of pharmaceutical innovation has certainly spurred significant innovation in this realm.  These approaches can be broadly categorized into “push” and “pull” incentive mechanisms.

“Pull” mechanisms–such as advance market commitments, prize funds, and expedited regulatory review—reward R&D outcomes by facilitating translation of innovation to marketable products.  Several “pull” mechanisms have yet to be tested.  For instance, pay-for-performance mechanisms, such as those contemplated by the proposed Health Impact Fund, would use government and donor financing pay for performance in lieu of normal profits gained from market exclusivity.  Other untested ideas include patent buy-outs, transferable IP rights and market exclusivity, reduction of patent length, and “optimal hedging to smooth public health expenditures”.

“Push” mechanisms, on the other hand, fund R&D at earlier stages. Patent pools, for instance, bring patents into a collectively owned and managed pool that can issue voluntary licenses to generic companies for product development. Other “push” mechanisms that have seen some success include targeted disease-specific funding, health innovation networks for the “Global South”, capacity-building and technology transfer initiatives, open-source and crowd-sourced R&D for neglected and rare diseases, and private-public product development partnerships.  “Push” mechanisms that have been proposed but not yet tested include taxes on patents; proportional, tiered or stage-specific partial prizes; and making undisclosed clinical trial data an international public good. Innovative financial proposals that de-link R&D investment from profits include linking donor funding to technology transfer commitments, cost sharing for clinical trials, for-profit investment partnerships, neglected disease and global health tax credits, and additional fees on patent applications (called “Green IP”).

For all of these mechanisms, a major challenge is to achieve implementation and demonstrable success at a large enough scale to attract international financing.  At the same time, this presents an opportunity for those mechanisms which are inherently scalable, such as open-source/crowd-sourced R&D.  Such systems expand, for instance, when a researcher contributes to a repository in order to access a needed data set.  Particularly in the earlier stages of drug discovery, this encourages collaboration, reduces costs, and therefore speeds up the pace of innovation.  However, open-source/crowd-sourced R&D systems have only been undertaken for a handful of R&D needs, such as neglected and rare diseases.  How might these efforts be scaled?

A recent NPR report highlights the way in which drug companies and medical researchers are using cloud computing to save time and money in their R&D efforts.  According to the report, a 21-million chemical compound screening required 50,000 laptops and cost under $15,000.  Certainly, this kind of cloud computing is many steps removed from the open-source/crowd-sourced R&D models currently in place for neglected and rare diseases.  But perhaps there is room for these R&D approaches to sustainably interact.  For instance, one can imagine a system in which data which would not otherwise be open-source is kept on the cloud, researchers pay to rent the cloud computers, and then based on the cloud’s output, only pay licensing or other fees to owners of those data sets which yielded useful results.  “Pull” mechanism?  “Push” mechanism?  Unclear, but as a highly efficient approach to R&D investment, certainly the kind of innovative approach to R&D ripe for additional financing contemplated by the CEWG.

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Adriana Lee Benedict was a Student Fellow during the 2012-2013 academic year. At the time, she was a second-year student at Harvard Law School interested in promoting access to medicines and biomedical research. She graduated from Harvard College with a concentration in History and Science, a secondary concentration in government, and a certificate in Mind/Brain/Behavior, and subsequently completed a Master of Science in the Department of Global Health and Population at the Harvard School of Public Health. Adriana pursued health and human rights work in Kenya, Tanzania, India, Peru and Colombia, and is was the co-chair of the Harvard chapter of the Universities Allied for Essential Medicines. Adriana’s research interests lie at the intersection of intellectual property and health law, public interest protections in international trade regimes, pharmaceutical research and licensing, and the international right to health. As a Student Fellow, Adriana analyzed regulatory implementation of the NIH Public Access Policy alongside an evaluation of alternative approaches to pharmaceutical R&D, with a special consideration of the impact of international trade and investment agreements on domestic R&D policies.

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