1. The PPP Model Works Policy Implications Dr M Moran m.moran@lse.ac.uk Pharmaceutical R&D Policy Project Wellcome Trust London School of Economics October 2005

2. PPP activity in the R&D landscape PPPs now conduct three-quarters of neglected disease drug development projects* Half with multinational drug companies under a “no profit no loss” model (e.g. TB Alliance Novartis) Half on a fully paid basis with smaller companies and academics (e.g. PA-824) Based on standard attrition rates, this combined PPP portfolio would be expected to yield 6-7 new neglected disease drugs by 2010 * Independent small company activity not fully captured

3. The role of PPPs They integrate the development process across multiple partners and/or subcontractors As PPPs mature, they function as a portfolio manager, selecting and de-selecting projects across the R&D spectrum from drug discovery to clinical trials They act as a fund manager or resource allocator, channelling philanthropic and public funds to the “right” kind of projects from a public health perspective

4. PPPs: a resource allocator

5. Performance Metrics Good public policies should encourage approaches that deliver optimal public health outcomes and maximum cost-efficiency on public investment : health value for developing country patients level of innovation capacity (ability to make drugs) development times cost and cost-efficiency We therefore measured the R&D performance of industry, industry- public partnerships and public groups against the following metrics:

6. PPPs deliver “higher health value” products than industry working alone Industry-alone 12 of the 13 neglected disease products under the industry-alone model had a low overall health value to developing country patients e.g. rifapentin, rifabutin, PAS reformulation for TB Partnered 3 of these 8 “partnered” products contributed significantly to reducing global health burdens halved the global burden of onchocerciasis between 1990 and 2000 (ivermectin) eradicated schistosomiasis in major parts of the world (praziquantel) introduced the first suitable new paediatric anti-malarial for decades (Coartem)

7. Level of innovation - Industry -Industry working alone (the pre-2000 model) had very low levels of breakthrough innovations, tending to focus on label extensions, reformulations and re-registrations of existing products - Industry working towards a partnered model (post-2000) have dramatically higher levels of innovation Chart 2 Drugs developed by Industry alone (with view to partnering) – end 2004 (16 projects) Chart 1 Drugs developed by Industry alone 1975-1999 (13 projects)

8. Level of innovation - PPPs Chart 3 Drugs in development by PPPs – end 2004 (47 projects) Nearly half of PPP projects (49%) are breakthrough R&D This is expected to increase once “low hanging fruits” are captured since PPPs increasingly focus on novel early-stage compounds to supply their pipelines

9. Development timelines PPPs Industry

10. Development Cost

11. Correlates of R&D Success 0 %  A focus on neglected disease drug development for developing countries over all other considerations  Industry involvement from an early stage  Public involvement from an early stage  Appropriate use of the respective skills of the public and industry partners  Management and scientific staff with industrial drug-making experience  Adequate funding  Larger portfolios PPPs most closely match this framework (but not entirely!)

12. Funding constraints are choking off this rapid- growth sector Only 4 OECD countries contribute to drug development PPPs –US, UK, Netherlands, Switzerland –EC minimal (<1%) Total government contributions for all PPP projects since 2000 is $43 million There are NO incentives to support industry PPP involvement - Currently over 30 drug projects

13. Financial PPP projections vs funding pledges PPP shortfall for 2005 is around 40% PPPs respond with inefficiencies by: –Limiting the number of projects –Slowing down R&D –Delaying industry contracts –Pressuring industry for discounts/in-kind

14. PRPP Proposals Based on these findings, we have developed several policy recommendations Our key recommendation is for an Industry R&D Facilitation Fund (IRFF) to support industry involvement in PPPs and improve the efficiency of PPP performance

15. PPPs MNCsCROsSMEs The IRFF is a public cash fund to subsidise industry input to PPPs How it works: 1.PPPs contract industry deals as they do now (2/3 of their current R&D spending) 2.The IRFF subsequently partially tops up PPPs for these industry payments (80%?) IRFF PPPs Industry R&D Facilitation Fund (IRFF)

16. IRFF: Advantages PPPs IRFF CROsMNCsSMEs IRFF DC MNCs SMEs CROs Academic Translation Increased cash flow allows PPPs to –Contract more industry deals –… at commercially competitive prices and without delays (SMEs/ CROs) –Be more viable long-term company partners Greater industry input improves PPP outcomes (a correlate of success) A stronger and more efficient R&D framework based on best practice

17. Improved efficiency of funding:  The best performers are the highest users  Funds are allocated in exactly the right amount at the right time across all neglected disease PPP projects (>40 projects) Public risk and “pick the winner” are reduced:  Industry/health experts in PPPs select projects and partners rather than governments  Risk is spread across total ND portfolio Minimum new infrastructure is needed (VC host?) Highly cost-effective (efficient model; efficient funding mechanism) IRFF: advantages

18. Average <$140 million per year until 2010 Total ten year spend to 2015 is 1.3 to 1.9 billion (less than $200 million/year) with costs flattening out as portfolios mature Less than $7 million per year per OECD country to subsidise industry input into all PPP neglected disease drug projects to 2015 The cost of the IRFF

19. Governments should preferentially fund industry-public partnered approaches if they want to maximise health impact and value-for-money The IRFF offers governments a simple, effective mechanism to achieve these goals Conclusions

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