Funding Open Source Drug Discovery

I’ve been speaking to many people about funding open source drug discovery. If there is no secrecy, and no patents, then Who Will Pay? It’s the obvious, central question behind the whole enterprise, particularly around Phase 3 trials. I’ve been asked this probably 20 times in the last 2 weeks of conferences and meetings.

The intellectual arguments in favor of openness are clear – openness means efficiency, inclusiveness, etc etc. It’s a done deal. But what about the money? How do you marry open source and a Big, Sustainable Financing Model?

An answer is to say “Pharma can’t do Open, so the money needs to come from the public sector. Or philanthropy.”

I guess that is true, but when I say this to people, their spark of interest is lost. This just sounds like another drain on the public purse. “These are times of austerity” people will say “where will you find the money for developing new drugs, for clinical trials.” I think people are hoping for something striking and new.

Funding for open source drug discovery will come from many places. But I am left wondering whether there are really new mechanisms we could consider. I’ve previously wondered aloud about retrospective patents and data exclusivity.

Major financing mechanisms have been proposed, such as the Health Impact Fund (“take a drug to market and you’ll be rewarded if it works, then it goes generic”) or Advance Market Commitments (“You can invest since there will be a market”) backed by large financing facilities – essentially permitting GAVI. There are more recent calls for up-front funds e.g. for antibiotics, which is mimicking what has already been achieved with the Global Fund. There are much-maligned Priority Review Vouchers (“develop a medicine for malaria and you’ll save millions developing a new drug for cancer”). There are also prizes and combinations of mechanisms.

(Notice how some of these are meant to work: governments issuing guarantees. We’ll come back to that.)

Question: What unifies these mechanisms? Answer: None has been combined with open source discovery (I think). Why? Because there have not yet been any open source projects that have taken a medicine to clinical trials. This is needed. What happens to these financial tools if you bolt on a commitment to complete transparency and no IP all the way from discovery to market?

I’ve been thinking about this hybrid:

On Day 1 of a drug discovery project you commit to open source principles, and you sell shares. People can buy these and sell them. Initially all shares could be owned by a public body, but could be sold to investors. Perhaps the entity selling the shares could be an organization with a portfolio of projects. Donations could be made, and competitive grants could be awarded, independently of such investor buy-in.

The projects run. Some fail. One hits. When the drug is successfully taken to market, the price is set at a level that ensures investors (including those who contributed key resources) get their money back. This would be achieved by legally-enforcible data exclusivity. The medicine would be made by the generics industry, but the price is initially enforced. Once the money has been recouped, the medicine goes fully generic. Everyone will know how much money needs to be recouped, because the development has been transparent.

So this is rather like the Health Impact Fund: payment for performance – in this case the period of exclusivity ends once the money has been recouped through patient use. A more successful medicine will probably have a shorter period of exclusivity. But here we have the ability to buy and sell shares, which adds the motivational aspects of the market. And with a commitment to zero secrecy.

Obviously also the period of price exclusivity could be shortened by cash donations – a zero-risk investment in global health.

I need economists to please point out the problems with this idea. I don’t know what happens, for example, if the managing organisation is valued, through shares, at $1Bn and Bill Gates gives a cash contribution to the research of $1Bn. If Gates wants money back he’d need to buy the shares, correct? Or he could just donate $1Bn and that would not affect the value of the other shares? Similarly governments could pay for the research in the usual way (“Track 1”: grant funding schemes, pooled funds) that would not need to be repaid. The repayment part (“Track 2”) is an option for people providing private funds?

Does that work?

(Notes: i) I’m posting this in advance of reading this important-but-5-year-old-book on the Health Impact Fund and other mechanisms. ii) I’m grateful for interesting preliminary conversations about this idea in the last 2 weeks with Steve Ward, Tom Higley, Steve Williams, Dave Busha and others (which is not to say they endorse))