|
Memorandum submitted by The George Institute for International Health, London Unit 1. Summary
1.1 The UK Government has pledged its commitment to the UN Millennium Goal to increase access to essential medicines for poor people in developing countries; all part of the overarching strategy to reduce global poverty[1] [2]. A significant part of the access problem is a desperate shortage of new drugs for diseases endemic in developing countries. The G8 acknowledged this in 2005, committing to "increasing direct investment... through such mechanisms as Public Private Partnerships... to encourage the development of ... drugs for AIDS, malaria, TB and other neglected diseases[3]."
1.2 Until the Millennium there was a paucity of Research and Development (R&D) into new drugs for neglected diseases by both the private and public sector. Since 2000, the advent of Public Private Partnerships (PPPs), predominantly supported by philanthropic organisations, have rapidly established a new landscape for neglected disease R&D, with 3 new drugs registered since 2000 and 8 - 9 more drug registrations for neglected diseases expected by 2010. These partnerships however are at great risk of failure due to a lack of public funds. New government policies are needed to support the work of PPPs, and ensure much needed drugs become available.
1.3 This submission is a summary of research conducted in 2005 by the Pharmaceutical Research Policy Project (PRPP) based at the London School of Economics[4] sponsored by the Welcome Trust. It focuses on how private sector pharmaceutical companies through PPPs, in developing and developed countries, are engaging in R&D for neglected diseases.
1.4 This document examines: - The importance of addressing ill health as part of a poverty alleviation strategy; - The current R&D landscape and the post-Millennium evolution of the field with the advent of Public Private Partnerships focussing on neglected diseases; - The role of private sector pharmaceutical companies in developed and developing countries in developing new drugs for neglected diseases; - The merits and shortfalls of PPPs as a mechanism for drug development; - And recommends possible financing and policy considerations for Government that are vital to ensure MDG commitments are honoured.
2. Recommendations for action by the Government
2.1 We recommend that the UK Government amend its perspective and policy practice to reflect the changed role of the pharmaceutical industry in neglected disease drug R&D since 2000, in particular by:
2.1.1 Recognising the new industry business model of neglected disease drug R&D, under which companies participate via Public-Private Partnerships (PPPs);
2.1.2 Encouraging further involvement by the private sector (in both developing and developed countries) in neglected disease R&D with PPPs, through the set up of the Industry R&D Facilitation Fund, a mechanism designed to finance industry input into PPPs. ;
2.1.3 Encouraging other donor governments to understand and support neglected disease drug development PPPs.
3 Organisation submitting evidence
3.1 The Pharmaceutical R&D Policy Project's (PRPP) remit is to develop new pharmaceutical R&D policy tools that could be implemented by Western governments and donors. It is an independent policy unit, set up in May 2004 at the London School of Economics. The project is initially sponsored by the Wellcome Trust and subsequently by the Global Forum for Health Research through contributions from the World Bank. In January 2006, the PRPP transferred to The George Institute for International Health, affiliated with Sydney University, while continuing to maintain a London office.
4 Supporting factual information
4.1 Evidence in this submission is drawn from the research report, The New Landscape of Neglected Disease Drug Development, produced by the Pharmaceutical R&D Policy Project, London School of Economics, September 2005. A copy of this report is included with this memorandum for reference and can also be downloaded at: http://www.thegeorgeinstitute.org/shadomx/apps/fms/fmsdownload.cfm?file_uuid=8106F17F-DB8D-D70E-90F7-B3FB8FB0F0E4&siteName=iih 5. What can the private sector do to alleviate poverty?
Ill health is a major cause of poverty
5.1 Both the scale of the global health divide and the intrinsic links between ill health and poverty are well documented. In 2001, the Commission on Macroeconomics and Health, created by the World Health Organization (WHO) demonstrated that good population health was a critical input into poverty reduction and economic growth. In sub-Saharan Africa for example the total cost of malaria is estimated to be nearly 17.4 per cent of GNP[5].
5.2 Reducing the burden of these communicable diseases is complex, involving improvements to water quality, education and infrastructure, as well as the longer-term development of preventative vaccines. However, during the decades needed to achieve these goals, reducing the disease burden will crucially rely on access to effective and affordable curative treatments for those who are infected now. We note that this means hundreds of millions of malaria and TB cases each year, which - human suffering aside - greatly reduce the economic productivity of those affected.
5.3 A further complexity in addressing this current and ongoing disease burden is the emergence and growing dominance of drug resistant strains, diminishing the efficacy of front line treatments for neglected diseases - TB, malaria, pneumonia, diarrhoea, cholera, HIV, gonorrhoea, and other sexually transmitted infections. Chloroquine, previously the first-line treatment for malaria, is now ineffective in 80 of the 92 countries where malaria is endemic[6].
5.4 The impact of effective and affordable treatment, particularly on eradicable diseases, is clear. For example, within 10 years the introduction of a new treatment for onchocerciasis has halved the global disease burden; and a new treatment eradicated schistosomiasis from major parts of the world (including China and Brazil).
5.5 It is here that the private sector role is crucial. R&D of new drugs still remains largely the preserve of Western pharmaceutical companies although companies based in developing countries are playing an increasing part. Without private sector input and assistance, it is unlikely that new neglected disease drugs are delivered that will address the needs of the world's poor and successfully manage and overcome drug resistance in the developing world.
5.6 The remainder of this paper examines how the private sector can and does engage in this area, and what donors need to do to support these companies. 6. The neglected disease drug R&D landscape before 2000: a general disengagement from the pharmaceutical industry
6.1 Until very recently, there has been a failure of investment by governments and the pharmaceutical industry in R&D for new drugs to address diseases affecting developing countries (neglected diseases[7]). In 1990, The Global Forum for Health Research estimated that only 10 per cent of R&D spending was directed at the health problems of 90 per cent of the world's population[8]. This disequilibrium became known as the "10/90 gap"; a gap that still persists despite increased investment by both the public and private sectors.
6.2 Investment has been limited in part due to widely held misconceptions which have for decades pervaded government policy and incentives. Policy has been based on the premise that public groups and academics would work "upstream" to develop promising new drug leads, while the pharmaceutical industry would conduct the "downstream" development of trialling these drug leads in developing countries, followed by large-scale manufacture and distribution.
6.3 The expense, high liability and complex logistics of downstream development have meant that pharmaceutical companies have been extremely reluctant to undertake neglected disease drug development. Before 2000, many companies left the infectious disease field and others adapted by substantially downsizing their neglected disease research and by focussing on cheaper, easier (but far less valuable from a health perspective) low-innovation products, such as reformulations of existing drugs. For instance, of the 1393 new chemical entities marketed between 1975 and 1999 [9], only 17 were for neglected diseases [10]; with the overwhelming majority being lower innovation products (new formulations or uses of existing drugs) rather than much needed "breakthrough" therapies aimed at overcoming growing parasite and microbial resistance.
6.4 Policy-makers have responded to this problem by focussing their thinking on the very considerable financial incentives needed to encourage private sector back into "downstream" investment. However, our research shows that a far more productive approach - from both the financial and health perspective - is instead to support a new industry business model that has appeared since 2000, and which allows companies to re-engage in neglected disease drug R&D at far lower cost and risk. This model is Public Private Partnerships.
7. Public Private Partnerships - the new model of private sector engagement in neglected disease R&D
7.1 Since 2000, the landscape has radically altered. Eight or nine new drugs are now expected by 2010 (at standard attrition rates). Over 60 neglected disease drug development projects are underway, including 20 products currently in the later stages of development - clinical trials and/or registration. The four drug development PPPs[11], which were all created around 2000, and the quasi-PPP WHO/TDR (the WHO drug development arm) , are together responsible for three-quarters of this activity. Figure 1. The number of drug R&D projects carried out by drug development PPPs since their creation*
7.2 PPPs have succeeded where traditional incentives have failed. They have managed to attract drug companies back into the neglected disease field by allowing them to participate in neglected disease R&D at far lower cost and risk than the traditional "do-it alone" approach. GSK, Novartis, Sanofi-Aventis are all examples of companies that are currently carrying out R&D within partnership agreements.
7.3 Under this new model, multinational drug companies have increasingly moved their neglected disease activities upstream to focus on cheaper, high innovation early-pipeline R&D i.e. drug discovery. In turn, the PPP partner provides the bulk of the neglected disease expertise, networks and funds needed to trial these drug leads at developing country sites. Once successfully trialled, the company can manufacture and distribute the resulting drugs at cost price (a crucial point for final affordability), since it has not had to bear the costs and risks of the full drug development process and, in particular, of clinical trials.
7.4 This new model has delivered major breakthroughs:
7.4.1 Company activity and innovation in drug development have increased dramatically. Eight multinationals now conduct over 30 neglected disease drug development projects (commonly in partnerships), with 63 per cent of these projects being "breakthrough" drugs aimed at new disease areas or overcoming growing parasite and microbial resistance.
7.4.2 PPPs are also using the model to effectively develop academic leads or shelved compounds that companies are not commercially interested in, for example by contracting out R&D to small companies, or by putting together consortia of development partners (industry contractors, academics and developing country manufacturers).
7.5 We also wish to highlight the potential role that PPPs can play in encouraging small company involvement in neglected disease R&D. Small firms involved with PPPs are universally driven by commercial motivations i.e. by the expectation of shorter-term profit. Some see neglected disease markets themselves, particularly larger markets such as Malaria and TB, as sufficiently attractive to warrant investment, and the help of PPPs in the form of funding and technical support in the clinical phases lowers the barriers to entry to these markets. For example Zentaris, a small German company, recently developed a new drug for leishmaniasis with the help of WHO/TDR.
7.6 A second - and potentially much larger - category is that of small firms who engage into 'add-on' neglected disease R&D if they receive full funding for it from PPPs, and if the research also supports their primary Western commercial focus. For instance, these firms may use neglected disease R&D to expand their information on core commercial compounds, or to establish proof-of-concept for a technology that can then be transferred to commercial markets. We note that in the absence of PPP support and funding, many of these small companies will not pursue an overlapping potential neglected disease drug. PPPs can also provide "enabling funding", supporting the creation of small companies with platform technologies or drug candidates that can have an impact in both the Western world and developing countries. An example of this is the US-based firm Amyris, which was able to start as a company thanks to funding from the Gates foundation through the PPP institute for One World Health. Under its funding agreement it is working on establishing a proof of concept for its drug biosynthesis technology, which will have great commercial potential, for a malaria drug.
7.7 The catalytic role that PPPs play in facilitating industry neglected disease drug development is witnessed by analysis of their funding streams. Two-thirds of PPP R&D funds now go directly to drug companies (almost equally divided between large and small firms). Figure 2. The distribution of PPP funds
8 PPPs work for companies, but are they good for public health and finances?
8.1 A recent submission by the Biomedical Industry Advisory Group (BIAG) and the International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) noted: "Industry supports PPPs for neglected diseases because they link up most relevant skills and capacities of different players and there is a clear division of labour between public and private sectors. Governments might consider fiscal incentives to encourage a larger number of companies to collaborate with [these] PPPs[12]."
8.2 These views on comparative advantage are substantiated by our research, which shows that PPPs outperform either industry working alone or public working alone in neglected disease R&D. In other words - and perhaps unsurprisingly - neglected disease drug development requires both neglected disease knowledge (a public strength) and drug development expertise (a private strength). Either alone is a recipe for lower productivity.
8.3
Health value for developing country patients
8.4 38 per cent (3 of 8) of products developed by industry-public partnerships between 1975 and 2004 have contributed significantly to reducing global health burdens (i.e. Ivermectin halved the global burden of onchocerciasis between 1990 and 2000). In contrast, only 8 per cent (1 of 13) of neglected disease drugs developed by industry-alone had high health value to developing country patients.
Levels of breakthrough innovation
8.5 The share of innovative products developed by industry before 2000 (previously 8 per cent of finished products) has increased to 63 per cent in the current R&D project portfolio carried out under the new "partnered" approach; while nearly half of all PPP projects (49 per cent) are breakthrough drugs aimed at overcoming growing parasite and microbial resistance.
Drug development timelines
8.6 Overall, PPP R&D timelines match or exceed industry standards for development of commercial New Chemical Entities (NCEs) and are substantially faster than industry NCE timelines for neglected disease projects (only a small number of products). The exception is WHO/TDR, which has significantly slower timelines than other partnered approaches.
Costs
8.7 The PPP approach is significantly more cost effective than industry-alone approaches for many reasons, including elimination of costs of capital (estimated to double R&D costs) and the ability to leverage in-kind inputs from industry and public groups. However, even with no in-kind component, PPP costs are low. For example, development of new Fixed Dose Combinations is in the range of $20 million; while MMV's malaria drug, synthetic peroxide, has cost $11.5 million from the laboratory through drug discovery and preclinical and into Phase I trials.
9. The pharmaceutical industry's direct role in developing countriesDeveloping country pharmaceutical firms and the new R&D landscape
9.1 Research has highlighted nearly one-quarter of the documented PPP neglected disease projects involved developing country firms as either the main or subsidiary partner.
9.2 Most developing country pharmaceutical companies are not R&D-based, instead focusing on large-scale manufacture and distribution of generic versions of existing drugs for both national and international markets. As a result, many have a comparative advantage in drug production at the end of the pipeline; the ability to offer low-cost scale-up and good manufacturing practices; and the ability to distribute in disease endemic countries.
9.3 This skills base means that, within PPP projects, developing country firms generally play the role of manufacturing and distribution partner for a small company or PPP lead, in the same way that multinational companies act as end-pipeline partners for small companies in Western markets.
9.4 However, developing country industry activity is now beginning to change, both generally and within PPP projects. Several large developing country companies are now moving into R&D either alone or in partnerships with Western multinationals (eg Lupin and Ranbaxy in India). PPPs are accelerating this process by facilitating technology transfer to these firms, giving them an opportunity to learn, and providing them support with the clinical stages and regulatory process.
9.5 In four of the ten PPP projects listed in Figure 3 below, the developing country firm is the main industry partner and is participating in clinical development as well as manufacture and/or distribution. For instance, MMV paid a Western Contract Research Organisation to support the Indian pharmaceutical firm Ranbaxy as part of one of its R&D projects for malaria, as it was the first time Ranbaxy was involved in the clinical development of a new chemical entity. That same PPP facilitated as part of another project a joint-venture between an Italian pharmaceutical company, Sigma Tau, which was looking for an entry to the Chinese market, and a Chinese pharmaceutical company, Holleykin Pharmaceutical. As a result, Sigma Tau and Holleykin jointly managed the Controls, Manufacturing and Chemistry aspects of the drug development process and Holleykin upgraded its manufacturing process to meet Western regulatory requirements.
Figure 3. Activity of developing country firms in PPP R&D projects
10. The funding shortfall of PPPs
10.1 Despite their central role in stimulating and facilitating neglected disease R&D, particularly company R&D, PPPs receive very limited public support. There are no public policies in place to specifically encourage or reward industry participation in PPPs. Public policy is solely founded on principles based on old understandings which focus on large incentives that seek to make neglected disease markets more commercially attractive and bring companies into the end-pipeline, where they are less skilled (at least for neglected diseases) and do not want to go.
10.2 As a result, PPPs are currently substantially under-funded. Our research showed that as of March 2005 there was a 40 per cent funding shortfall, in part due to a deficit of public funds: 80 per cent of PPPs' total funding came from grants from philanthropic organisations with OECD governments collectively providing only 16 per cent.
Figure 4. PPP funding sources and forward projections of guaranteed funding streams and budget needs as of March 2005
10.3 In 2005, the G8 committed to "increasing direct investment and taking forward work on market incentives, as a complement to basic research, through such mechanisms as PPPs and APCs to encourage the development of ... drugs for AIDS, malaria, TB and other neglected diseases." The Government's recent financial pledges to PPPs are a welcome statement of its intent to honour the G8 commitment. However, the efforts of the UK Government need to be augmented and consolidated by other G8 members as a matter of urgency; otherwise the sterling progress being made by PPPs to develop new drugs for neglected diseases will fail.
11. What aid instruments can be used by donors to encourage PSD?
11.1 Drug development often spans more than a decade and requires considerable logistical and financial planning. Without guaranteed funding streams at least in the medium term, planning is difficult and can lead to delays in drug development, a constrained ability to take up new projects, and reluctance by private sector partners to engage into collaborative R&D with PPPs.
11.2 On the basis of our research findings, it is recommended policy makers establish secure funding streams that are specifically aimed at supporting industry neglected disease drug R&D within PPPs, to ensure their sterling work is continued and the drugs urgently needed to alleviate the health burden of developing countries are delivered.
11.3 One simple, cost-effective mechanism to achieve this is the proposed Industry R&D Facilitation Fund (IRFF).
Industry R&D Facilitation Fund (IRFF)
11.4 It is recommended that a new public fund is established, an Industry R&D Facilitation Fund (IRFF), which would be a long-term single central mechanism to subsidise industry input across all neglected disease drug development PPPs. The proposed IRFF is a simple, cost-effective financing facility already endorsed by all PPPs and recommended for further consideration and development by Industry.
11.5 The benefits of a centralised fund are manifold. For donors, the principal benefits include:
11.5.1 Minimising risk and simplifying policy choices - the IRFF would provide a single mechanism to fund a global portfolio of R&D projects, eliminating the responsibility on governments of having to "pick winners" and spreading the risk of investment across projects;
11.5.2 Maximising value for money, by financing and thereby further encouraging Industry involvement with PPPs - the most cost-efficient R&D approach - PPPs are strengthened and neglected disease drug development is optimised;
11.5.3 Providing a single central point of information on global neglected disease drug R&D funding by company, organisation and disease - a recommendation of the DFID 2005 review of MMV.
11.6 It is estimated, based on the combined budget forecasts of current PPPs, that $200 million per annum is needed to finance Industry's vital input into the current portfolio of PPP neglected disease R&D projects, and ensure delivery over the next ten years of current drugs in the development pipeline. This represents an average cost of only $7 million per annum per OECD country to facilitate the development of much needed new drugs for patients in developing countries who desperately need them.
11.7 PPPs are a critical catalyst of private sector engagement in neglected disease drug R&D and provide a proven optimal package for ensuring much needed new drugs are developed quickly and efficiently. It is important that the G8 commitments are not reneged on. The UK Government must seize the initiative and catalyse discussions with OECD partners about possible financing mechanisms to ensure the good work of industry for neglected diseases, catalysed PPPs is further encouraged. The IRFF is one such possible mechanism.
11.8 A copy of our report elaborating on the research findings mentioned above and detailing further the potential of the Industry R&D Facilitation Fund is attached to this memorandum, or can be downloaded at: http://www.thegeorgeinstitute.org/shadomx/apps/fms/fmsdownload.cfm?file_uuid=8106F17F-DB8D-D70E-90F7-B3FB8FB0F0E4&siteName=iih
April 2006
[1] WHO (2005), Health and the Millennium Development Goals, http://www.who.int/mdg/publications/MDG_Report_08_2005.pdf, p28. [2] DFID, DoH, DTI, Increasing people's access to essential medicines in developing countries: a framework for good practice in the pharmaceutical industry, A UK Government policy paper, March 2005, p1. [3]UK Government (2005), The Commission for Africa Report vs. the Gleneagles Communiqué on Africa http://www.number-10.gov.uk/files/pdf/g8-vs-cfa-final.pdf [4] Since completion of this study in September 2005, the PRPP is now based at the George Institute for International Health affiliated to the University of Sydney, Australia. [5] World Health Organization (2001), Macroeconomics and health: investing in health for economic development. Report of the commission on macroeconomics and health, Geneva: WHO. [6] Oxfam Briefing Paper on Pfizer (2001), Formula for Fairness: patient rights before patent rights, Oxfam. [7] The ten neglected diseases listed by the World Health Organization Special Programme for Research and Training in Tropical Diseases (WHO/TDR) are leishmaniasis, schistosomiasis, onchocerciasis, lymphatic filariasis, Chagas disease, malaria, leprosy, African trypanosomiasis, tuberculosis and dengue. [8] Global Forum for Health Research (1999), "The 10/90 Report on Health Research."Geneva: Global Forum for Health Research. [9] Trouiller P et al. (2002), Drug development for neglected diseases: a deficient market and a public-health policy failure, Lancet, 359: 2188-94. [10] These include four drugs for TB and 13 for other neglected diseases. [11]The four PPPs are: Medicines for Malaria Ventures (MMV), created in 1999; Institute for OneWorld Health (iOWH), created in 2000; The TB Alliance, created in 2000, Drugs for Neglected Diseases Initiative (DNDi), created in 2003. [12] IFPMA, Submissions by BIAG and IFPMA to the WHO Commission on Intellectual Property Rights and Innovation in Health, May 2005. |