Monday, May 24, 2010

Global Health’s Push-Pull Financing

By Loren Becker, Global Health Program Analyst, FasterCures

What would you do if you made something no one can afford but can’t live without? Biotech companies working on developing drugs for diseases of poverty face this daunting question every day. Pursuing an idea that could potentially save millions of lives from malaria, tuberculosis or other neglected diseases requires a substantial financial investment with little to no financial returns. This was at the heart of an innovative financing discussions at the Partnering for Global Health Forum and the Rethinking Financing for Global Health panel at the Milken Institute Global Conference.

According to experts on these panels, this challenge could be addressed through push or pull mechanisms
  • “Push mechanisms” incentivize investments by subsidizing (or directly paying) biotechs to conduct R&D through product development partnerships, tax credits, and grants. These offer the least risky scenario for biotechs, but are costly for donors and require them to take on the full risk of failure.
  • “Pull mechanisms” create a guaranteed market, for example, or increase the value of a more marketable product. These typically require companies to take on more risk at the onset but also provide a financial reward for success when a product is approved and reaches the market. If the reward is priced high enough, investors might see the up-front investment as being more worthwhile. For cash-strapped biotechs, one solution might be to establish interim rewards, granted for reaching specific milestones in the development process (i.e., completion of a Phase 2 trial). Panelists at the Forum suggested that such a system might increase the willingness of companies to shoulder some of the burden.
Whether any of the solutions discussed proves to be effective at stimulating increased R&D investment for global health remains to be seen. A pilot donor commitment to purchase a pneumococcal vaccine adapted for the developing world has shown success at enticing multinational pharmaceutical companies to invest in R&D. However, biotech pipelines and decision trees look different, so it is unclear how this success will translate into this sector.

What is clear is that this kind of constructive and creative thinking is vital to curing diseases of the developing world.

Related Links:

No comments: