Tuesday, October 25, 2011

Paying for Tomorrow's Medical Breakthroughs

By Margaret Anderson, Executive Director, FasterCures

How are we going to pay for innovation and who will pay? Two big questions.

Let me share a few things we are doing in these areas. It used to be that in discussions about filling the R&D pipeline so that treatments and cures would magically come out the other side, the conversation would linger on the FDA as the final frontier. Now in addition to issues around regulatory hurdles, the discussions have evolved and include:

1.) whether financing will exist to even “get” things into the pipeline AND then
2.) if approved, whether patients can get reimbursed.

These are critical considerations that need attention and solutions. FasterCures and the Milken Institute held a Financial Innovations Lab in July to explore financial tools and other ground-breaking approaches that are being used to advance initiatives in medicine and other industries. The Lab spotlighted models for partnering in research and development, and identified finance instruments and incentives. A few are described below.

Fast Forward, a wholly-owned subsidiary of the National Multiple Sclerosis Society, is a venture philanthropy model that provides leveraged, philanthropic funding to translate academic research and further develop biotech research into new treatments. The technologies are identified and evaluated by scientific and business advisors. Fast Forward makes $250,000 to $1 million investments.

Israeli Life Sciences Fund uses a standard venture capital-structured fund with the government and private sector as limited partners. The Israeli government, which takes the first loss before the other limited partners, has committed $80 million to boost returns for private investors.

Flow-through shares, which originated in the Canadian resource industry, encourage higher-risk investments through tax incentives. Oil and mineral exploration companies issue these shares as a way to pass government tax deductions for exploration on to investors, effectively halving the risk of investment.

There was broad agreement that the medical research system has much to learn from financial models that have worked in other industries such as filmmaking, telecommunications, and oil and gas. But participants cautioned against simplistic analogies, noting the unique circumstances that define the medical research process. Science is unpredictable, and failure to fully vet a product has consequences that are measured in terms of life or death. More discussion will take place on a paper from this lab and the models at a breakfast session our upcoming Partnering for Cures meeting so stay tuned.

On the topic of “Who Will Pay for Tomorrow’s Breakthroughs?” we’ve organized a plenary panel at Partnering for Cures with a terrific lineup of panelists. Brook Byers of Kleiner Perkins Caufield & Byers; Ron Cohen of Accorda Therapeutics; Sir Michael Rawlins of the UK’s NICE; Ellen Sigal of Friends of Cancer Research and PCORI; and Reed Tuckson of United Health Group will all look at the role that insurance coverage decisions and insurers themselves may be playing roles that are farther upsteam in the R&D and investment process. They’ll also tackle whether patient groups can bring harmony to the marriage of comparative effectiveness and personalized medicine.

We need more discussion and most of all solutions on both the front end of financing biomedical solutions AND the back end in terms of who will pay – JOIN US!

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