Healthy Skepticism Library item: 9073

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Publication type: news

Goozner M.
The Future of Non-Profit Drug Development
GoozNews 2007 Mar 23
http://gooznews.com/?p=699

Notes:

Transcript of talk presented on 23 March 2007 to the European Association of Hospital Pharmacists.

Full text:

My topic this morning is the bright future of non-profit drug development. I’ve taken the liberty of adding the word “bright” to my talk’s listed title because there is a non-profit drug development industry struggling to emerge that holds out great promise of making significant medical advances in the years ahead. But before I get to my predictions for the future, I first must describe where we are in the history of drug development, and why I think present trends will inexorably push many drug developers – especially those concerned with making a significant contribution to the health and wellbeing of mankind – in the direction of the non-profit model.

Also, please accept my apologies for my U.S.-centric view of the world. I have been studying and writing about the pharmaceutical industry for almost a decade now as a U.S.-based journalist interested in trends within the U.S. pharmaceutical industry. For purposes of this discussion, I think that focus works well because it is trends within the U.S. pharmaceutical industry and the U.S. pharmaceutical market that have driven the industry into its current predicament.

And make no mistake about it. The industry is in a predicament. Despite large and rising investments by both the public and private sectors in biomedical research and development, the output of new therapeutics from the global pharmaceutical industry is at a low ebb. This situation defies conventional economic models. Greater investment in research and development is supposed to result in a rising level of innovation in an industry. The drug industry’s situation – rising R&D expenditures, but declining output of new therapeutics – cries out for explanation, which I will seek to provide.

But first let me tell you a little story about how I got involved in studying pharmaceutical innovation because I think it sheds some light on the industry’s current situation. About a decade ago, the U.S. began a debate about how to modernize its senior citizen Medicare program, which is the one universal health insurance system the U.S. has. The discussion about modernizing Medicare at that time boiled down to a single question: Should we add a prescription drug benefit? When President Lyndon Johnson signed the program into law in 1965, it did not include coverage of prescription drugs. At that time, drugs were seen as a relatively minor cost of health care. But in the intervening decades, drugs became a much more significant part of treating and managing disease, especially those that hit us later in life. Moreover, as each new generation of drugs came along for treating the chronic ailments of aging: high blood pressure, acid indigestion, arthritic pain, high blood pressure and the like, industry charged a substantial premium over the cost of the older, generic drugs that physicians previously used to treat those ailments. And those increased costs were being felt directly by the nation’s elderly population. Clearly, if Medicare was going to meet the needs of retirees in the 21st century, it was going to have to cover drugs.

So a debate ensued over the best way to shape the program. Social liberals in the U.S. Congress believed that if the seniors drug program was going to be affordable for the government and taxpayers, it needed to establish formularies that controlled which drugs would be covered. Also, the government needed to negotiate prices with manufacturers of the drugs that it put on the formulary to hold down costs.

The pharmaceutical industry, represented in the U.S. by the Pharmaceutical Research and Manufacturers Association, reacted with a massive lobbying and public relations campaign against the proposed benefit. They argued that a government program with strict formularies and negotiated prices amounted to a form of price controls that would reduce industry revenue. And if you reduced industry revenue, they argued, it would reduce industry investment in research and development, which was the lifeblood of pharmaceutical innovation. In other words, without high prices, there would be no new drugs for the people who are clamoring for cures for cancer, Alzheimer’s disease, Type II diabetes and other disorders of an aging society.

As I listened to these arguments, I was struck by how different the pharmaceutical industry’s argument was from the other industries that I had encountered over the course of two decades as a business reporter. I had traveled from the U.S. industrial Midwest to Silicon Valley to Japan and New York. I had reported on a half dozen different industries. I had attended dozens upon dozens of corporate meetings. In each context, on whatever continent, corporate executives always told the same story. If they didn’t develop new products and more efficient processes, their firms would lose ground in the race to stay competitive in an increasingly global market. If they didn’t invest heavily in R&D, these executives said, their products would be less innovative, and their prices higher than the competition. Ultimately, they said, a failure to invest heavily in R&D means their firms would die.

But for the first time in my life, I was hearing a set of industry executives – the drug industry’s executives – saying something exactly opposite: If the pharmaceutical firms didn’t get high prices, they said, the firms wouldn’t invest in R&D and you would die. I had what psychologists call a cognitive dissonant moment and began conducting the research that ultimately led to publication of a book, “The $800 Million Pill,” which sought to answer the questions: Where do new, innovative drugs really come from and what do they really cost to make?

That investigation led me to investigate the development of some of the most significant pharmacological advances of the last quarter of the 20th century. They included new biologics like human recombinant erythropoietin, a product of the newly emerging field of genetic engineering. They included the HIV/AIDS triple cocktail — highly-active anti-retroviral therapy or HAART, whose emergence in 1996 turned that deadly plague into a manageable disease, at least in the advanced industrial world. And they included the new so-called targeted therapies in cancer therapeutics such as trastuzumab or Herceptin for some breast cancers and imatinib mesylate or Gleevec for chronic myeloid leukemia.

What I discovered was that the stories behind each of these breakthroughs had several elements in common:

1. Each was preceded by decades of basic research into the underlying biology and natural history of the disease; this research was universally funded by the public sector – either by government directly or through tax-subsidized non-profit foundations; and
2. Behind each successful drug development program based on that science was a dedicated scientist or team of scientists who had devoted their entire careers to developing cures for that particular patient population, often in a clinical setting.

This is not to say that industry’s contribution to the development of new breakthrough drugs wasn’t significant. Industry was and is the repository of many of the skills of medicinal chemistry that allow drug developers to formulate products with the proper pharmacokinetic and pharmacodynamic properties that allow them to be used effectively in humans. Financially, industry played an essential role because individual companies who held or licensed the patent rights almost always took the experimental drugs through their final and most expensive tests – the third stage clinical trials to prove efficacy that are necessary to gain approval from regulatory authorities around the world.

But when it came to significant breakthroughs, those medicinal chemists would not have targets to go after without the foundation of basic and applied science provided largely by the public sector. And industry wouldn’t have clinical trials to fund without the dedication of physician/scientists who are committed to finding cures for the patients they were seeing on a day-to-day basis.

Perhaps nothing illustrated these relationships better than the story behind the development of Gleevec, a small molecule drug that originated in the Swiss labs of Ciba-Geigy, now part of Novartis. In the late 1960s and early 1970s, researchers at the University of Pennsylvania discovered that a chromosomal mutation was responsible for the explosion of white blood cells that characterized chronic myeloid leukemia or CML. This chromosome would later be called the Philadelphia chromosome because of where the discovery was made. It took another decade for researchers to identify the gene disrupted by the transfer. The gene’s discoverer was Owen Witte, whose work at the University of California at Los Angeles was supported in large part by the non-profit Howard Hughes Foundation. Witte spent another decade trying to convince some company to develop inhibitors of the white blood cells produced by the mutation. He needed something that would block he mutant tyrosine kinase on the surface of the cell. He couldn’t find any company willing to do it. The patient population was just too small.

But in the early 1990s, Brian Druker, a physician/researcher at Oregon Health Scences University and a CML specialist, heard that a tyrosine kinase inhibitor developed by Novartis in another drug development program was active against the CML. With the help of Nicholas Lyden inside the company, he began lobbying the firm to get involved in treating this relatively rare disease. It took FIVE YEARS to convince Novartis to produce the drug in sufficient quantities to conduct proof of concept clinical trials in humans. Throughout this period, Druker’s work was supported exclusively by the government’s National Cancer Institute and the non-profit Leukemia and Lymphoma Society. He later told me: “It was entirely my own lobbying that got the trial going.” Even when preliminary results showed a miraculously high recovery rate, it took a letter-writing campaign by patients from all over the world to convince Novartis chief executive Daniel Vasella to order his managers to produce the drug in sufficient quantities for a third stage clinical trial and to give expanded access to the thousands of patients around the world suffering from the disease.

Of course, Novartis’ initial reluctance to get involved in this program was not because the company was venal or blockheaded. CML is a rare disease, striking a few tens of thousands of patients around the world every year. But during the 1990s, industry, driven by the stock market, had begun demanding blockbuster drugs from its pharmaceutical development programs. If a drug didn’t hold out the promise of generating a billion dollars a year in sales, it received about as much attention as a backbencher in parliament. And a cure for CML just didn’t hold much financial promise, even if the company charged a very high price for the drug, which it eventually did.

There are literally thousands of rare diseases like CML. The U.S. government, which gives special incentives for developing treatments for rare diseases, estimates there are over 6,000 separate rare disorders affecting nearly 50 million people in the U.S. and Europe. They range from inherited metabolic disorders like Gaucher and Fabry disease to rare cancers and auto-immune disorders. But only a small percentage of those diseases have drug companies actively engaged in trying to discover potential new drugs and biologics that might lesson their impact. The market simply isn’t large enough for them to get involved, even if they were to charge exorbitant prices for any drugs they might develop. That leaves these fields wide open for academic researchers working on government or non-profit grants.

The development of a treatment for Gaucher’s disease, which is now sold by Genzyme of Cambridge, Mass., provides the paradigmatic example of how devoted researchers working in the public sector can develop cures with very little help from the private sector. This rare genetic disorder, which leaves carriers of the mutation without the ability to process certain lipids in the blood. It affects an estimated 5,000 people around the world. Untreated, it usually kills people before their 40th birthday. Starting in the 1970s, a researcher at the U.S. National Institutes of Health named Roscoe Brady began researching this disease. Over the ensuing decades, he discovered the enzyme that wasn’t being produced by the defective gene. He then began working on a method for deriving that enzyme from ground up placentas. In the late 1980s, he turned the entire process over to Genzyme, which in the early 1990s got FDA approval for the purified enzyme and began charging over $200,000 a year per patient for the treatment, which they called Ceredase. But even at that price, the company only generated a few hundred million dollars a year in sales. Later, after Genzyme began making a recombinant version of the protein based on the gene that had been discovered by one of Brady’s colleagues and put in the public domain, the price barely came down, even though it was a much cheaper manufacturing process.

Based on the knowledge it had from its experience with Gaucher’s disease, you’d have thought Genzyme’s scientists would have rapidly begun turning out proteins for the other liposomal disorders like Fabry’s disease or the polysaccharide disorders, which were also based on genetic mutations. But it took them more than a decade before they did. Why? There was less money in going after treatments for extremely rare conditions when there were much larger markets – like blood factors in hemodialysis – to go after.

There are many, validated targets for rare diseases that the pharmaceutical industry could go after. But they don’t or they do so half-heartedly. Why? Because the size of the market doesn’t justify the investment or taking the risk of failure. So the research and development is left largely to researchers in government and academic settings, who must dribble the ball almost all the way to goal line before handing it off to a drug company for the score.

In recent years, this model has changed somewhat with the evolution of an active biotechnology sector largely funded by venture capitalists. Today, researchers in the universities are encouraged to patent their early stage basic science discoveries and license them to private firms. In many cases, those firms are start-ups that the researchers themselves either own or are involved with. Indeed, many of these startups in the U.S. receive direct subsidies from university investment funds or local and regional governments. As these companies move their discoveries through the drug development process, each successive step is funded by infusions of cash from either these public partners or venture capital investors. The Holy Grail for these firms is getting their molecule through a successful proof of concept trial in humans. Then the major pharmaceutical firms either buy the firm, license the drug or establish a milestone payment system that finances its final third stage clinical trial development. Again, without the early stage support of the government and, in some cases, non-profit and university sectors, none of this would be possible.

Despite heavy investment of both public and private resources in this biotechnology start-up model, biotechnology firms have been relatively ineffective at bringing new therapeutics to market – at least so far. There are over 1,500 biotech firms in the U.S., and hundreds more around the world. These firms spend more than $20 billion a year in research and development. They have over 300 products being tested for over 200 diseases, according to the Biotechnology Industry Organization, the U.S. industry’s trade group. Yet the industry as a whole has only 12 drugs that sell more than a half billion dollars a year; and only about 125 total products that have been approved by the Food and Drug Administration.

Moreover, most of the industry’s biggest sellers were the low-hanging fruit of the recombinant engineering revolution and have been on the market for quite some time. They include erythropoietin, granulyte colony stimulating factor, human growth hormone, and human insulin. These therapies work well because the underlying condition – kidney failure or diabetes, for instance – led to a failure to produce particular enzymes required for normal human functioning. So if you replaced the missing enzyme with one that was made using genetic engineering, the patient was, if not cured, at least temporarily relieved of the potentially fatal symptoms of not having that missing molecule.

But today, most of the diseases that are the research subjects of biotech companies involve interfering with malignancies whose reproductive systems are out of control. Or they are trying to interfere with the overexpression or underexpression of proteins associated with the degenerative diseases of aging. Decades of research into the microbiology of various diseases has identified hundreds of potential targets for pharmacologic intervention in cancers or degenerative diseases. These targets are part of the complex biological cascade of events that take place when things start to go wrong in the body. But is very unclear at the outset of these development programs whether inhibiting or stimulating further production of these cellular interactions will have much impact on the underlying disease, if it has any at all. I’m not saying that these efforts are doomed to failure. Recently there have been some very excellent results from targeted therapies such as the antiangiogenesis drugs like Avastin. It has proven very effective against macular degeneration. It has had moderate success in staving off the growth of some cancers. But to reverse a degenerative disease like, say, rheumatoid arthritis, which probably involves a cascade of numerous factors, or to inhibit a fast-growing cancer with an monoclonal antibody, is not going to be the slam dunk that replacing a missing protein was.

Indeed, what’s happening in biotechnology is symptomatic of what is happening in pharmaceutical research as a whole. The United States is the world leader in investing in biomedical research and development. In the public sector, the National Institutes of Health spent $28.6 billion in 2005, largely for basic science research. Although that has leveled off in recent years as chronic U.S. budget deficits have been exacerbated by the large expenditures for the war in Iraq, the U.S. in real inflation adjusted dollars spends far more today than it did two decades ago to support basic and applied science in biomedicine. Indeed, it is more than four times greater than it was in the early 1980s!

Yet as fast as government expenditures have grown, they have not kept pace with the pharmaceutical industry, whose investment in R&D has exploded along with its sales. While the drug industry’s critics like to complain about the escalating marketing expenditures of the industry, which take up to 40 percent of total sales, the fact is that R&D budgets have also benefited from rising industry sales. The U.S. industry spent an estimated $39 billion in 2004. This includes investment in the U.S. by U.S.-based firms, investment overseas by U.S. firms, and foreign companies’ R&D expenditures in the U.S.., who have increasingly moved significant R&D resources to the U.S. to take advantage of the U.S. government’s massive investment in scientific research. (It is a little known fact that in licensing its inventions to the private sector, NIH must give first preference to firms whose R&D facilities are located within the the U.S., whether they are U.S.-owned or not.)

All told, over the past quarter century, the private sector’s investment in the search for new medicines has grown eight percent per year on average, significantly faster than the industry’s growth in sales and profits. Total spending is now six times greater than it was in the early 1980s.

Despite this massive public and private effort, output, as measured by the number of new drugs, biologics, vaccines and devices approved for use by regulatory bodies like the U.S. FDA, has slowed in recent years. Last year, the FDA approved just 21 new drugs and biologics, one of the lower totals since 1993. Moreover, about half of these new drugs were not given priority status for review by the FDA, which meant they were not considered a significant new advance in medicine. This significance ratio has held steady for over a decade. Clearly, the steady increase in private and public R&D spending is generating diminishing returns, whether measured by return on investment or public health.

This falloff in R&D productivity has occurred despite extraordinary advances in the technology of drug discovery. The public sector’s massive investment in basic science, mostly conducted at universities, has uncovered the complex details of how cells work and the chemical interactions of their constituent parts. A government-led project decoded the human genome; scientists are rapidly identifying the functions of the proteins that the genome produces; and, for over 30 years, we have had the bioengineering skills to reproduce those proteins and monoclonal antibodies in mass quantities. We can use these tools to identify the biochemical interactions of many diseases. This in turn has given scientists hundreds of potential targets for drug therapy.

To go after those targets, scientists have developed new tools like mass screening. They’ve developed sophisticated bioassays and attached them to computer chips to identify potentially effective new drugs. Advances in biochemistry and x-ray crystallography have given medicinal chemists the ability to design and synthesize new drugs capable of affecting those targets faster and more accurately than ever before. And, the drug industry and government have financed and built an infrastructure for conducting clinical trials that far surpasses what existed in previous eras.

So why is output slowing down? I would offer two simple hypotheses for the decline in R&D productivity. The first one parallels the explanation I gave earlier regarding the limited success of the biotechnology revolution. The small molecule drug revolution pioneered by Europeans like Paul Erhlich and Gerhard Domagk has evolved to the point where it is now a mature industry. In the past century, scientists have developed drugs for most of mankind’s common maladies. We can kill most of the microbes that invade our bodies. We can control blood pressure, allergies, minor aches and pains, and acid indigestion. We can cure a few cancers and prolong life for a few more. We can give drugs to prevent some heart attacks. And, for many of these disease states, we are now on the second or third generation of drugs. If we look at blood pressure control, we’re in our sixth or seventh.

In other words, as in biotechnology, the low-hanging fruit of medicinal chemistry has been picked. To be an innovator today, you must discover cures for chronic diseases like diabetes, most cancers, dementia (Alzheimer’s disease), rheumatoid arthritis, and the other maladies of aging societies. Will there ever be a pill to slow the aging process, or the diseases that accompany aging? That is going to require a lot more investment in basic research to understand the chemical cascades that affect many of us as we age, and then a lot more research beyond that to understand how we can safely intervene in the process. I wouldn’t count on rapid success.

The second reason for declining productivity is that industry R&D largely ignores areas where it is possible to have a tremendous impact very quickly and where there is tremendous need: the neglected diseases of the developing world. Industry does not seek the cures for drug resistant tuberculosis, malaria, leishmaniasis, Chagas disease or hookworm. It could spend its vast resources developing drugs and vaccines for these conditions, but it doesn’t because there is no market. This is the flip side of the rare disease situation I discussed earlier. For a rare disease, there are very few patients. So, even when they or their insurers or their governments are willing to spend a lot of money for a treatment for their disease, for the drug companies, it isn’t a very large market.

This isn’t the case for the neglected diseases of the developing world, where there are billions of potential customers. But those potential customers have very little money. Indeed, they have virtually no money. And when there is no discretionary income for medicine, there is no drug market. It is a classic case of what economists call market failure. Allow me to quote a Nobel Prize-winning economist on this point: Joseph Stiglitz, formerly of the World Bank and now at Columbia University. He recently wrote that:

(Quote) It is a matter of simple economics: companies direct their research where the money is, regardless of the relative value to society. The poor cannot pay for drugs, so there is little research on their diseases, no matter what the overall costs. (Unquote)

But rather than look for ways to artificially stimulate demand in these needy countries (by lobbying for greater aid, for instance), the drug industry instead devotes a substantial share of its R&D budgets to developing new drugs in their existing markets. Many of these new drugs are nothing more than replacements for older drugs that are losing patent protection. Upon occasion, they are superior to the older drugs. But even when they are, it is usually not by much. This strategy of developing what are known in the U.S. as me-too drugs may be good for their bottom lines, but it provides a very small return for public health.

Again to quote Stiglitz: “A me-too drug, which nets its manufacturer some portion of the income that otherwise accrues only to the company that dominates a niche, may be highly profitable, even if its value to society is quite limited.”

Allow me to briefly mention two examples that illustrate how the miraculous discoveries of modern chemistry and biology have been used by the drug industry, not for public health, but to fatten its bottom line. More than two decades ago, scientists discovered that one type of antihistamines – the H2 antagonists – could limit stomach acid production. This breakthrough was better than acid absorbers for acid indigestion, which in chronic cases can lead to ulcers and even death. These H2 antagonists enjoyed a long life on patent, and then went what we in the U.S. call “over the counter.” In other words, you didn’t even need a doctor’s prescription to get them. You could walk into a corner drugstore and buy them yourself at a much lower price than they cost as a prescription drug. Before they went off patent, as they contemplated this huge loss of revenue, the companies that made these drugs discovered a new class of antiacids – the proton pump inhibitors, which counteracted the production of stomach acid at its source, not the signaling histamine that triggered acid production. Omeprazole (Prilosec) and other proton pump inhibitors also enjoyed a long patent life and wracked up billions of dollars in sales for the industry.

But as it reached the end of its patentability, the company that made omeprezole (AstraZeneca) came out with a follow-on drug called Nexium. What was Nexium? It ‘s nothing more than the enantiomer of Prilosec, which was the racemate mixture. In other words, when people took Prilosec, half of what they were taking was Nexium. Did Nexium improve anybody’s outcomes? No. It merely gave AstraZeneca a drug that it could sell as a prescription medicine after Prilosec went over-the-counter. And in the U.S. at least, the strategy has been successful. You cannot pick up a magazine in the U.S. without finding full page ads for Nexium, the “new purple pill.” Physicians are prescribing billions of dollars of these pills for patients with heartburn and excess stomach acid, relief that they could get at a fraction of the cost simply by walking into the corner drug store without a doctor’s prescription.

The other example that I would like to offer about how industry R&D has gone astray is a darker tale. It involves a class of pain relievers known as Cox-2 inhibitors, the most infamous of which was Merck’s Vioxx. Gastroenterologists have long been concerned that a small percentage of people who routinely took traditional pain relief medicine like aspirin, ibuprofen and naproxen, collectively known as non-steroidal anti-inflammatory drugs or NSAIDs, suffered from gastrointestinal side effects. This affected somewhere from 2 to 4 percent of patients. In a small percentage of those, it led to bleeding ulcers, and, in very rare circumstances, could lead to death. By selectively inhibiting just one of the cyclooxygenase enzymes – the one that caused inflammation, not the one that helped control the production of stomach acid – the Cox-2 inhibitor class of medicines held out the promise of eliminating this side effect.

It was an elegant theory. Unfortunately, none of the major clinical trials that showed that these drugs were comparable to previous NSAIDS at controlling pain (and thus able to get regulatory approval) proved that this class of medicines actually succeeded in reducing the gastrointestinal side effects. What the trials did show in some cases, however, was that there was an excess of heart attacks and strokes from taking the Cox-2s. In fact, the pivotal Vioxx trial, published in the medical literature in 2000, showed that the cardiovascular risk from taking the drug was four times higher than the comparison drug, which was naproxen. The authors of that study, which was funded by Merck, speculated that the results could have been the result of naproxen having cardio-protective qualities. Only four years and tens of thousands of deaths later was it shown – in a very large trial aimed at proving that Vioxx protected people against colon polyps – that Vioxx in fact did result in higher rates of myocardial infarction and stroke.

Here we had the perfect storm of misplaced R&D priorities. In order to eliminate a minor problem, the drug industry invested hundreds of millions of dollars in developing a new drug that wound up causing much worse problems than it would have ever solved.

As a result of the Vioxx and other near scandalous situations, I believe the era of the blockbuster drug is coming to an end. Over the next few years, some of the drug industry’s best-selling drugs will be coming off patent. Very good drugs for lowering cholesterol, lowering blood pressure, minor pain relief, allergies, and blood sugar control will all be either available as inexpensive generic medicines or will even become non-prescription drugs. But because of the intense pressure generated by aging societies and tight public budgets, the games that have been played in the past – substituting an enantiomer for a racemate or introducing a new class of drugs for a condition where control agents are already 90 percent effective – simply will not be tolerated by the public or public agencies responsible for paying for health care.

So where will real innovation come from in the years ahead? One area generating tremendous excitement is using genomics to create personalized medicine. Technology and science are driving drug developers in this direction. Why do some people suffer from the side effects of drugs, and others don’t? Why do some people respond positively to a cancer chemotherapy regimen, while others don’t?

We all have slightly different genetic make-ups. These slight variations may account for the different reactions different people have to different drugs. If we could test people in advance for this variations, then it might be possible to tailor prescribing to the exact needs of individual patients. This would be vastly superior to what happens now, which is that physicians try one drug after another until they figure out which one works best for that particular patient. Many scientists are working to identify these differences, and developing tests that could be used in advance of prescribing individual drugs.

But what are the financial implications of this potential innovation? Genetic testing will become common. Indeed, people will demand it since they will want to know what works best for them. So we have added new costs to the system in the form of tests. But at the same time, we will have reduced revenue to the drug industry by limiting the number of people who are able to take an individual drug. This may be a tremendous boon to the practice of medicine, but it is a threat to the industry’s bottom line.

So allow me to recapitulate what I see as the most significant opportunities for medical innovation in the years ahead:

1. Understanding the basic science and natural history of the diseases of aging so that biomedicine has not just targets, but validated targets for therapeutic intervention;
2. Developing personalized medicine based on genomics, which will allow drug developers and physicians to target their interventions in the most effective way possible; and
3. Coming up with treatments for the neglected diseases of the developing world.

In each of these arenas, governments and the non-profit sector will play a leading role or innovation will continue to lag. But they must do so in a way that builds upon lessons learned from past successes.

1. Governments must step up their investment in basic and applied research. But it must do so in intelligently. Governments must embrace the fact that many of its most successful research programs have been targeted research campaigns aimed at specific goals, whether it was drugs for HIV/AIDS or basic research programs like the human genome project.
2. Governments must restructure the incentives for innovation, especially the patent system. Scientific collaboration will be necessary to achieve the promise of personalized medicine, but the current patent system may be undermining that collaboration. There will also need to be innovations in how we bring these breakthroughs to market, since personalized approaches to health care financed through current pricing models will either bankrupt health care systems of aging, advanced industrial societies or make these breakthrough technologies unaffordable for everyone but the upper classes; and
3. Non-profit drug developers and generic manufacturing must be at the heart of our approach to developing therapeutics for the diseases of the developing world, an approach that is increasingly being recognized by donor nations.

Let me address these one at a time.

To leap ahead in our efforts to come up with therapeutics for chronic diseases of aging, governments will need to increase their investment in basic science. Let’s take one example: the fight for a cure for Alzheimer’s disease (AD). Great Britain’s National Institute for Health and Clinical Excellence is under pressure from the two companies that make cholinesterase inhibitors, including donepezil or Aricept, to make them available for the early stages of the disease. Yet the Cochrane Collaboration last year said that “there is little evidence that donepezil improved cognitive function, and no evidence that donepezil delays progression to AD.” Does this mean that the years of basic and applied research that went into developing the cholinesterase inhibitors was wasted? No. It only means that the mechanism that they inhibit does not by itself halt the progression of the disease.

To make progress against AD and other degenerative diseases of aging, our governments need to step up to the plate with targeted research campaigns. We must learn so much about the natural history of the various forms of this disease that drug developers not only have targets, but have validated targets. This strategy has a proven track record. The targeted research campaign that developed the drugs that can now control HIV/AIDS was initiated and largely funded by the U.S. government. Public and non-profit sector researchers identified the virus, characterized its genome, identified targets and even came up with the first drugs that inhibited its replication. The U.S. government also helped financed a huge clinical trial network to test those drugs. Lost in the celebration over the arrival of HAART therapy in the mid-1990s was the fact that it was a targeted research campaign, largely funded by the U.S. government which spent over $10 billion on research into HIV/AIDS between 1987 and 1996, that laid the groundwork for the companies that brought the final pieces of that triple cocktail – the protease inhibitors – to market.

Does that mean that a targeted government program aimed at conquering dementia can have the same type of rapid progress? One need only look at the U.S. government’s war on cancer to be reluctant to make bold predictions. But very large, targeted research campaigns aimed at elucidating the basic science puzzles behind the chronic diseases of aging remain the best hope for making any progress in any of those fields, whether it be dementia, most cancers or neurological disorders like Parkinson’s disease.

The same can be said about the emerging field of stem cell therapy, which holds out the promise of regenerating destroyed or non-functioning cells, whether in the brain, pancreas, heart or spine. Here, again, government funded programs for researchers in the non-profit sector are leading the way. In the U.S., because of the Bush administration’s stance against federal funding for embryonic stem cell research, states like California are leading the way with fairly large investments in the field.

I want to spend a few minutes talking about stem cells because this new field provides a textbook example of how over-commercialization by researchers in the non-profit sector can actually retard a field. As I mentioned earlier, the new paradigm since passage in 1980 of the Bayh-Dole Act in the U.S. is for non-profit researchers to patent their early stage discoveries and form venture capital-funded companies to pursue the next stages of research. Venture capitalists are willing to fund these early stage start-ups because these firms control the intellectual property that their founding scientists argue hold out hope of leading to a cure for some disease. It’s led to a mad rush to the patent house by basic science researchers, which has been aided and abetted by a very liberal patenting policy enabled by the U.S. Patent and Trademark Office and the courts. The PTO has granted thousands of patents for genes, for single nucleotide polymorphisms, and for proteins, cell receptors and other molecular pathways whose role in disease states are merely surmised.

In some cases, the discovery turns out to be the building block of an entire field, which gives that discoverer an intellectual property claim on all subsequent developments in the field. This is precisely what happened in stem cell research. James Thompson of the University of Wisconsin was the first scientist to isolate embryonic stem cells. His university’s technology transfer office won a patent that embraced virtually all potential uses of that invention. The university subsequently licensed some of the major uses of that invention to a single firm, Geron Inc., which had funded Thompson’s research. Wisconsin also made the invention available to other researchers for other purposes, but at a steep price. What happened next was covered in Nature Magazine. In 2005, the magazine reported that a San Diego researcher named Jeanne Loring watched her start-up firm collapse when it couldn’t get access to the Wisconsin line at reasonable rates. Academic researchers complained of similar roadblocks.

Thompson was hardly alone. A recent survey conducted by the United Kingdom’s Stem Cell Initiative identified over 18,000 stem cell patents issued around the world, with two-thirds of them in the U.S. Patent law firms in the U.S. are warning their clients that any firm or research institution that is planning to pursue stem cell projects may face blocking patents that they must license – if they are available. This emerging patent thicket represents a distinct threat to the traditions of open science required for progress in the non-profit and university sectors, where the basic building blocks of therapeutic advancement have always been laid. It chokes off collaboration. It adds transaction costs to everyday laboratory encounters. It’s impossible to quantify the damage done by this early stage scientific patenting because how can one count the number of researchers who abandon a line of research because they can’t get access to the necessary licenses or execute the necessary material transfer agreements? How does one count the number of researchers who never even consider a line of research because someone else has already locked up the key patents?

Some researchers have suggested a way out of this impasse. They’ve called for creation of a common patent pool supervised by a non-profit organization that would make licenses freely available to any researcher who agrees to contribute their subsequent inventions to the pool. Patent pools have been successfully used in other high-technology industries like consumer electronics and software. Open access pools are being created in the field of agricultural biotechnology where a quarter of all patents reside in the public sector. The Public Intellectual Property Resource for Agriculture (PIPRA) is seeking to create patent pools that can deliver advanced farming technologies to poor countries at low or no cost. Even large pharmaceutical firms are experimenting with pool arrangements for single nucleotide polymorphisms, which could turn out to be the building blocks of personalized medicine.

These arrangements are going to be necessary if the products that result from this research are going to be affordable. Unlike patent pools in consumer electronics or even in agriculture, the end stages of the research process in biomedicine – which are the second and third stage clinical trials – are the most expensive part of the process. They also entail the greatest risk of failure. Traditionally, we’ve relied on the private sector to carry out these final stages of research. In exchange for footing the bill and taking that risk, we allow pharmaceutical and biotechnology companies exclusive rights to the intellectual property, which allows them to charge enormously high prices – somewhat lower here in Europe than in the U.S., but high nonetheless. As we can see from escalating health care costs all around the world, this model is no longer sustainable.

But there is an alternative to the exclusive rights-high price model. Governments could establish a prize system for medical innovation, with the size of the prize driven by the public health need and the investment required to bring the therapy successfully to market. Under the prize system, once the therapy has been approved by regulatory bodies and the prize awarded, the intellectual property would be turned over to any generic manufacturer who could then make it on a cost-plus basis for their nation’s health care system.

You are probably asking: Well, wouldn’t the prize on top of generic manufacturing equal the same high prices that we currently have? The answer is no, because there would be no prize or very small prizes for me-too drugs. A prize system would eliminate the billions of dollars wasted on pharmaceutical industry marketing. And it would channel research resources into fields where there is the greatest public health need. Instead of driving health care costs higher, which is often now the case with new technologies, biomedical research would begin to accomplish what research and developjment achieves in every other field: delivering better outcomes for patients at lower costs.

A very interesting experiment is already underway in this kind of non-profit drug development. It is taking place in the neglected disease arena, where well-financed charities like the Bill and Melinda Gates Foundation and international donors operating through the Global Fund are laying the groundwork for an alternative drug development model for the 21st century.

In the neglected diseases arena, non-profit drug developers like Medicines for Malaria Venture, based in Geneva, One World Health, based in San Francisco, and the Global Alliance for TB Drug Development, based in New York, are blazing the trail to the future. These organizations are not only developing drugs, often in partnership with the pharmaceutical industry, but they are reaching intellectual property agreements that ensure that their products will be affordable in the developing world if and when they are developed.

I recently had the opportunity to travel to the Thai-Burmese border to see this emerging system in action. I saw researchers connected to the non-profit Shoklo Malaria Research Unit in Mae Sot conducting clinical trials to develop new drugs to combat malaria, one of mankind’s age-old scourges. Virtually wiped out in the advanced industrial world, malaria still strikes a half billion people in the developing world every year. Its main victims are small children suffering through their first bout with the disease. Somewhere between one and two million children under the age of five die every year from the disease.

In many parts of the world, especially Africa, the most virulent form of the disease – plasmodium falciparum – has developed resistance to existing drugs like chloroquine, which since the 1960s has been the main way to treat the disease. But starting in the mid-1980s, Thai, French and British scientists working in Thailand have conducted a series of pathbreaking clinical trials that showed that a new class of drugs – artemisinin-based compounds – were effective against chloroquine-resistant p. falciparum. Where did artemisinin come from? It is derived from the sweet wormwood bush. Traditional Chinese doctors first identified that a cold tea made from sweet wormwood leaves and bark was effective against high fevers nearly 1,700 years ago. It’s modern derivative form was discovered by Chinese scientists in the 1970s as part of a program that began during the Vietnam war after Ho Chi Minh asked Mao Tse Tung for help for his soldiers living in the jungle. He told Mao that he was losing more of his soldiers to malaria than he was to American bombs!

The chemical form of the drug came along too late to help the Vietnamese, but its isolation and manufacture gave the world a new weapon in its war against drug-resistant malaria. It took nearly two decades for university- and non-profit-based researchers to prove its effectiveness through clinical trials, to identify that its best use was in combination with other drugs to prevent the emergence of resistance, and, finally, to convince the World Health Organization that it should be first-line therapy throughout the developing world. That finally happened in 2002.

But price was still a roadblock. Because most Chinese versions of the drug do not meet first-world standards of good manufacturing practices, they are not approved by western regulatory bodies and cannot be purchased by western aid programs like the Global Fund to Combat AIDS, TB and Malaria. The only WHO-approved version of artemisinin-based combination therapy until recently was manufactured by Novartis. But Coartem, as the Novartis drug is known, cost over $2 for the three-day treatment. That’s 20 times the price of chloroquine, which, even if often ineffective, was at least something people in poor countries could afford.

But the price is coming down. Why? Competition recently arrived. A partnership between Sanofi-Aventis and the Drugs for Neglected Diseases Initiative, which is a non-profit offshoot of Medicines Sans Frontieres, recently completed final clinical trials and began the worldwide registration process for a new arteminsin-based combination therapy treatment that will cost under $1 per adult course and under 50 cents for each child’s course. The final clinical trials were conducted at low-cost by researchers in Africa and Latin America. And Sanofi-Aventis, who will manufacture the product, has agreed to turn over the intellectual property to any generic manufacturer anywhere in the world if they can produce it at a price lower than their plants.

Getting this new drug out to the world’s poor is still a problem. Health care delivery systems are woefully inadequate. The aid bureaucracies at the World Bank and the WHO are still moving far too slowly. For instance, a U.S. Institute of Medicine committee chaired by Nobel Prize-winning economist Kenneth Arrow issued a report three years ago that called on aid agencies to purchase a sufficient supply of artemisinin-combination therapy pills each year to treat everyone in the world. This would cost less than a half billion U.S. dollars a year. Then, this centralized supply should flood the developing world’s distribution channels, from the village dispensary to the national hospitals and clinics, at a low enough price to essentially push ineffective chloroquine out of the market. This would also have the important side effect of eliminating the counterfeit artemisinin pills and the monotherapy pills that are coming out of around 18 factories around the world, according to the WHO. This must be stopped if physicians are to avoid losing this new drug to resistance like all the malaria drugs that have come before it.

Unfortunately, the World Bank still hasn’t come up with a plan for creating this subsidy and lining up sufficient manufacturing capacity to produce enough of this drug to fight the disease everywhere, which is necessary if the world is going to make a serious dent in malaria’s death toll. When I attended a press briefing on the new Sanofi-Aventis – DNDi drug at the French Embassy in Washington two weeks ago, an Institute of Medicine official said the World Bank plan was due sometime later this year. That’s three years after the original report calling for the subsidy, which is longer than it took DNDi to conduct the final clinical trials.

But let me not end on a negative note. What we have seen in the development of artemisinin-based combination therapy is happening on a dozen fronts. Non-profit groups are working to develop new drugs for drug-resistant tuberculosis; leishmaniasis; and microbicides to prevent the transmission of HIV/AIDS. Next month, I will travel to Brazil to report on the start-up the first efficacy trial for the world’s first hookworm vaccine, which is being led by the non-profit Sabin Institute in Washington with funding from the Gates foundation. Is success guaranteed? Of course not, just as it is not guaranteed in any drug development program, whether attempted by the for-profit or non-profit sectors. But what is guaranteed is that these therapies, if successfully developed, will be made available to the global poor at prices that they and their governments can afford.

I would suggest that the advanced industrial world can learn something from these non-profit efforts. We live in aging societies. The new therapies that will emerge to treat conditions particular to aging societies threaten to bankrupt all of our national health care systems. We need to restructure our incentive systems along the lines I discussed earlier – patent pooling, prize systems, generic manufacturing – if we’re going to continue to provide the latest advances in medicine to all of our citizens.

As currently structured, the private sector’s profit imperative prevents it from tackling the world’s most pressing public health problems. The innovations it does come up with come at too high a price. This emerging non-profit sector and its model has the potential to step into the breach and make advances in medicine affordable to all. And I’m sure it will. Because as we’ve seen so many times before in medical history, it is human needs and the tireless efforts of committee scientists that drive pharmaceutical innovation, not private profit.