Wizemann, Theresa, Robinson, Sally, Giffin, Robert. "2 Current Model for Financing Drug Development: From Concept Through Approval." Breakthrough Business Models: Drug Development for Rare and Neglected Diseases and Individualized Therapies: Workshop Summary. Washington, DC: The National Academies Press, 2008.
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Breakthrough Business Models: Drug Development for Rare and Neglected Diseases and Individualized Therapies - Workshop Summary
Early- and Late-Stage Development
Historically, the largest government investments in basic drug discovery research have been made by the National Institutes of Health (NIH). The Defense Advanced Research Projects Agency (DARPA) has also contributed to the discovery stage by taking on some relatively high-risk biologic projects. Moreover, in part as a result of the public’s impatience with the slow pace of the discovery process, state governments are increasingly taking the initiative in this area. One such example is the California Institute for Regenerative Medicine, a state agency established in 2005 by the California Stem Cell Research and Cures Initiative, which provides grants and loans for stem cell research and facilities at California’s research institutions and universities. Another example is the Texas Cancer Initiative, under which state funds are dedicated to cancer research conducted in Texas. Beyond these public investments, private foundations are also taking a significant financial interest in the discovery process, facilitating progress by funding research in their particular areas of interest.
At the other end of the continuum is late-stage development, which is funded primarily by pharmaceutical companies or venture capitalists with some collaborative support from government sources, such as NIH. Such partnerships are critical in the transition from proof of concept to clinical development.
Translational Research: Discovery Through Proof of Concept
Between basic discovery research and late-stage development lies the critical step of proving the utility of a proposed drug. The funding gap that often occurs in this period has been referred to as the “valley of death.” The risks are great and may be considered as not worth taking for products designed to treat rare and neglected diseases, which may ultimately yield a very limited return on investment. To help fill this funding gap, U.S.-based foundations have increased their investments in discovery and development for new drugs specific to their diseases of interest. In 2007 such groups invested approximately $75 million in biopharmaceutical companies, a 10-fold increase since 2000 (Gambrill, 2007).
At the government level, the Department of Health and Human Services’ Small Business Innovation Research and Small Business Technology Transfer programs provide financial assistance to small companies attempting to advance their initial discoveries to commercial development. In recent years, NIH has significantly increased its focus on translational research. For example, NIH’s National Center for Research Resources administers the Clinical and Translational Science Awards, which fund a national consortium of medical research centers that train physicians in