Panelists from diverse sectors discussed the business aspects of developing MCMs. The discussion delved further into topics raised during the discussions of Ebola, influenza, and coronaviruses, including collaboration, public–private partnerships, value, and building sustainable, resilient, business models despite the uncertainties. There are challenges not only in sustaining product development and production, but also in sustaining partnerships, networks, people, and expertise.
Venkayya of Takeda Pharmaceuticals shared his personal perspective on lessons from global health, government, and industry that may apply to the biodefense and MCM enterprise for emerging infectious diseases.1 Prior to 2000, research on agents of bioterrorism and neglected diseases in global health was limited to small groups of passionate, poorly funded researchers. In 2000, Bill & Melinda Gates launched their foundation and made a critical initial investment in GAVI, the vaccine alliance, which seeks to provide children in the poorest countries of the world with access to the same life-saving interventions that are available to children in rich countries. In 2001, there was significant investment in biodefense and the launch of many new activities following the 9/11 and anthrax terror attacks. As a result of
1The statements made are Venkayya’s personal views and are not made on behalf of Takeda Pharmaceuticals.
these events, there has been a revolution in global health and in biodefense, Venkayya said.
The Gates Foundation continues to invest about $4 billion in its programs each year. A number of new actors have also entered the space to address “market failures” in global health and biodefense. This includes the spectrum of companies developing products, from those focused primarily on profit, to those passionately committed to improving the lives of others. All companies, though, are accountable to either shareholders or boards of directors and must demonstrate rational allocation of capital. Venkayya observed a pervasive ideology in the global health community and in governments that companies should not be allowed to make undue profits. This impedes fully tapping into the innovation that exists in the world, he claimed.
Any rational actor will allocate capital to the programs that provide the best return on investment.
— Rajeev Venkayya,
President, Global Vaccine
Business Unit, Takeda
A large amount of innovation is happening in small start-up companies. Venkayya used Apple’s “app store” platform as an example of one of the most distributed forms of innovation possible, which is fully open to developers. Anyone can innovate and immediately have access to a market of billions of people. Apple is now coming out with a platform that will allow researchers to create apps to conduct clinical research and gather data from laboratories around the world. Exciting innovation is also happening in academic institutions, but most cannot advance on their own from innovation to commercialization and impact. “How can we, as a community, tap into this innovation and address some of the market failures?” he asked.
As a company, Takeda is passionate about making an impact in infectious diseases where there are unmet needs, including norovirus and dengue. The company deliberately chose to develop vaccines that would have a market in both developed and developing countries, to touch as many lives as possible and have the maximum impact possible in a sustainable way.
Venkayya explained that pitching a vaccine business to company leadership as corporate social responsibility is not a successful approach. Any rational actor will allocate capital to the programs that provide the best return on investment (e.g., oncology, diabetes, hypertension, Alzheimer’s disease). Prevention, especially in the form of vaccines, does not generally provide a good return on investment. The investment
bodies in a company need to see a business model that works and a commercial potential that contributes to the company’s future. One such approach in vaccines is tiered pricing, which allows a company to charge more for a vaccine in a wealthy country, and just a few dollars for the same vaccine in the poorest countries. This tiered-pricing model is currently supporting access in some of the poorest countries of the world and needs to be preserved, Venkayya said. He acknowledged that some people are uncomfortable that wealthy countries are subsidizing the health of children in poor countries; however, we live in a world of tremendous inequity. There is a fundamental responsibility to address these market failures, he said.
Product Development Partnerships
Financing this innovation is essential, Venkayya stated, and there are a variety of approaches to innovate, including incentives for companies. Push incentives help to provide a clear, de-risked pathway to the market through investment and by providing key capabilities. Pull investments essentially guarantee a market, which is especially important in places where the commercial potential is not apparent.
Another approach to financing is product development partnerships, Venkayya offered, such as the Malaria Vaccine Initiative, Rotavirus Vaccine Program, Aeras (a tuberculosis, or TB, vaccine initiative), International AIDS Vaccine Initiative, and others. A product development partnership is essentially a program manager, securing funding from bilateral donors (e.g., donor governments who provide aid to a recipient country or organization), pushing that funding out to the innovators with the most promising drug, diagnostic candidates, or platforms, and providing some level of project management support. A product development partnership can also provide downstream certainty, helping the technical partner to address issues such as market potential, regulatory pathways, pre-qualification, or stratification of subjects who would receive the MCM. This type of partnership is attractive for companies that may not have the bandwidth to address market and regulatory issues.
Targeted Limited Investments by Government
According to Venkayya, the real promise is novel vaccine platform technologies (e.g., the Vaxart platform described by Latour in Chapter 4)
that move development away from the “one bug, one drug” approach. However, it will take some time for these platform technologies to mature, and to have the full buy-in of the key regulatory agencies, Venkayya noted. Until then, one proposal is to work closely with industry to expand the investment in a suite of vaccine and drug candidates that have potential—NIH and BARDA are already doing this, he noted. The best case would be to have a Phase–III ready compound (i.e., all potency and serologic assays developed, final manufacturing process at final scale developed). Phase III–ready assets are very expensive to acquire, he said, as they have largely been de-risked. The U.S. government could make investments to get products as close as possible to Phase III–ready, and then make the product available to companies to acquire for Phase III development. There would need to be some incentive for companies, he noted, and a stockpile purchase by the government is not likely to be sufficient incentive to justify the large investment a company is going to make to lead the product through to Phase III—especially for larger companies. Incentives might include, for example, the freedom to sell the product in any market in the world, and at any margin, or licensing the technologies or intellectual property that was created in the development of that product at a discount.
The U.S. government needs to become more sophisticated about how companies do business, Venkayya pointed out, and it has to be very flexible in crafting deals with companies that de-risk their investment in these programs. Government also has a role in streamlining the regulatory pathway, including defining clear and transparent alternative approaches to licensure, because regulatory un-certainty represents risk for a company. Government does not have to do everything, though. One existing operating model described by Venkayya is the approach used by the biotechnology company Celgene. The Celgene business model makes targeted limited investments in acquiring promising technologies and candidates. Importantly, he said, it allows the acquired companies to continue to operate and make decisions as usual (no new management team installed by Celgene, no governance committees that review product development and make stage gate decisions). This is one type of approach that we need to bring into government, he said.
Effective approaches to engaging industry need to be very flexible, and company and countermeasure specific. Venkayya suggested the need for a toolbox of different approaches that could be used in agreements with companies to ensure that the return on investment for the company is compelling enough to make it worth their while, or is at least cost-
neutral. Companies want to do the right thing, he said, but they cannot make business decisions that will put them at a loss.
The efficacy of antibacterial drugs is currently threatened by increasing antimicrobial resistance, said John Rex of AstraZeneca.2 CDC estimates that 23,000 deaths per year in the United States are attributable to antimicrobial resistance. The pipeline of new products to address this and other such challenges is essentially empty, he said, and the number of active companies in 2013 was estimated to be the same as the number of active companies in 1960. Rex offered three reasons why this is the case: it is difficult to discover new antibacterial products; it is hard to develop them; and the return on investment is poor, despite the fact that a new antibacterial agent could have a dual use as an MCM (Kinch et al., 2014). There are also several basic tensions in anti-bacterial development, including the need to minimize the use of all antibiotics, the desire to have new antibiotics available on demand, and the need for those antibiotics to be developed before an epidemic. In some ways these tensions are irreconcilable, he said. Continuing, he described lessons from the work surrounding antimicrobial resistance and translations of that work that could address the MCM-specific challenges and barriers.
Net Present Value
One European Union (EU)-based model examining the cost of creating a hypothetical antibiotic estimates that approximately $600 million is spent on discovery and development (including failures) for the first 13 years of the product lifecycle, Rex explained. Approximately $2.5 billion3 is earned in the market during the next 20 years, which includes about 10 years of some market exclusivity, followed by about 10 years of declining sales (Sharma and Towse, 2011; Spellberg et al., 2012). Although this might sound like a good return on investment, it
2The opinions expressed by Rex are his own and are not made on behalf of AstraZeneca.
3For reference, the top 100 prescribed drugs by U.S. retail sales in 2013 ranged between $725 million and $6.2 billion annually. See more at http://www.drugs.com/stats/top100/2013/sales (accessed August 4, 2015).
does not compare to high-selling “blockbuster” drugs, and Rex pointed out that the model does not take into account net present value (NPV). NPV is an important measure of how much an investment is actually worth in today’s terms, based on the cost of capital, risk, and other parameters, resulting in a per-year discount. Ten percent is a commonly used discount in industry, he stated. For example, at a 10 percent per-year discount, $100 in 10 years’ time is worth only $39 today. A project NPV takes into account all future monies, both receipts and expenditures, and discounts them back to a selected starting year so clear cost/benefit amounts are better understood. Any NPV of more than zero means that at least some value has been created.
Rex reconsidered the EU cost model in terms of NPV, starting at year 0 (the day discovery starts), and taking into account expense and revenue projections discounted at 10 percent per year over the lifecycle. At the end of 33 years, he calculated that NPV adds up to a loss of about $50 million. A recent U.S.-based analysis shows similar results, with a comprehensive model considering drug development for six different key indications (Sertkaya et al., 2014). They found that the NPV of the new drug was always less than $40 million. However, the study also estimated the value to the patient based on the value of days of work and life restored, and found that to be much higher than just the monetary NPV, ranging from $500 million to $12 billion per drug. Together, Rex suggested, these models show that, while starting antibacterial research and development is financially irrational, we as a society under-value these drugs. Incorporating the societal value of these investments into drug development adds a critical angle to understanding and communicating different types of incentives to the public, investors, and other stakeholders.
Restoring Vitality to the Pipeline
To ensure that life-saving drugs needed in the future will be available, this problem of low or negative NPV must be addressed and resolved. The global antibacterial community has been working to move the economic models back into consistently positive territory through a range of initiatives, incentives, and new regulatory guidance. As an example, Rex described the New Drugs for Bad Bugs initiative that was created under the auspices of the EU Innovative Medicines Initiative, a public–private partnership between the European Commission and the European Federation of Pharmaceutical Industries and Associations
(EFPIA)4 member companies. Seven topic-specific collaboration areas exist, with topic 4 as the Drive-AB project that is centered on driving reinvestment in research and development and the responsible use of antibiotics. Drive-AB was launched in the fall of 2014 and is focused on addressing the tension between economics and stewardship, Rex explained. A multidisciplinary, multistakeholder community will develop evidence-based measures for responsible antibiotic use and create actionable options for new commercial models that address the needs of multiple stakeholders.
Incentive Approaches from Antibiotic Efforts
A range of approaches are being explored, and Rex noted there is a particular interest in de-linking usage from reward to the innovator (i.e., reward should not be based on sales). One suggestion identified during the workshop is a push incentive in the form of a refundable tax credit. This approach has an immediate impact on NPV. Another is a pull incentive that is an insurance-based approach. There would be national acquisition of a new antibiotic at a fixed, predictable rate over a period of time. This annual fee approach would guarantee availability of the drug, whether used or not. Rex suggested that this approach is akin to life insurance in the sense that we pay the insurance premium, and we are happy when the insurance does not need to pay out.
Different models will be needed to incentivize the development of MCMs for identified threats before they emerge, and for the rapid and more expensive development of MCMs in response to a disease after it emerges, said Joe Larsen, acting deputy director of the CBRN (chemical, biological, radiological, and nuclear) Division at BARDA. From BARDA’s perspective, business models in general need to have transparency of requirements, goals, and objectives, and a clearly defined marketplace. Flexibility in the approach of incentive programs is essential, including flexible partnering mechanisms. Because of this,
4The EFPIA is the trade organization representing EU-based pharmaceutical companies.
Larsen said, traditional government contracting mechanisms will not be suitable for some MCM development programs.
BARDA’s incentive programs to date have focused largely on push incentives for advanced research and development (e.g., subsidizing development costs) and pull incentives in the form of procurements (stockpiling or vendor-managed inventory of pharmaceuticals and supplies). Larsen acknowledged that, in order to respond to an emerging infectious disease, alternative business models will likely be required to incentivize industry, and a mix of push and pull mechanisms need to be considered and implemented, especially when considering how to appeal to both small, nimble companies and larger companies with more resources and capabilities. Larsen elaborated on a novel portfolio partnering approach to overcome some of the challenges of government contracting, and briefly reviewed several alternative pull mechanisms (see Box 7-1). For products targeting emerging infectious disease threats, partial or full de-linkage pull models will likely be necessary to reward innovation in the face of market uncertainty, he said.
- Conventional stockpiling: U.S. government places order, contractor fills. May include advanced and milestone payments for initial development. (Although effective for influenza, not likely to be a cost-effective medical countermeasure model for other emerging infectious disease threats.)
- Vendor-managed inventory: U.S. government states inventory requirement, industry guarantees that quantity in their inventory at all times, and government rights to use it.
Partial De-Linkage Model
- Company develops product up to end of Phase II and then enters into contract/agreement with government
- Agreement includes $300–$500 million payment to reward innovation upon Food and Drug Administration approval (level of payment determined by novelty of technology, differentiation in market place, addressing unmet medical need, the need for support of Phase III and Phase IV postmarket commitments)
- Industry can sell product commercially (condition for antibiotics is implementation of a stewardship plan)
Full De-linkage Model
- Company develops product up to end of Phase II (antibiotics) or end of Phase I (emerging infectious diseases) and then enters into contract/agreement with government
- U.S. government or other entity buys intellectual property from industry and assumes control, manages further development
- If disease emerges, terms could be negotiated to return or sell license back to industry
Fee for Service
- Establishes a consortium of companies through an Other Transactions Authority–like mechanism to rapidly identify, screen, and characterize products for emerging infectious disease
- When not actively responding, pays consortium a fee to have them on retainer and assume a “ready” position
- U.S. government creates list of priority pathogens (20–40), with the ability to be modified at any time
- Establishes a monetary prize (value of at least 11 percent plus cost of capital) that a company would win upon getting the product to end of Phase I
- Would still require follow on infrastructure to respond to an emerging infectious disease event
SOURCE: Larsen presentation, March 27, 2015.
During the discussion, Venkayya observed that the incentive programs all had a reward (cash payment, investment by the government) for reaching a certain point. He raised a concern that cash payment by the government to a pharmaceutical company could be problematic in the eyes of policy makers or the public. Larsen suggested though, that public opinion on government reward of private research has shifted, at least with regard to antimicrobial resistance and antibiotic development. He reiterated that some of the pull mechanisms, such as the partial de-linkage model, include clear stipulations that are built in as a condition of the payment (e.g., programs for appropriate use of the product). Such stipulations that ensure limited and appropriate use might also engender a bit more public support. Meghan Majorowski, director of global health at FSG (formally the Foundation Strategy Group), agreed that there is a tension around payments to pharmaceutical firms for
development, although the palatability of the American public toward this approach is improving. She stressed the need for innovative funding strategies that are not cash payouts. Rex noted that the previously mentioned Drive-AB project is meant to precipitate a very public conversation about the true value of an antibiotic, both an antibiotic correctly used, and an antibiotic available but not used, which will be a long process working in many directions. One participant suggested that through future meetings, the Academies could consider a similar approach to increasing understanding of the true value of MCM development—separate from the typically understood “market value.”
Venkayya also observed that, in addition to the palatability of cash rewards, there is a level of uncertainty in some of the pull incentives discussed. The potential to get a reward is very different from a guaranteed reward when putting a project forward internally, he said. Larsen replied that the de-linkage model is really meant to target additional incentive toward development of those antibiotics for which the government believes there is the greatest unmet medical need (including resistance). He recognized, however, that there is still risk as the government decides who will receive the funding/contract, but any developer that reached a defined point in developing an antibiotic would get the refundable tax credit. Venkayya suggested the possibility of a priority review voucher as an incentive for neglected product development because clear criteria are in place. If a company brings an MCM to the market, they will get a priority review voucher. Advancing the approval timeline on a potential blockbuster with the help of a voucher is potentially very lucrative.
Portfolio Partnership Approach
to Antibacterial Drug Development
To highlight another potential MCM approach, Larsen described a model established in 2013 by BARDA and GSK as a 5-year, $200 million public–private partnership that supports the development of multiple antibiotic candidates. The agreement is flexible and allows for activities and resources to be adjusted fluidly to adapt to technical risk and programmatic priorities. The agreement comes under the HHS Other Transactions Authority (OTA), a mechanism that has been used widely by other agencies, but had not been used by HHS previously. Agreements under OTA are outside of the federal acquisition regulations that apply to other government contracts, allowing for a maximum
amount of flexibility and the design of mutually agreeable terms. The BARDA/GSK agreement allows GSK to have external collaborations for co-development, or through licensing. Governance is collaborative through a BARDA/GSK Joint Oversight Committee.
Larsen suggested that this model could be employed for emerging infectious diseases where there is a high degree of uncertainty in MCM development and in the commercial marketplace. Perhaps a consortium of companies could be formed through this type of flexible partnering mechanism, dedicated to development of products for emerging infectious diseases. More examples of these types of public–private partnerships and consortiums are described by additional speakers in the next sections.
Robert Garry, professor of microbiology and immunology at Tulane University School of Medicine, and program manager for the Viral Hemorrhagic Fever Consortium (VHFC), described how a modestly funded university-based consortium was able to quickly develop an Ebola rapid diagnostic test. Established in 2010, VHFC comprises universities (including, among others, Harvard University, Tulane University, the University of Texas Medical Branch at Galveston, and the Scripps Research Institute) and several small-to-medium biotechnology companies (including Zalgen Labs, Autoimmune Technologies, and Corgenix Diagnostics). There are also partners in West Africa, including the Kenema Government Hospital in Sierra Leone, where VHFC has a Lassa fever program.
The Kenema Government Hospital was a very important site for research on Lassa fever by CDC and others in the 1970s and 1980s, Garry explained. The facility was closed down by CDC in 1993 because of the civil war in Sierra Leone. In 2005, a group of investigators refurbished the laboratory and rebooted the program to focus on modern diagnostics for Lassa fever. In 2008, recombinant Lassa fever ELISA assays were established and are now in use across Sierra Leone, Nigeria, and other parts of West Africa. In 2010, a rapid diagnostic lateral flow immunoassay for Lassa was introduced (ReLASV®).
Switching Gears from Lassa Fever to Ebola
When EVD emerged, VHFC was already in West Africa and was in a unique position by having an existing research program on a viral hemorrhagic fever, Garry said. VHFC first worked to protect its collaborators and colleagues by establishing Ebola diagnostics at the Kenema Government Hospital. The consortium sequenced the first 99 Ebola genomes (Gire et al., 2014), and rapidly published clinical data (Schieffelin et al., 2014). VHFC developed the first rapid diagnostic immunoassay for Ebola (ReEBOV™), and received an EUA from FDA, and emergency use authorization and listing (EUAL) from WHO, in February 2015.
Garry explained that the previous method for diagnosing Ebola was quantitative reverse transcriptase polymerase chain reaction (qPCR). qPCR requires venipuncture by a skilled phlebotomist and takes 1 to 5 days to transfer the tube of blood to a central laboratory and get a result. The assay requires a skilled technician and laboratory with electrical power, PCR machines, and centrifuges. The lateral flow immunoassay rapid diagnostic test developed by VHFC requires only a finger stick, minimal training to collect the drop of blood, a 15-minute assay, and minimal training to perform the assay, which requires no power or laboratory equipment. Garry stressed that development of this point-of-care test could not have been done without the existing consortium, and their prior experience with Lassa fever, demonstrating the significance of having an ongoing program in place at the site of an outbreak.
Stepping back to explain initial stages of the Ebola diagnostic development, Garry said funding from NIH for initial development was received in May 2014, and field testing was initiated in July and August of that year. Additional funding was received in December 2014 from the Gates Foundation and the Paul Allen Foundation to push the product through to approval for emergency use. The question in March 2015 was how to get this test into broader use and to West Africa where it was really needed. Looking forward, the market for the product is the federal government (e.g., stockpiling by BARDA) or perhaps for sale to wealthier African nations with a need (e.g., Nigeria). Other options include subsidization or outright purchase of the tests by philanthropic
organizations or foundations (e.g., the Bill & Melinda Gates Foundation). However, depending on the status of the outbreak, the future challenge will be convincing the U.S. government of the need to stockpile this product for future outbreaks, or convincing wealthy countries or foundations to buy or subsidize the product when there is no immediate demand. Garry also suggested implementing orphan drug–type incentives5 as a potential approach to encourage development of MCMs for emerging infectious diseases.
The Critical Path Institute is a nonprofit, neutral third party that drives a number of large public–private partnerships focused on various high-end medical need areas. One of those partnerships is the Critical Path to TB Drug Regimens (CPTR) Consortium, which was described by Debra Hanna, executive director of CPTR. She noted that their neutral role in the process becomes very important where there is multisector involvement, especially when for-profit industry and regulatory health authorities are involved.
CPTR was established in 2010 with the core mission of accelerating the development of an entirely novel four-drug regimen for the treatment of TB. The aspiration is to have a regimen that is safer, shorter in duration, and more efficacious than the current standard of care, which Hanna noted is more than four decades old, for TB. CPTR expanded its mission in 2013 to support the development of rapid drug susceptibility testings (DSTs) and diagnostics to ensure the effective deployment of new drugs and drug regimens if development is successful. This added mission will both improve outcome for patients and provide market durability for any new agent that is developed going forward.
5An orphan drug is defined in the 1984 amendments of the U.S. Orphan Drug Act as a drug intended to treat a condition affecting fewer than 200,000 persons in the United States, or which will not be profitable within 7 years following approval by the FDA. For more on the Orphan Drug Act see http://www.fda.gov/downloads/Drugs/DevelopmentApprovalProcess/SmallBusinessAssistance/UCM311928.pdf (accessed October 4, 2015).
Establishing the Consortium
TB is not an emerging infectious disease; in fact, one-third of the world has been infected with TB, and 1.5 million people die from TB each year. However, Hanna said TB is a case study for what happens when it is globally decided to declare an infectious disease problem as solved. Drug and diagnostics development programs are divested and pipelines go dry. Subsequently, drug development tools, biomarkers, methodologies, and regulatory strategies in the area go stagnant. This makes the assessment of new molecules and improvement on existing regimens that much harder.
The complacency toward TB began to shift in 2007–2008 when the number of multidrug-resistant and extensively drug-resistant cases of TB began to rise even as the global burden of the disease began to drop slightly. Around that same time, there was also a reemergence of TB drugs in the pipeline, largely because of the courage and goodwill within a few companies, Hanna said. Some were repurposed antibiotics, while others were intentionally designed to be effective against TB. The Bill & Melinda Gates Foundation looked for mechanisms to accelerate the development of these new drugs and an entirely new drug regimen. It was very clear to them at the time that no one sector could take on this problem by itself. Pharmaceutical companies cannot bear the cost of full research and development for each individual drug, and especially not for four new drugs to be put together in a new regimen. Academic laboratories had models to assess the feasibility of molecules but could not design and manufacture molecules. Resources would need to be combined to make true progress.
In 2009, the Gates Foundation partnered with the TB Alliance and the Critical Path Institute to operationalize this public–private partnership and create a neutral third party, with regulatory authorities participating actively from the start. There are now more than 40 different organizations that participate in this large public–private, cross-sector partnership, with 350 individual participants giving of their expertise and time, she said. Participants from all sectors helped build the strategy for the initiative and develop the initial roadmap for projects that CPTR would do. CPTR is fully funded by the Bill & Melinda Gates Foundation, with significant in-kind contributions, as well as data and intellectual property contributions from various partners.
The CPTR Model
The CPTR model was intentionally designed around key areas or gaps for accelerating the process (see Figure 7-1). One key area, The Regulatory Science Consortium is focused on improving and validating the available methods and drug development tools. This includes biomarkers needed to support effective decision making and de-risk this costly process, especially when transitioning from early- to late-stage clinical trials, and when relying on combination studies. CPTR worked through a formal drug development tool and biomarker qualification process that has been defined by both EMA and the FDA. All of this requires sharing of information and data. Another facet of the initiative, The Drug Development Coalition, has developed a legal framework that protects companies’ intellectual property but allows CPTR to move forward with these projects. The Rapid Drug Susceptibility Testing consortium is focused on facilitating and informing the development of rapid DST that will be needed to effectively deploy these new drugs.
FIGURE 7-1 Critical Path to Tuberculosis Drug Regimens (CPTR): Holistic Approach.
NOTE: DST = drug susceptibility testing.
SOURCE: Hanna presentation, March 27, 2015.
The Research Resources Group is addressing issues such as infrastructure, access to populations, appropriate use, and ethics associated with running clinical trials in the countries where TB is endemic. Within this group, the Global Regulatory Pathways program focuses on harmonization and accelerating approval from national regulatory authorities where these drugs will be used in that space, after approval in major markets. Hanna noted that CPTR does not focus on new molecule discovery; rather, it works with several discovery engines to fill the pipeline.
One key gap in the consortium’s approach is that all of the funding comes from the Bill & Melinda Gates Foundation. CPTR is working on a sustainability mechanism and seeking additional funders to continue work on diagnostics and data platform as well as the drug regimen. Another concern is relying on political goodwill to maintain these drugs moving through the development path. Hanna noted that several of the major pharmaceutical partners have completely divested their anti-infective research and development, which has had a very serious impact in the TB drug development space. Although not part of the original focus, advocacy and incentive development for pharmaceutical companies to stay in antibiotic drug development is becoming a priority for the consortium going forward.
Meghan Majorowski of FSG described how the concept of shared value could apply to MCM development. FSG was started by Michael Porter in 1999 with the idea that foundations could be achieving more impact with their dollars. The organization now also works with companies on their philanthropic and corporate social responsibility activities, and with business units in particular to deliver social impact.
Shared value is the concept that the business value of a company and social value can overlap using the company’s assets or skills (Porter and Kramer, 2011). Shared value should actually enhance the competitiveness of the company, Majorowski said, and shared-value activities can become the focus of a company in a for-profit sector. Majorowski described three ways to create shared value:
- Reconceiving products or redefining marketplaces
- Examining the supply chain for ways to reduce costs to the organization, reduce the raw materials needed, and increase job
skills, that together improve the company’s bottom line with the company’s existing resources
- Increasing value through cluster development (e.g., putting the supply chain and the distribution chain closer together in markets)
To help in visualizing these concepts, Majorowski described an example of a shared value business model of the Novartis social venture, Arogya Parivar, in India. Novartis created a distribution network to bring 80 of their products from 11 therapeutic areas into rural India. Products were sold in smaller quantities, making it easier for people in rural areas to afford what they needed. Novartis also went into the villages and trained doctors. Within 30 months, the company was able to break even financially on the venture, she said, and the rural market in India is now a growing part of their portfolio. Another example is the Novo Nordisk efforts to address diabetes in China through provider training, patient education, public awareness, and health system strengthening. As a result, the company has seen a growing market share in insulin sales in China. What starts out as a social design can become a large economic part of the company over time, she said—they do not need to be mutually exclusive.
Translating Shared Value to MCMs
Reconceiving products and markets is especially applicable to MCM development, she thought. For shared value, there needs to be a defined social purpose or need that is shared both internally and externally. An important aspect of this, she explained, is shared-value measurement. This can be a challenge both externally and within companies. Another element is the co-creation aspect of shared value. The shared-value business model usually requires that the company partner with different types of organizations (e.g., nongovernmental organizations, government, foundations). For MCMs, establishing shared value is a bit more difficult, she said. FSG does work with companies in terms of strengthening health systems, which is applicable to the ability to respond to threats and deliver MCMs. Many companies are involved in strengthening the health system with the idea that, over time, it will allow them to enter those markets. There are also opportunities for shared value in terms of establishing partnerships to enhance discovery capabilities. Majorowski noted that the shared value model is easier to implement in
emerging markets where there is a very clear, unmet need, but is more difficult in the U.S. market.
Sustaining key capabilities for MCM development over time was a common theme of the discussion in this session. Majorowski emphasized the importance of commercial entities being able to sustain their internal capabilities, including scientific expertise and pipelines. She said that some pharmaceutical companies are having discussions to create venues where they can keep key capabilities alive, yet still deliver value to their stakeholders. It is important to describe the need and provide a forum for partners that allows them to contribute those assets.
In addition to creating venues to sustain capabilities, there is also an ongoing fundamental question of funding. The Lassa fever team in place in West Africa was almost entirely dependent on NIH grants, Garry of VHFC said, noting also that the environment for funding is extremely competitive right now with some NIH institutes funding only 1 in 10 grant applications. Leading research institutions are having to take cost-cutting measures, including layoffs, because of reduced NIH grant funding. Even with alternative sources of money (e.g., foundations, other funding agencies), it is challenging to keep a specialized team together under such circumstances. Garry estimated that the direct cost to keep operations going in Nigeria, Sierra Leone, and institutions in the area is between $4 and $5 million per year. Rex of AstraZeneca suggested that, overall, that amount is relatively inexpensive in terms of maintaining the infrastructure and ability to make an immunoassay lateral flow test for a new pathogen.
VHFC could not have developed the Ebola rapid diagnostic test in about 7 months if they had not had that group of very skilled experts already assembled.
—Robert Garry, program manager
for the Viral Hemorrhagic Fever
Sustaining Clinical Trial Capabilities
Rex noted that CPTR now has clinical trials capabilities in place, which can be viewed as a tool for rapid MCM development, but ensuring those capabilities are maintained in different locations around the globe can be difficult as well. Hanna of CPTR pointed out that it took nearly 2
years to conduct an organized analysis of the clinical trial sites being used throughout the world for TB clinical trials, and to identify which of those trial sites were best trained and which needed more training. CPTR, as the neutral entity, brought together all the right partners in order to conduct the training, develop training manuals, and make sure the clinical trialists were well educated, she said. The actual trials are run either by the companies themselves or through the TB Alliance as the product development partner. The trials are funded in part through the companies, like Janssen, who have new TB medicines. However, many of the trials are also supported through NIH funding mechanisms and through the Bill & Melinda Gates Foundation and other funding sources. Even if a company is able to bring a product through early development, there are internal challenges in convincing leadership to commit resources through Phase III development, because those corresponding costs are so high. CPTR is bringing together different kinds of funding partners to help make sure those trials are seen through to completion. The group is also bringing forward validated models and clinical trial strategies, and modeling and simulation tools that can help to design better trials. The existence of the clinical trials network will not necessarily make product development less expensive, she said, but there is a potentially large cost advantage to having capabilities available to pull together, and to be able to start clinical trials more quickly. The key with product development partnerships, Hanna noted, is showing flexibility in how they partner with and reward pharmaceutical companies to bring in drugs from their pipeline.
Following Rex’s challenge to identify one area they would highlight for action in the near term, Hanna said there is a need to articulate and test a suite of funding options and incentive models with all the key stakeholders. This point was further emphasized by Arthur of BIO, who added that this suite of options and incentives may have to be different for small versus large companies, and also include different considerations for classic MCMs versus products for emerging infectious diseases.
Majorowski reiterated earlier statements from Farrar of the Wellcome Trust about clarity of language and requests, stressing the importance of clearly defining the unmet MCM needs and targets that
qualify as national or international security threats. A recommitment to basic science is also needed, Garry noted. For example, the NIH budget has been relatively flat for the past 10 years, which is an actual decrease in real funding of at least 25 percent over that time. Larsen of BARDA suggested that, from a policy standpoint, a framework of prioritization for emerging infectious diseases would be valuable, so that the list is manageable and tangible in terms of product development and all partners are clear on priorities. Developing some consensus on appropriate stopping points in development would also be helpful Larsen added. Given the limitations in capabilities to develop these products, aligning business models and incentives to reach reasonable points in development could improve understanding and decision making.