“Pay for success” contracts – a model to develop new therapies from old drugs
crowdfundedcures.medium.com
crowdfundedcures.medium.com
I have used this pathway myself and the FDA is quite comfortable with it. I don't really understand the fuss. Nor do I understand why the DAO matters.
https://www.fda.gov/regulatory-information/search-fda-guidan...
"The United States Government will give $1B to the first company or person to demonstrate a safe and effective treatment that halts or reverses the effects of Progressive Supranuclear Palsy[1] using treatments with existing FDA approval."
[1] My Dad has it. It sucks. 0/10 do not recommend. https://en.wikipedia.org/wiki/Progressive_supranuclear_palsy
On our product it was an approved API with different dosage and a different mode of administration. Still in trials, but if approved it will have normal patent protection.
Edit: the first “is” was autocorrected into “isn’t”. Glad I saw it!
Yes, it is possible to reformulate a generic but there's only a business model if you can prevent off-label competition (and a compounding pharmacy could also reformulate). This is what I mean by information about a treatment protocol for a repurposed generic / off-patent drug being a public good. What if your new use for the off-patent and or compounded drug was a very effective new treatment or cure for an unmet medical need? This is the real tragedy of the commons. It's not always possible to rely on reformulations, dosage or mode of administration to prevent generic competition, and could actually cause public harm if the patented reformulation of the drug is less safe or effective - see https://www.nature.com/articles/s41587-021-00999-0 . And it's possible to fix it with a pay for success or bounty model, as long as we can convince a payer agree to put a price on successful off-patent RCT data (e.g. $10-50k per QALY). However, this hasn't been tried to date.
Repurposing generics has becoming increasingly popular, because the clinical trial risk is much better in phase 2/3 (where most of the money is lost) than for novel compounds. Combine that with FDA fastrack designation for orphan diseases, and it's become quite the popular space for innovation. Even some of the papers "cited" by this article contradict it.
> This means that if one company pays for the expensive clinical trials showing that a specific treatment protocol for an off-patent drug works in a new indication, they cannot prevent others from “free riding” on this valuable information, which is a “non-rivalrous non-excludable” public good once it is published online
This isn't true. Composition of matter patents are not the only patents. If so, we wouldn't see generic repurposing at all, and obviously that isn't correct.
I cannot reconcile these articles with the high investment in repurposing I see in pharmaceutical startups.
There is repurposing of on-patent drugs while a monopoly profit can be enforced. That's not the point. The point is that information about which off-patent drugs work in new indications is the definition of a non-excludable and non-rivalrous public good. There is no way to enforce a monopoly profit if people can take the generic drug off-label or have it compounded in a pharmacy. Therefore, there is a tragedy of the commons preventing private investment to unlock this generic drug repurposing innovation (unless someone can come up with a new patented formulation that will not be subject to off-label competition, which is not always possible).
A pay for success contract is a solution to this problem. You can also enforce differential pricing for repurposed generic drugs while preventing off-label competition using e-medical records, but this is also another kind of pay for success mechanism (like an advance market commitment or the agreement to pay a minimum order of the Covid vaccines under Operation Warp Speed). However, it might not be politically and commercially feasible to prevent off-label use, especially for generics which are widely prescribed for other off-patent indications.
If the costs for these types of solutions can be SO much lower, it surprises me that there isn't a more robust subculture working on it with money they've made when their last tech startups went public. Almost everybody knows somebody with a rare or expensive-to-treat disease, right?
Is it just too early? Are we only just learning how to figure out exactly which mutations cause exactly the wrong protein production errors in the cells, and then can assess the effects of off-patent generics to treat them? Or is there more to it than that?
I only learned about Medikanren[0] a couple weeks ago, and since this isn't my field, immediately felt like I was behind on some very important knowledge, and I'm fascinated by the thought of trying to figure out how to address this problem by thinking this far outside the big pharma box.
It reminds me of FOSS in that the funding challenges may be similar, but for treating disease.
This would allow tools such as Medikanren and other AI and personalised medicine approaches to drug discovery to be properly utilised. Doctors need RCTs to know which drugs are safe and effective and unfortunately, those RCTs are expensive, which creates a market failure if there is no ROI possible with patents. You can't solve a market failure with direct public funding, it's too inefficient. You need to update the social contracts to create a new market.
You are correct, it's the same "public goods" problem for FOSS projects, but for medicines, and uses a "bounty" model to solve it, but has not been implemented to date.
This is especially important for rare conditions that are unlikely to ever see robust R&D purely on the basis of the size of the market.
If success is a particular percentage of outcomes after 10 years in a trial, maybe that's not that attractive to an investor.
Outcome payments are disbursed to the fund by payers upon success of a particular clinical trial. Payment amounts are determined based on savings generated for the payer (e.g., a national health service or private health insurer) which ensures the model is scalable, using standard pharmacoeconomic assessment (e.g., $50k per QALY, or Quality-Adjusted-Life-Year or $100k per additional prevented hospitalisation in treatment arm vs usual care) that considers the incremental cost savings due to showing efficacy of this new off-patent treatment in RCTs versus cost for standard usual care
My preference is to have a payment for a specific robust outcome like per prevented hospitalisation in the treatment arm of an RCT. For most patented drugs, this would be a very high cost (e.g. if 50 patients treated to course of patented drugs costing $50k each for one prevented hospitalisation, society would be paying $2.5m per successful outcome under patent system). This is also more closely linked to how outcome payments for social impact bonds are determined (e.g. $5k per homeless person given a job and put in a home or per prisoner that is given a job and stays out of prison for one year).
Regarding ROI for impact investors, it should be a market rate (5-10% p/a) paid over a period of time (e.g. 5 years) and subject to phase 4 surveillance trials showing the safety and efficacy of the off-patent treatment protocol is maintained over time. The impact investment opportunity can be made more attractive (above market rates of return) if payers such as govts, health insurers or philanthropy also provide matched funding without an expectation of return - effectively acting as follow on investors but relying on the impact investors to lead the round and pick the winners (promising off-patent repurposing RCTs to fund) instead of traditional direct grant funding where payers take on all the risk of RCT failure. I also note that it is over 100x cheaper to repurpose generic drugs, so the cost per QALY should be much more value for money (e.g. $1k per QALY) and would outcompete the patented drugs. Open Source Pharma Foundation are working on a Phase 3 trial of a repurposed off-patent vaccine - https://www.fastcompany.com/90498448/how-open-source-medicin.... Old vaccines can provide broad spectrum protection by boosting innate immunity - see https://www.pnas.org/content/118/21/e2101718118. The lack of private incentives to repurpose off-patent medicines is a massive missed arbitrage opportunity that could generate trillions of dollars in value for society, if only it could get payer backing.
Your fleshed out thoughts is exactly the kind of line I wanted to see in the article. Just mentioning QALY is no better than a manager vaguely promising to pay you when the product "scales". You'll end up arguing fruitlessly over definitions. I would have liked to see a concrete example of how an investor would expect to be paid in practice. Until specific examples of what that could translate to in practice have been offered, it's just a buzzword.
I agree that QALYs are vague should only be used as a tool to determine a specific price for repurposing RCT data. The price and "deliverables" (i.e. successful generic drug repurposing RCT data) will be specifically defined in the contractual language and negotiated with a payer in advance. Essentially you ask a payer to state a price they are willing to pay for off-patent RCT data to treat a specific disease (e.g. $100k per prevented hospitalisation in the treatment arm of a Phase 2/3 RCT, and may also require regulatory approval as a condition or "bonus"), then put it to the market in an RFP document. This would be scalable if the price paid is less than the amount of savings for payers. For repurposed generic drugs there is a significant arbitrage opportunity because the marginal cost of generic drugs and it is over 100x times cheaper to conduct RCTs and achieve regulatory approval ($10-15m, enter phase 3 trials immediately) vs patented drugs that take 10-15 years and cost over $1-2b. So even agreeing to transfer 1% of cost savings into a pay for success contract could generate billions of dollars in outcome payments for generic drug repurposing and trillions in healthcare cost savings in the US alone from the discovery of new low cost generic drugs to treat diseases
E.g. from the article:
By way of example only, repurposing the off-patent NSAID ketorolac as a prevention treatment resulting in 10% reduction in breast cancer recurrence would cost $5 million annually (100,000 cases at $50 per case for ketorolac and its administration). The savings would be over $1 billion annually (10,000 patients at approximately $100,000 per patient for the treatment of metastatic disease)
It really isn't that much different from how military contracting works, except the process would be more competitive because anyone would be allowed to conduct the RCTs - the idea is to leverage the market to crowdsource the solution using pay for success, otherwise it's not really much different from the risks of traditional grant funding "picking the winners" (although it still is different in the sense that the the funds are not provided up front from the payer). But like biotech industry, you want everyone to be able to raise money for RCTs and a minimum of bureaucracy (except dealing with FDA and ethics approvals, which is a necessary evil).
The key difference here is that you now have a market for something that is essentially a public good. Ideally, payers should form a syndicate to minimise free riding - this is one of the core benefits of patents: they tend to be enforced globally since GATT/TRIPS, even in India and China. The equivalent would be a global pay for success fund (similar to the proposed Health Impact Fund - see https://en.wikipedia.org/wiki/Health_Impact_Fund, although this is not focussed on incentivising generic drug repurposing to save payer healthcare costs, which would be scalable, but more on developing new therapeutics for neglected/tropical diseases)
Ahahah, my apologies I didn't realise I was commenting directly to the author, otherwise I would have not have referred to you in the third person.
I disagree about "too much detail" here, in that clarity and simplicity, not vagueness, are the correct remedy to the risk of overinformation.
But yes, your comments here add a lot more clarity to the idea, and it is indeed an interesting proposition, thank you for taking the time to elaborate. Hopefully someone who had the same initial impression as I did might find their way to this thread and be equally satisfied with your added thoughts here.
In my view, there is a role for new patented drugs, but this model will reduce pharma's ability to game the patent system via "evergreening" (e.g. releasing a slightly tweaked formulation of a drug just prior to expiry of the old generic and trying to get doctors to switch to new formulation using excessive marketing). It would give payers another option other than patented drugs to buy successful RCT data.