[1]thx to keith cooper flickr creative commons
In a bid to jump start drug development for rare diseases, a pair of lawmakers has introduced a bill that would allow the National Institutes of Health to establish a private investment fund.
The idea is to raise $400 million from private investors and use the proceeds to develop early-stage compounds. The NIH’s National Center for Advancing Translational Science would develop these early-stage compounds and then transfer them to the fund. And in exchange, the agency would get a stake capped at 25 percent.
The goal is to benefit taxpayers, patients, and investors, explained Andrew Lo, who directs the Laboratory for Financial Engineering at the MIT Sloan School of Management and published a pair of papers that served as the springboard for the legislation. He believes the fund could underwrite anywhere from 25 to 50 rare disease drug projects.
“Basically, the fund would be an investor and invest in a variety of different projects,” said Lo. “But we don’t want the government involved in managing those assets. So the fund would take those therapies and, with private financing, advance them through the clinical pipeline. We need private sector investors, because they move those therapies along more quickly.”
Details are still being worked out, but the legislation [2] would permit the NIH to act as an advisor and also provide some technical services. The entire effort, which was first reported [3] by our Stat colleague Rebecca Robbins, would likely be overseen by an advisory board and a fund manager. Ultimately, the fund may resemble a hybrid between a public-private partnership and a venture capital vehicle.
“The life sciences industry desperately needs help to overcome the ‘valley of death,’ ” said Juan Vargas, a Democratic Congressman from California who co-sponsored the bill, in a statement [4]. “The R&D Fund would allow for a larger number of biomedical projects to be funded, and thereby increase the likelihood for new cures to be found faster, more efficiently and with greater efficacy.”
Whether the legislation, known as the Rare Disease Fund Act [5], will gain traction remains to be seen. But certainly, there is considerable interest in not only developing medicines faster, but making greater use of federal agencies toward that end. And given that government financing is not required – but taxpayers could earn profits – the bill is likely to gain attention, especially from patient groups.
In one of his papers [6], Lo and his co-authors estimated that the average annualized return of such a fund could range from 12 percent to 15 percent, but that could go still higher depending upon the financing used to raise funds. And a simulated performance of an NCATS rare-disease portfolio that is comparable to a portfolio of drugs held by a venture capital fund, the internal rate of return exceeded 25 percent.
One patient group is hopeful the notion will work. “We are encouraged by its intention and looking into the specifics… to determine if it can deliver on what it is promising,” a spokeswoman for the National Organization for Rare Disorders wrote us.
But not everyone is enamored of the idea. Brook Baker, a professor at Northeastern University School of Law and a senior policy analyst for Health GAP, a group that advocates for wider access to medicines, agreed that the NIH should be more involved in supporting development of promising drugs. But he criticized the terms
The bill provides funding without “corresponding responsibility for the product developer,” he told us. “The funding will help select research winners, but then its winner take all. [Companies with] medicines for rare diseases already get special periods of market exclusivity and greater tax breaks, but now they will get publicly funded venture capital support as well.”