Venture Philanthropy: Is It Really Promoting Patient Centric Drug Development?

By Anna Rose Welch, Editorial & Community Director, Advancing RNA

In 1999, The Cystic Fibrosis Foundation, under the leadership of Robert J. Beall, chose to funnel its resources directly into California biotech Aurora BioSciences rather than into a grant for academic research. This move eventually led to the approval of Kalydeco for cystic fibrosis (CF). Just this past week, Vertex Pharma (which acquired Aurora BioSciences) approved its second drug, Orkambi, for CF, which combines Kalydeco and lumacaftor. This was not just another big win for Vertex and CF patients, but also for what has now become a trend known as “venture philanthropy.”

Within the last 10 years, a number of nonprofit groups, including the Michael J. Fox Foundation and the Multiple Myeloma Research Foundation, have taken a similar approach to ensuring that their targeted patient populations are being well represented in pharma R&D. These venture philanthropy arrangements can be structured in several different ways. A nonprofit may choose to invest in and fund a startup (with the promise of future milestone payments for any promising developments), or to assist a start-up with the process of running a clinical trial (e.g., boost recruitment using patient registries, help with protocol development and/or site selection). Derek Rapp, president of JDRF (formerly known as Juvenile Diabetes Research Foundation), said it best in an article in the Washington Post: The primary goal of these partnerships is to determine, “Will our funding lead to something happening that otherwise wouldn’t happen?”

Rapp’s question speaks to the rather unsettling changes that have hit pharma R&D in the past few years. When it comes to turning a promising scientific idea into a reality, a lot of scientists and small companies are running into trouble finding the necessary sources of funding. Big Pharma, which has been drifting away from its own drug discovery, is on the lookout for candidates being developed by outside sources. However, given the high costs and risky nature of drug discovery, companies have become increasingly skittish about the notion of investing early on. Enter venture philanthropy. Many industry onlookers have lauded nonprofits’ investments in drug development as a way to end “the valley of death,” the gap between academia and basic research and late-stage pharma-run clinical trials.  

However, many have questioned the effects this kind of philanthropy has in the long run. A big concern in the industry is that these partnerships could lead patient-driven organizations to become too focused on monetary incentives. There’s also the concern that this trend could lead to the increased privatization of medical research, and in turn, higher drug prices and less relevant drug development. Venture philanthropy ultimately means scientific research is being driven, not by publically-funded institutions (i.e., government-controlled) such as universities and government agencies, but by private philanthropists. This money is then dedicated to the development of a product which gains intellectual property protection and, most likely, a startling price tag. (Take Kalydeco, for instance, which costs $300,000 per patient for a year of treatment. It should come as no surprise that the CF Foundation has taken some flak for not doing enough to keep the price of the drug under control. Beall maintains that the Foundation was not “at the pricing table.”)

In his opinion piece in The New York Times a few months ago, Llewellyn Hinkes-Jones argued that privatized research skews the R&D terrain. “The resulting race for private funding has created perverse incentives to research blockbuster drugs, even if they are not the most imperative from a public policy standpoint,” Hinkes-Jones states. While he acknowledges that this form of funding can help promising orphan treatments get Big Pharma attention, “Researching extremely rare diseases may also represent a misuse of public and private funds. Efforts to cure, rather than treat or prevent, obscure diseases can be expensive, diverting investment from more common afflictions. The high costs of focusing on rare diseases are then eventually pushed onto the healthcare system by way of egregiously high drug prices.”

I’ll admit to my own squeamishness about the move toward privatized research (or privatized anything, for that matter). Given the pressures facing NIH funding these days, I would very much like to see more attention paid to the academic realm. I’ve always been particularly interested in what Elizabeth Warren has had to say about how to increase NIH funding, and in turn, support of academic research. And, like many others out there, I often have a hard time seeing how establishing patient centricity and succeeding in business can be mutual — and equal — goals.

When it comes down to it, the partnerships these nonprofits form are business arrangements and have financial goals. As Louis J. DeGennaro, president of The Leukemia & Lymphoma Society, told the Washington Post, “When we partner with a company, it’s not a grant, it’s a business alliance. There’s a contract with time lines and milestones. We’re paying for performance.” The CF Foundation’s Beall told Chemical & Engineering News that to make any progress in drug discovery, “You’ve got to run [the partnership] like a business. We have a checklist of 20 to 30 items we like to see included in our contracts,” and should a company decide they don’t wish to complete the deal as arranged, they are financially responsible to the CF Foundation.

We’re living in the age of virtual biotechs and growth pharma. It seems fitting that nonprofits should also be undergoing an identity shift to get cures to patients. However, as this trend is likely to continue and orphan drug prices keep escalating, there should be more attention paid to how these partnerships are structured — especially as a candidate is picked up by Big Pharma and put through development. If a nonprofit is privy to milestone payments, why are they not also given a seat at “the pricing table?” The price of drug development is undebatably high. It’s logical to argue that Big Pharma, which takes the reins of costly later-stage development, should have the final say over a drug’s worth. However, partnerships with patient advocacy organizations are becoming a more important part of drug development. Likewise, these organizations’ investments are helping further drug development. It only makes sense to me that the nonprofit, and ultimately the patients’ voices, should be represented in whatever results from the initial public funding.