11 September 2016

Direct Funding of R&D by Governments

Much of the scientific progress in medicine is a consequence of government-funded research and development (R&D).

The largest funder of R&D is the United States government, which provides funding for biomedical R&D performed in-house or by third parties under research grants, contracts, and cooperative research and development agreements (CRADAs). The U.S. National Institutes of Health (NIH) is the most import federal agency funding biomedical research, but many other agencies contribute. For example, the U.S. Department of Energy funded much of the research that was instrumental in the sequencing of the human genome and in the development of new diagnostic tests. The U.S. Army funded much of the research that lead to the development of the prostate cancer drug Xtandi, and Department of Defense Agencies agencies like the Biomedical Advanced Research and Development Authority (BARDA) fund all aspects of R&D for a number of vaccines and antibiotic drugs. The role of the federal government in funding R&D can and should be expanded in some areas, particularly as regards increased funding for later stages of drug development. For example, the NIH has spent decades to develop a new vaccine to protect against the Respiratory Syncytial Virus (RSV), and now, after conducting promising Phase II trials, is licensing the technology to Sanofi, a giant French pharmaceutical company. The NIH could have retained more rights in the vaccine and funded the Phase III trials itself, so that the vaccines would be inexpensive when it reaches the market.

Every developed economy government funds biomedical R&D to some extent, as do many developing countries. Many high income countries, such as Switzerland, do not pay as much for biomedical R&D as does the United States, as a percentage of GDP.

For more than a decade, the World Health Organization (WHO) has been considering a new treaty or other agreement on the funding of biomedical R&D, based upon the principle of delinkage of R&D costs from product prices. More recently, there has been considerable mobilization for global cooperation on the development of new antibiotic drugs, also embracing to some extent the principle of delinkage. Health groups, such as KEI, Médecins Sans Frontières (MSF), Oxfam, Health Action International (HAI) and the Treatment Access Campaign (TAC), to mention a few, have proposed addressing the need for additional public sector R&D funding in a variety of international agreements as an alternative to provisions in trade agreements that are designed to expand patent rights and raise drug prices, and also to address a variety of critical health innovation needs, including such public health challenges as Ebola, Zika, or Avian flu.

The current system of trade agreements focuses solely on obligations to fund R&D through the granting of expanded and extended monopolies on products and high prices, even though it is obvious that such instruments do not address the funding of basic science, pre-competitive development work, and many critical innovation needs. This focus on incentives provided by high prices ignores the importance of other funding mechanisms (direct funding and R&D subsidies), and locks countries into a trajectory of higher and higher prices for drugs, vaccines, and diagnostic tools.

Under delinkage scenarios, governments would expand direct funding of R&D and R&D subsidies, and also reform the incentives now provided by monopolies and high prices.