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 Journal of Controlled Release 345 (2022) 275–277

Contents lists available at ScienceDirect

Journal of Controlled Release

journal homepage: www.elsevier.com/locate/jconrel

The economic challenges of new drug development☆

Laurence S.J. Roope
Health Economics Research Centre, Nuffield Department of Population Health, University of Oxford, United Kingdom

A B S T R A C T

The COVID-19 pandemic has witnessed highly successful efforts to produce effective vaccines and treatments at an unprecedented pace. This perspective discusses
factors that made this possible, from long-term investments in research infrastructure to major government interventions that absorbed much of the risk from
research and development. We discuss key economic obstacles in the discovery of new drugs for infectious diseases, from novel antibiotics to diseases that primarily
affect the poor. The world’s collective experience of the pandemic may present an opportunity to reform traditional economic models of drug discovery to better
address unmet needs. A tax-funded global institution could provide incentives for drug discovery based on their global health impact. International co-operation
would be needed to agree and commit to adequate funding mechanisms, and the necessary political will would require strong public support. With the current
heightened appreciation of the need for global health system resilience, there may be no better opportunity than now.

1. The accelerated drug discovery of the pandemic was a combination of sustained long-term investment in research
infrastructure, large sums of newly available funding, government
The COVID-19 pandemic has seen unprecedented and highly suc­ intervention, and some good fortune that, as a coronavirus, the
cessful efforts to produce effective vaccines and treatments at lightning pandemic came from a family of viruses that was being studied [1,2].
speed. Much like the anecdotal professor writing their keynote speech in In this perspective, we reflect on some key economic obstacles in
half an hour, en route to the conference, this has only been possible drug development. We argue that the world’s collective experience of
thanks to years of prior investments in cognate research [1,2]. These the pandemic may present an opportunity to reform traditional eco­
include, among others, the considerable investments into mRNA vac­ nomic models of drug discovery to help address present and future
cines that acted as a springboard for the Pfizer and Moderna vaccines; unmet needs.
the research infrastructure employed to tackle coronaviruses that
underpinned the Oxford-AstraZeneca vaccine; and the research infra­ 2. The unmet needs from diseases with high global burden but
structure underpinning the RECOVERY trial, which was set up in record low margins
time, taking just nine days from conception to launch.
This research infrastructure, together with unprecedented amounts From the perspective of a drug company, most infectious diseases are
of funding, made available at short notice because of the global emer­ low margin businesses. In the traditional economic model, remuneration
gency, allowed drug discovery to occur at a phenomenal pace. To a for drug companies is based on prices times volumes. This means that
vastly greater extent than in normal times, pharmaceutical companies there may only be sufficient financial incentives to innovate if antici­
were able to gamble and risk failure as governments took on liabilities pated volumes, at an above break-even price, are high.
by providing huge development support and committing to pre- While there is certainly such potential once a disease becomes a
purchasing candidate vaccines [3]. This enabled multiple large trials pandemic, at which point sales volumes are extremely high and high-
to be conducted in parallel [1] and trial timelines to be compressed by income countries are prepared to spend heavily to acquire them, it
running the usually distinct phases I to III of clinical trials, as well as can be a major barrier beforehand. Even relatively high anticipated sales
licensure processes, partly in tandem [3]. Meanwhile, manufacturing of volumes may provide insufficient incentives if the expected pricing is
multiple candidates began at scale so that large stockpiles of vaccines low. In large part, this explains the failure of the traditional model to
were available immediately upon licensure to begin Phase IV and na­ eradicate diseases that mainly affect poor people in poor countries, even
tional vaccination programmes immediately [3]. In sum, the fast success when the numbers are high – such as malaria and tuberculosis which,

☆
When confronted with the global threat of a modern plague, the world community of scientists, pharmaceutical companies, and governments came together to
meet the challenge in an unprecedented way. Here, a leading thinker in health economics outlines how this occurred, providing a perspective on how the COVID-19
pandemic has provided valuable learnings for the future.
E-mail address: laurence.roope@dph.ox.ac.uk.

https://doi.org/10.1016/j.jconrel.2022.03.023
Received 11 March 2022; Accepted 12 March 2022
Available online 17 March 2022
0168-3659/© 2022 The Author. Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
L.S.J. Roope Journal of Controlled Release 345 (2022) 275–277

respectively, kill 500,000 and 1.5m people annually [4,5]. At pricing

levels low enough to ensure high sales volumes and good access to a new
drug, the resulting revenue may be insufficient to offset the costs of
research and development (R&D).
What of the patent, a cornerstone of the traditional economic model
that aims to improve incentives for innovation? A patent affords a
company exclusivity for a period of time to manufacture, market, and
sell a new drug. (In the US, this is typically 20 years from filing date
though extensions are possible). By eradicating competition, this en­
ables the drug innovator to charge higher prices. The intent from a so­
cietal perspective is to accept reduced access to drugs in the short-term
as the price of providing better incentives for future innovation. How­
ever, in the case of diseases that mainly affect poor people, exclusivity
may not equate to the ability to make a profit, as sales volumes at a price
likely to recoup R&D costs may not be widely affordable in poor coun­
Fig. 1. 1. Author’s estimates based on data reported in [10] (Yegros-Yegros
tries. Thus, patents do not necessarily unblock the pipeline for discovery et al.’s Additional File 2, worksheet “Diseases Included in study”); 2. Vertical
of such drugs, and unmet needs in poor countries continue. bars denote 95% confidence intervals of Pearson’s product-moment correla­
Alongside the COVID-19 pandemic, the world also faces the slow- tions; 3. LMIC denotes “low and middle income countries”; HIC denotes “high
burning crisis of increasing resistance of bacteria to our stock of anti­ income countries”; ALL denotes full sample of countries; 3. DALY denotes
biotics. Antibiotic consumption continues to grow, increasing selection “disability adjusted life years” and is a measure of the burden of a disease in
pressure on bacteria to develop resistance to treatment. This poses a terms of mortality and disability. One DALY represents the loss of the equiva­
grave threat to modern health care, much of which is dependent on lent of one year of full health.
effective antibiotics to prevent and treat infections associated with
routine medical procedures [6]. In addition, “pull” incentives are intended to ensure that, once a safe
An unusual feature of antibiotics is that there can be considerable and effective drug is developed, it will provide sufficient revenue to
value in having access to several types of antibiotics, with different ensure an attractive return on investment for its developers. In the
mechanisms of action, to fight the same pathogen. This contrasts with context of diseases with high global burden but low margins, this means
other drugs, for which a new drug is generally only advantageous if it is that pull incentives need to be designed in such a way that there are
more cost-effective – that is, some combination of being more effective, sufficient incentives for innovation, even with low prices and/or sales
cheaper, or both. The value of having multiple antibiotics stems from the volumes [11–14]. This requires “delinking” the profits from drug dis­
ability to continue to use a new antibiotic once bacteria develop resis­ covery from prices and volumes.
tance to an older antibiotic that was once equally effective [6]. Without In the case of antibiotics, there have been tentative steps towards
innovation and a diverse set of antibiotics, over time, infections become subscription-based models. In the UK, the government is currently
difficult or impossible to treat due to the inevitable onset of resistance testing a subscription model, with annual lump-sum payments being
[7]. made for two antibiotics, the amount being based on their value to the
Unfortunately, the societal value that would be reaped from inno­ National Health Service rather than the number of doses that are sold.
vation and a diverse pool of antibiotics is not being realised. Though the However, progress remains slow. A critical question that needs to be
details differ, fundamentally the problem boils down to a similar lack of addressed is how a reasonable fixed price can be determined [15]. While
incentives as in malaria and tuberculosis. In the case of antibiotics, a the price must incentivize innovation, it must also, in a single-payer
particular issue is that, once an effective new antibiotic is developed, healthcare system, be good value to the taxpayer [15]. While this
there is likely to be considerable pressure to restrict its use, to reduce the value should undoubtedly account in some way for the wider costs of
selection pressure for resistance to develop. This, together with the fact antibiotic resistance, estimating such a value is immensely challenging;
that effectiveness of the new antibiotic is nevertheless likely to decline it may be more pragmatic to adopt an insurance-based valuation
over time as bacteria inevitably develop some resistance, reduces the approach, where the new antibiotic is seen as contributing to insuring
volumes that are likely to be sold over the time horizon during which against the societal costs from a substantial reduction in the effective­
companies will have a patent. ness of current antibiotics [6].
As with drugs that mostly affect poor people, high costs of drug Critical to the design of sufficient pull incentives, whether for anti­
development together with insufficient anticipated revenues have biotics or for diseases like malaria and tuberculosis, is the problem of
resulted in a colossal market failure, whereby a misalignment of in­ finding and co-ordinating countries or institutions that are willing to pay
centives between pharmaceutical firms and those of society results in for them. It has recently been estimated that the sum needed globally to
considerable unmet need. return a positive net present value for discovery of a novel antibiotic
ranges from US$2.2–4.8bn, with a best estimate of $3.1bn [16].
3. Reforming drug discovery to meet unmet needs from diseases Considering that the current subscription scheme in the UK, the first of
with high global burden but low margins its kind in the world, contributes £100m over a 10-year period, it is clear
that global co-ordination will be needed to make the provision of suf­
In recent years it has become widely recognized that incentivising ficient pull incentives a reality.
novel antibiotic development requires a combination of so-called “push” If achieving this seems challenging in the context of antibiotics,
and “pull incentives”, and this perspective argues that the same is where all countries are likely to see clear benefits, how could such a
needed to address unmet needs from diseases such as malaria and model possibly work in the context of diseases that mainly affect people
tuberculosis. “Push” incentives refer to government or regulatory in­ in poor countries? One possibility lies in a system such as the Health
terventions that bring down R&D costs, reducing their financial risks, Impact Fund (HIF) [17]. The basic idea of the HIF is to create a global
and increasing the probability of success. Beyond industry, push in­ government-funded agency that offers yearly reward pools from which
centives in the form of research grants for targeted basic research could new drugs can receive a share for a fixed period of time (e.g. 10 years),
also help to address the problem that high-burden diseases common in corresponding to the drug’s contribution to the global health impact of
low-income countries have been relatively under-studied in academia all HIF-registered drugs. Countries could pay some percentage share of
[8,9] (Fig. 1). GDP into the fund. While the HIF has been envisaged primarily as being

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