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Analysis

R&D Investment for Economic Sustainability, Access to Therapies

By Miriam Bello | Thu, 08/26/2021 - 11:30

R&D in pharma is key to develop precise therapies and a sustainable health system for countries. However, collaboration between the public and private sector is key to mitigate the risk of these ventures and make the most of the available resources.

“Public-private partnerships should play an increasing role in advancing scientific progress and innovation,” says an article by Pfizer. Only a collaborative R&D ecosystem that reflects this will speed up the development of innovative breakthroughs to benefit all citizens. “We believe governments need to continue to provide routes for public and industry partnered consortia that reflect the environment required for innovation, rather than solely focusing on academia-led consortia.”

Investment in pharmaceutical R&D not only improves the health of the population. In the medium term, it can also generate savings in health spending (by reducing hospitalizations) and health operating costs. According to Macrotest, many economies are driven by an innovative pharmaceutical sector. However, developing new drugs is a costly and uncertain process as only about 12 percent of drugs entering clinical trials are ultimately approved by regulatory agencies like the FDA or COFEPRIS. The average cost of developing a new drug ranges from less than US$1 billion to more than US$2 billion. Those estimates consider the costs of both laboratory research and clinical trials of successful new drugs, as well as expenditures on drugs that do not make it past the laboratory-development stage, that enter clinical trials but fail or that are not approved.

The needed investment varies across disease areas based on their profitability, the disease burden and how risky drug development is, referring to a specific ailment, explains an article by OHE. This variation means that incentives do not always encourage commercial investment in R&D for diseases or technologies that may be a priority considering a country’s disease burden. OHE explains that to compensate for the potential gaps in private research funding, governments directly invest in pharmaceutical R&D particularly supporting drug development at public institutions.

COVID-19 and Public Investment

Governments can directly support private developments, like vaccines, in two primary ways, either by covering the costs of R&D or by committing in advance to purchasing a successful vaccine batch upon a firm achieving specified development goals.

For instance, for the development of the Moderna vaccine in the US, the New England Journal of Medicine reported that several government entities contributed to the development, such as the National Institute of Allergy and Infectious Diseases and the National Center for Advancing Translational Sciences, two of the centers from the National Institutes of Health, an agency of the US Department of Health and Human Services and BARDA. The total contributions were of US$2.5 billion.

Thanks to this investment, the US had rapid and exclusive access to this vaccine. It is one of the few countries encouraging mass vaccination among its adult population and is currently over halfway of vaccinating the eligible population. Although there are no specific analyses on Moderna alone, a study by IMPLAN showed that production of the COVID-19 vaccine from US companies Moderna, Johnson & Johnson and Pfizer generates US$32.3 billion in revenue and supports 88,179 jobs. The US$10.6 billion investment by the federal government in those three companies creates a ripple effect throughout the economy and supports the sustained work of the supply chain.

Private Investment in Mexico

Private investment has also made a difference in treatment access. Mexico’s infrastructure and resources to produce a COVID-19 vaccine was proven wanting against countries like the US, the UK (which, just as the US did with Moderna, supported the Oxford-AstraZeneca vaccine), Russia or China. However, the nation’s pharmaceutical sector is globally recognized and an important player for global pharmaceutical companies that have manufacturing plants in Mexico.

While development might not be the country’s strongest suit, production and packing are. These processes also require investment in state-of-the-art facilities able to support the science behind the vaccine. “The market is competitive but its potential is greater. Some companies are already taking advantage of the opportunities, like Liomont, a company that employs around 1,470 people and has a production capacity of more than 120 million units per year, which will be involved in production of the AstraZeneca-Oxford COVID-19 vaccine,” said to MBN Enrique Martínez, Founder and Director General of INEFAM.

Still, for Sonia Pérez, Executive Director of UDIBI-IPN, while manufacturing capabilities are to be taken advantage of, the lack of investment in R&D “is what stops the country from moving from manufacturing to technology development,” she told MBN. Moreover, Jorge Valdez, Dean of Tecnológico de Monterrey School of Medicine and Health Sciences (TecSalud), said that to achieve what governments and private companies have with the COVID-19 vaccine, we need to let go of the “absurd” idea of government and private sector separation. “In Mexico, the public and private sector are heavily divided, regardless of the industry, which has been proven to be absurd.” Thanks to private investment in Mexico, Liomont’s production of the COVID-19 vaccine has facilitated the country’s access to thousands of vaccines.

The Road Forward

Developing the COVID-19 vaccine in record time was just an example of what can be achieved through investment, according to Constanza Losada, President and Country Manager of Pfizer. “We must continue to invest in research to reduce the global burden of today's diseases and protect future generations from subsequent pandemics. We welcome the fact that the population knows, through our vaccine, the value of innovation as an engine of competitiveness and a solution to global problems,” she said.

A Pfizer article on policy recommendations to support investment in robust R&D infrastructure recommends:

  1. To develop innovation clusters to compensate the currently fragmented R&D ecosystem and attract highly skilled workers, as well as investment capital, to support biosciences innovation.
  2. To increase government investment in innovation, especially foundational basic research and disruptive innovation through digital approaches and technology, to improve the R&D system and accelerate the development of treatments and vaccines.
  3. To stimulate incentives and investment in public-private partnerships to promote collaboration between stakeholders supporting the life sciences ecosystem and to recognize the value of innovation.

Looking into developing countries, additional actions are also recommended considering their limitations regarding resources. Since companies do not have the incentive to devote adequate resources to R&D in developing countries as profitability is mainly found in rich country markets, WHO suggests a rather different approach: the creation of a Global Fund where contributions by developed and developing country governments and other donors are shared depending on specific targets. To supervise the funding, the UN suggest establishing a Public Health Council to set priorities. “A Public Health Council that is made up of a range of stakeholders (governments, NGOs, as well as international organizations) would have the overall responsibility for the governance of the architecture guidelines and for supervising the funding of R&D,” states WHO.

Photo by:   Jaron Nix on Unsplash
Miriam Bello Miriam Bello Journalist and Industry Analyst