Pharma, Policy, Startups

Venture philanthropy in healthcare is OK as long as black lives matter

In this brave new world of drug development, we’re seeing philanthropic foundations intertwine with industry to bring […]

In this brave new world of drug development, we’re seeing philanthropic foundations intertwine with industry to bring meds faster to market. But this new model could unfold into a popularity contest, pitting underfunded disorders against media darlings or wealthy folks’ diseases (read: Ice Bucket Challenge). Case in point:

Fifteen years ago, the Cystic Fibrosis Foundation invested some $150 million into a biotech upstart, with the hopes of developing a more effective therapy for the rare genetic disorder. That investment’s paid dividends: In November, the CFF sold its royalty rights for $3.3 billion – which it could reinvest in new drugs to develop.

This could be a powerful new avenue for VC-wary startups to canvas for cash. Instead of approaching a government institution for a grant or laying out the use-case of a drug to a private equity partner, a startup may have more opportunity to pitch a philanthropy that is already deeply vested in the cause.

The royalty sale is a huge win for the CFF, but this “venture philanthropy” move has raised a litany of concerns – as highlighted in Tuesday’s New York Times opinion piece. The privatization of medical research – and the subsidization of pharma – tops that list:

There is nothing to stop pharmaceutical companies from creating their own philanthropies, funding research with tax-exempt dollars and then selling themselves the rights to the intellectual property. Without price controls on the final product that come with public funding, the potential costs of the resulting medicines are limitless.

So far, there is no effort to extend government price controls to venture-philanthropy-derived research. The Cystic Fibrosis Foundation did little to lobby for lower prices on the drugs that were developed from the research it funded. As a result, Kalydeco, a cystic fibrosis medication it funded, is one of the most expensive drugs available, at $300,000 a year.

My main concern with this won’t win me any favors from the orphan disease community. Cystic fibrosis is a well-funded disease. It’s also largely a Caucasian disease. There are about 70,000 folks around the world who suffer from the disease – a very small figure when compared to the general population.

Around the same time that the CFF invested $150 million in Vertex Pharmaceuticals, the biotech behind Kalydeco, sickle cell anemia – a very painful genetic disorder more prevalent among those of African descent – only raised a pittance in funding. A 2013 piece in the Baltimore Sun writes:

In 2003, it turned out, sickle-cell disease attracted about $500,000 in private charitable funding. Cystic fibrosis, which affected fewer than a third as many people (nearly all of them Caucasian) attracted $150 million — 300 times as much.

That year, there were also 115 federally funded comprehensive care centers dedicated to cystic fibrosis. There were 10 for sickle-cell disease according to the study, which later appeared in the journal Pediatrics.

Experts say the figures haven’t changed much. Sickle-cell, it’s clear, is an orphan disease in more ways than one.

“The disparities are jaw-dropping,” says Lanzkron, who in 2008 founded the Sickle Cell Infusion Center at Hopkins, the only facility in Maryland that treats both children and adult patients. “The reasons, of course, are complicated. But when you show people these figures, it stuns them. We’re doing our best to spread the word.”

With the over-privatization of medical research funding, what if medical funding priorities shift to small pockets of privilege?

The NYT piece builds on this idea:

But while Big Pharma might be faulted for funneling billions of dollars into erectile-dysfunction drugs and off-label drug marketing, 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 health care system by way of egregiously high drug prices. Such a choice involves an incredibly complex moral calculus, one that is best processed by democratic public institutions.

The CFF has generated impressive dollars with this unconventional funding route, and deserves a good thump on the back. But orphan diseases are a mere drop in the bucket when it comes to public health – so perhaps we have to think too in greater good terms. And consider a little parity when it comes to disease funding, right?

All said, however, the NYT concedes there are positives to this new model:

Rather than the staid model of government-funded institutions handing out grants to academic research facilities, a new breed of “venture philanthropies” like the Cystic Fibrosis Foundation could corral private investment into developing lifesaving drugs quickly and cheaply.

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