How to Incentivise Development of Open Source Medical Treatments without Patents

Crowd Funded Cures (www.crowdfundedcures.org), a New Zealand based charity, is commissioning a high-level feasibility study conducted by Guidehouse (formerly, the public consulting arm of PwC) to use financial innovation to incentivise development of Unmonopolisable Therapies and Unprofitable Therapies using Pay for Success Contracts such as Social Impact Bonds (SIBs) or Prizes/Bounties. Unmonopolisable Therapies such as repurposed off-patent drugs or supplements are true “open source medicines” or “public goods” and require the establishment of alternative “non-patent” incentives such as Social Impact Bonds (SIBs) which are designed to incentivise private investment in delivery public goods and services. Similarly, Unprofitable Therapies such as development of new antibiotics or neglected diseases would benefit from the same SIB mechanism.

The Guidehouse study would be used as collateral to persuade a Healthcare Payer (including government, philanthropic organizations, etc.) to back a $10–100 million fund for a specific disease class (e.g. COVID-19, pancreatic cancer, depression, Crohn’s disease, diabetes, antibiotics, neglected diseases etc). Currently, other than direct public funding (which is rare for large Phase II/III clinical trials), the only way that Healthcare Payers support generation of large clinical trial data / QALYs is through the payment of monopoly prices for new patented drugs. The goal is to open up the Pharma R&D space to incentivise Impact Investors to fund large Phase II/ III randomised controlled trials (RCTs) for Unmonopolisable Therapies and Unprofitable Therapies (e.g. repurposed generic drugs and/or supplements) in return for outcome payments from the fund if successful. This will help improve the current R&D productivity crisis in Pharma known as “Erooms Law”, whereby it costs between $1–4b dollars to develop a single new patented drug, with Pharma ignoring more viable and affordable medical interventions. We are helping launch the CrowdFundedCures (CFC$) charitable crypto token on the Binance Smart Chain to support this mission (currently available on Pancakeswap decentralised exchange).

DISCLAIMER: CAPITAL AT RISK. Any donations made via crowdfundedcures.org would be 100% used to support the mission of our NZ charity (No. CC49977) and with no-obligation to receive CFC tokens and with no liability to the charity as it is not holding or selling CFC tokens. CFC Tokens are charitable utility tokens used to facilitate smart contracts for social impact bonds or prizes to repurpose off-patent drugs, and available from a Nevis-based CFC Treasury. This document does not constitute a prospectus nor offer document of any sort and is not intended to constitute an offer or solicitation of any investment or other product or service in any jurisdiction.

BACKGROUND

I am a NZ and Australian Patent and Trade Mark Attorney and founded Crowd Funded Cures in 2013 to address the patent incentive problem for medical innovation outlined in my 2014 LLM thesis [1]. I am also publishing a 220-page book “PATENT PANDEMIC” based on my thesis to raise awareness about the problem and my proposed solution. We are a unique charity because rather than directly funding clinical research, our mission is to establish the world’s first Pay for Success Contract (e.g. SIB) to fix gaps in the patent system for Unmonopolisable Therapies that cannot be adequately protected by patents (including repurposing off-patent drugs, supplements, diets and lifestyle interventions) and Unprofitable Therapies that lack financial viability (including antibiotics and neglected diseases). By using financial innovation to put a “price” on improved health outcomes, we can leverage the superintelligence of the markets to crowdsource new, innovative and affordable “open source” medical treatments. Also, by using financial innovation to incentivise investors to fund clinical trials that do not fit the current pharma business model, we can create a new business model that can take advantage of the latest biotechnological innovations to improve global health such as using AI to repurpose off-patent drugs, gene sequencing, personalised medicine and wearables (similar to how putting a “price” on carbon credits helps incentivise the markets to reduce carbon in the atmosphere or social impact bonds incentivise impact investors to fund the delivery of public services). By tokenising SIBs and/or making them tradable it would also be possible to create new efficiencies by encouraging market participants to co-operate in a manner that maximises health benefits [2]. Payers or our charity can agree to redeem the token at a premium price which would incentivise the token holders to fund clinical trials that achieve the criteria for successful clinical trial using off-patent drugs.

USING FINANCIAL INNOVATION TO FIND NEW MEDICAL TREATMENTS

We are currently trying to raise US$50k for a feasibility study to establish a pilot Social Impact Bond of US$10–100m to “de-risk” Phase II/III clinical trials that repurpose off-patent drugs to treat Covid-19 or other diseases. The intention is that larger Phase III/IV clinical trials would then be funded by governments or charities after being “de-risked”. We plan to expand to other disease classes with high healthcare costs and unmet medical need (e.g. cancer, cardiovascular disease, neurological disease, autoimmune disease, ageing/longevity) if the pilot is successful.

Even with the vaccine roll-out progressing globally, a viable pharmaceutical treatment for Covid-19 is urgently required and there are various off-patent (aka generic) drugs that could be candidates, including cimetidine, famotidine, dipyridamole, fenofibrate, bezafibrate, sildenafil citrate, fluvoxamine and/or ivermectin [3], with a combination of generics and determination of optimal dosing regimes being the likely path forward.[4] However, clinical trials for generic drugs rely on direct grant funding via healthcare payers (including governments, health insurance companies, charities or NGOs) who can suffer political backlash and allegations of cronyism or corruption if the clinical trial fails.[5] Therefore, payers also do not tend to get involved in large definitive clinical trials due to the expense (e.g. US$1–20m+ per Phase II clinical trial) and high risk of failure (e.g. 50–75%), and hence the market failure.

With “pay for success” contracts such as Social Impact Bonds, the risk of “picking the winners” via grant funding is transferred from payers to the market, with investors being incentivised to achieve the outcome payment criteria in the contract. The terms of the contract can ensure market rates of return (e.g. 2.5% — 7.5% p/a) as long as payers agree to pay for the outcomes, and this is a scalable business model as long as the outcome payments are less than the overall healthcare cost savings generated as a result of discovering a new repurposed generic drug. Prizes as alternatives to patents for inventivising clinical trials have been proposed in the past [6], as well as Social Impact Bonds (SIBs) for drug repurposing [7]. However, none of these financial innovations have received backing by payers to date, despite the potential to create billions of dollars in reduced healthcare costs.

PAY FOR SUCCESS CRITERIA

An example of success criteria for a successful “outcome payment” under a SIB would be a Phase 2/3 randomised controlled trial, conducted by an independent Contract Research Organisation (CRO) showing that treatment with an off-patent/generic drug(s) within 3 days of symptom presentation results in a certain percentage reduction in hospitalisation within 5 days of treatment, with the outcome payment proportional to said reduction. Outcome payments could also be made according to percentage incremental improvements vs usual care (e.g. 50% reduction vs usual care x US$10m total outcome payment pool available). These criteria would be subject to review by appropriate medical and pharmacoeconomic experts to ensure maximum QALYs for the outcome payment. Notably, this is the same mechanism used by Healthcare Payers to determine the price to pay for a new patented drug (e.g. US$50k/QALY). The outcome payment payment would be made over a period of 5 years, provided that the effect is maintained with no significant adverse events. However, it is possible to design the outcome payment criteria according to the Healthcare Payer’s needs. For example, an outcome payment could be a lump sum for the best clinical trial results achieved by a certain cut-off date (e.g. 2 years), with 70% going to 1st place, 20% to 2nd place and 10% to 3rd place (similar to the X-Prize model), although this does not guarantee minimum health impact/cost savings for the backers of the prize, and does not reward incremental improvements. It is possible to design a SIB that reaches “equilibrium” by making a fixed payment (e.g. 20% of the fund) every year to the RCTs “registered” to the fund, proportional to percentage improvement over usual care. In the case of a SIB, the amount of the “outcome payment” to investors would typically be based on a percentage of healthcare cost savings due to the RCT showing that an affordable generic drug works, thus financially justifying backing by Healthcare Payers and allowing the mechanism to scale, with a global syndicate of Healthcare Payers backing the same SIB.

If you would like to help our mission or find out more, please email savva@crowdfundedcures.org

[1] Kerdemelidis, S. (2014). Deadly gaps in the patent system: an analysis of current and alternative mechanisms for incentivising development of medical therapies. (available at https://ir.canterbury.ac.nz/handle/10092/9826)

[2] See, for example, Health Bond proposal by Ronnie Horesh, the NZ economist who first conceived of social impact bonds in 1988 (available at https://www.socialgoals.com/health.html). See also a proposal by an Austrian-based organisation to issue and trade a “Health Impact Token” on the crypto markets (see https://healthimpacttransfer.org/).

[3] Rogosnitzky, M., Berkowitz, E., & Jadad, A. R. (2020). Delivering Benefits at Speed through Real-World Repurposing of Off-Patent Drugs: The COVID-19 Pandemic as a Case in Point. JMIR Public Health and Surveillance, 6(2), e19199 (available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7224168/). See also Rogosnitzky, Moshe, Esther Berkowitz, and Alejandro R. Jadad. “No Time to Waste: Real-world Repurposing of Generic Drugs as a Multifaceted Strategy against COVID-19”. See also the e Covid-19 Early Treatment Fund established by Silicon Valley entrepreneur, Steve Kirsch, which discusses preventative treatment of Covid-10 with the off-patent drugs fluvoxamine and ivermectin (at https://timesofindia.indiatimes.com/blogs/voices/early-treatment-for-covid-is-key-to-better-outcomes-155397/).

[4] See https://insightplus.mja.com.au/2020/21/risks-challenges-to-repurposing-approved-medicines-for-covid-19/

[5] Pepcid-COVID Study Raised Red Flags Weeks After $21M Grant (available at https://apnews.com/92e6cabd8834e6865eee67f116b006c1)

[6] For example, Medical Innovation Prize Fund Act S1137 and S1138 proposed by Sen Bernie Sanders in 2011, available at https://en.wikipedia.org/wiki/Prizes_as_an_alternative_to_patents

[7] Bloom, B. (2016) “Repurposing social impact bonds for medicine.” (available at https://ssir.org/articles/entry/repurposing_social_impact_bonds_for_medicine) and see https://www.findacure.org.uk/the-rare-disease-drug-repurposing-social-impact-bond/ for the UK pilot.

Our non-profit’s mission is to use pay for success contracts to repurpose off-patent medicines https://crowdfundedcures.org