How to Solve The Tragedy of the Commons Caused by Reliance on the Patent System to Develop New Drugs
The Problem: Lack of Private Incentives to Repurpose Off-Patent Drugs
Millions of lives could be saved if drug companies weren’t limited by a patent model that dates back to the 15th century . The problem is that when the patent on a drug runs out, drug prices plummet, creating a patent “cliff” that leaves pharma companies with almost no incentive to repurpose off-patent drugs for new uses. In particular, clinical trial data showing which off-patent drugs are safe and effective treatments for new diseases is “highly non-excludable”, “unmonopolisable” or “public good” information which is almost impossible to stop people from using, even with a patent . Off-patent or “generic” drugs that have successfully completed Phase 1, 2 and 3 clinical trials for safety and efficacy are, in principle, available to be re-patented as reformulations or new uses to treat new diseases. But companies also lack incentive to do this if the off-patent version of the drug has similar efficacy and active ingredient to the patented drug, and can also be prescribed off-label, which means it’s difficult to recover the cost of the clinical trials proving efficacy of the patented reformulation . A patented reformulation may also be less safe or effective than using the off-patent drug in a new way, resulting in potential harm to patients . For this reason, the off-patent drug repurposing dilemma has been referred to by the NIH’s National Center for Advancing Translational Sciences (NCATS) as the “tragedy of the commons” . That’s why governments, health insurers and charities need to find a new way to incentivise off-patent drug development.
The Solution: Pay for Success Contracts
There is a solution to this tragedy, which should be intuitive. If you want to incentivise somebody, you give them a prize. Crowd Funded Cures propose establishing financially innovative “pay for success” contracts (e.g. Social Impact Bonds, Advance Market Commitments, Value Based/Differential Pricing) as an alternative incentive to fix this gap in the patent system. Under the pay for success model, a generic drug company is promised a minimum pre-order and exclusive subsidised price for their “branded generic” or a flexible outcome payment, only if they successfully repurpose and re-label an off-patent drug by funding the Phase 2 and 3 clinical trials required . This pay for success financial model can lead to billions of dollars in healthcare cost savings because it can be 100 times less costly and 10 times faster to repurpose off-patent drugs than patent-centric drug development, by relying on existing Phase 1 safety data . Similar proposals to use Social Impact Bonds to repurpose generic drugs to treat rare disease have been made but have not received backing to date .
In the meantime, please sign the petition to ask governments, health insurers and charities to back off-patent drug repurposing pay for success contracts as a new, open-source approach to incentivise the development of faster, safer, cheaper and more effective treatments — and cures — for patients, without reliance on patents.
Sign the Petition
The Tragedy Caused by Reliance on the Patent System to Develop New Drugs Millions of lives could be saved if drug…
 A 2021 study of 197 drugs approved by the FDA since 1997 showed that the chance of a drug being repurposed for a new use approaches zero as soon as it goes off-patent or “generic” (See https://pubmed.ncbi.nlm.nih.gov/33397471/).
 The following 2013 paper by Profs Amy Kapczynski and Talha Syed discusses the limits of patents with respect to certain types of “highly non-excludable” therapies including repurposing off-patent drugs and lifestyle interventions and suggests using prize incentives as well as increased public funding to address this problem (see https://www.law.yale.edu/sites/default/files/documents/pdf/Faculty/Kapczynski_Nonexcludability.pdf at 1944). The author’s 2014 thesis also discussed this problem of “unmonopolisable therapies” and proposed a flexible prize mechanism to “de-risk” clinical trials for such therapies due to public funding being centralised and inefficient (see Chapter 8 https://ir.canterbury.ac.nz/handle/10092/9826).
 For this reason repurposed generic drugs and other therapies where it is difficult to enforce a monopoly price to recover the cost of clinical trials are referred to as “financial orphans” that lack private incentives for development under the patent system (see https://www.healthaffairs.org/do/10.1377/hblog20140306.037370/).
 https://dndi.org/wp-content/uploads/2019/10/DNDi_ModelPaper_2019.pdf. See Figure 1 on page 17: Cost to repurpose existing drugs without and with new formulation.
 See proposal by Bruce Bloom, former CEO of Cures within Reach (https://ssir.org/articles/entry/repurposing_social_impact_bonds_for_medicine) and Findacure’s RDDR SIB project for the NHS to back a generic drug repurposing Social Impact Bond to treat rare diseases (https://www.findacure.org.uk/the-rare-disease-drug-repurposing-social-impact-bond/).