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The Value of Product Development Partnerships

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The Value of Product Development Partnerships

An Interview with Rob Lin

By Claire Topal
August 11, 2014

A product development partnership (PDP) is a 21st-century nonprofit organizational structure that enables the public, private, academic, and philanthropic sectors to aggregate funding for the development of drugs, vaccines, and other health tools as public goods. PDPs target neglected diseases whose solutions lack commercial incentives and which disproportionately affect people in developing countries. NBR spoke with Rob Lin, Vice President of Finance at the Infectious Diseases Research Institute (IDRI), about the value of the PDP model to global health R&D, criticisms of the model, and its significance for the U.S.-Asia relationship.

How did PDPs first come about?

Around 20 years ago, researchers and funders realized that there was a need to create health solutions for diseases of the poor in developing countries, and that this need wasn’t necessarily being (or going to be) addressed by pharmaceutical companies given existing market mechanisms. PDPs were created as a tool for donors and governments to fund projects that would address some of these inequities and reduce or even remove the risk for pharmaceutical companies to be engaged in the process.

The way PDPs work is similar to drug and vaccine development in the pharmaceutical sector. The main differences are that funding doesn’t come from private sources but rather from public sources—either governments or large foundations—with the goal of developing health solutions for diseases of the developing world that don’t have a large market potential.

Help us understand the gaps PDPs fill, and why the market doesn’t address them.

The pharmaceutical market has traditionally been focused on the blockbuster model, where companies look for medicines that can be given on a periodic basis and generate large amounts of revenue. Lipitor, for example, was a perfect drug for a pharmaceutical company because it can charge a significant amount of money for the drug and patients must take the drug every day in perpetuity.

By contrast, for a company that makes malaria drugs, there’s no recurring revenue from individual patients. A disease like malaria is very episodic. If those who are infected take their medications, hopefully they will be cured after a short period of time. On top of that, the majority of people who contract malaria can’t afford the prices companies would normally be able to charge in the U.S. and EU markets. This is why PDPs exist—to find a way for needed innovation to happen.

PDPs are focused on developing health solutions that are affordable for the developing world. Neglected tropical diseases (NTD) affect more than one billion people worldwide and put more than two billion people at risk, particularly those living in poverty. Children are disproportionately affected and must live with the consequences their whole lives, including severe physical pain, disability, disfigurement, mental impairment, and death. Entire communities bear the physical and economic burden from increased healthcare costs and reduced productivity.

How much does it cost to create a new drug for a rare or neglected disease? Why couldn’t a pharmaceutical company develop these tools independently (for example, through a corporate social responsibility approach)?

The latest statistics on how much it costs to bring a drug from concept into full approval is between $1 billion and $1.5 billion. This figure is elevated because it takes into account the costs of failed projects along the way and some cost of capital adjustments (what a company could theoretically have made investing in other opportunities). Sinking a billion dollars into something with little or no market is difficult for a company to explain to its shareholders. Corporate social responsibility is important and can certainly play a significant part in a company’s actions, but it can’t play the primary role. PDPs thus offer a way for companies to contribute their strengths and expertise to projects that are tremendously important but which don’t carry financial incentives for their stakeholders.

How do PDPs work?

Each PDP is a little different. The RTS,S vaccine, for example, is currently being developed by the PATH Malaria Vaccine Institute (MVI) in partnership with GlaxoSmithKline (GSK). MVI and GSK are each investing about 50% of the resources for development of this vaccine through direct monetary and in-kind contributions, but GSK will have the full rights to market the end product. GSK has stated that it will market the vaccine at a 5% margin above their manufacturing cost, with proceeds going back into research for neglected infectious diseases.

Because MVI’s sole purpose is to create a malaria vaccine, it channels the funding it receives from governments and foundations into a number different projects in various stages of development, of which RTS,S is the closest to market. The donor community and governments pool their resources for the development of a malaria vaccine into MVI; MVI uses those resources to select projects and then manage the projects through the development process.

The majority of the seventeen PDPs in the health sector right now follow this model, with each one being devoted to a specific disease or set of diseases. The organization that I work for, IDRI, has its own R&D lab, and we conduct the vast majority of our research on-site. By contrast, most PDPs focus primarily on project management and channel funding for R&D through partners, whether pharmaceutical companies or academic research institutions.

With so many partners working on novel health products, how do PDPs deal with IP? What challenges come up?

In most cases, PDPs channel funding through pharma partners, who own the rights to the product. In return for those rights, the pharma partner commits to ensuring global access to the product at a reasonable price for those in developing countries.

IDRI is fairly unique in that it owns the patent rights not only to its technology but also to any drug and vaccine candidates in its pipeline (an aspiring drug or vaccine project is termed a candidate through early research and clinical development until it is approved for sale by a regulatory body). There are other specific instances where PDPs own some individual internal candidates in the pipeline. For example, Aeras is working on several TB vaccine projects; several of them are in-house, some are external candidates.

IP is a nuanced issue, particularly when you mix internal and external projects. Part of a PDP’s mission is to choose the best candidates to go forward. There’s a portfolio management aspect that can become a source of conflict. Regardless of whether there actually is any conflict, there can be a perception of conflict if a PDP is selecting between internal and external candidates. External review committees can certainly help address this issue, but at the end of the day, whether justified or not, there are always whispers if an internal candidate is selected over an external one.

At IDRI, we work almost entirely with internal candidates. We don’t have the funding to support external candidates, so we haven’t had to grapple with these issues.

In addition to addressing a lack of commercial incentives, PDPs also create collaborations between numerous sectors and organizations who engage at different stages of each project—why?

Most new biotech companies are strong in the early research phase, need some help during the clinical development phase, and require considerable help in the marketing phase, which is where the big pharma companies come in. Numerous partnerships between big pharma and smaller biotechs exist in which the biotechs do the early work and then the established pharma company leverages its expertise in development and marketing. Similarly, PDPs can shepherd an idea from the early phases through the later phases but have the flexibility—and, I would argue, the advantage—of choosing the best partner to execute each phase along the way.

The best partner at each phase may not be the same partner throughout the lifecycle of a drug’s development. Early on, for example, a PDP may select targets through work with scientific collaborators at universities. Later in the process, however, it might find the best pharma partner for clinical development and marketing.

In addition to HIV, TB, and malaria—the “big three” diseases—some PDPs focus on diseases that may be unfamiliar to some, such as parasitic infections like leishmaniasis and schistosomiasis, as well as diseases that many believe to have been eradicated, such as leprosy. Do PDPs that address these less widely understood diseases face increased challenges?

I think there’s a bigger hurdle to get funding to address those diseases. If you think of the spectrum of neglected diseases, HIV and TB are at one end, where almost everyone has heard of it and has the potential to contract it—in the rich and poor world alike. Malaria is a little further in on the spectrum: you actually have to go to a place where there are infected mosquitoes to get the disease yourself. Going down the spectrum to other diseases of poverty, such as schistosomiasis, leishmaniasis, and leprosy, fundraising becomes much more difficult—not that fundraising for any of these diseases is easy.

Not many people can tell you what schistosomiasis is, yet it’s endemic in 78 countries and affects more than 240 million people (40% of them children), making it second only to malaria in impact of a parasitic disease. Similarly, about 12 million people in 98 countries are afflicted with leishmaniasis —another lesser known parasitic disease—leading to between 20,000–50,000 deaths each year. People are unlikely to prioritize or push their governments to support the development of solutions for diseases they have never heard of. Additionally, even though leprosy dates back to biblical times, most people don’t realize it’s still a problem in certain pockets of the world. IDRI has an exciting leprosy vaccine project and a terrific partner in the American Leprosy Missions, but the fundraising scope is much more limited than it is for some of the other diseases we target.

How prevalent in Asia are the diseases that PDPs tend to target?

NTDs are prevalent in the Asia-Pacific, being present in at least 39 countries and areas. Leishmaniasis is a large problem in some rural parts of South Asia, particularly in the northern Indian state of Bihar. And though leprosy was officially eradicated in India in 2005, the majority of today’s 250,000 cases are in India and Indonesia. With respect to TB, China is the largest reservoir of TB in the world.

Are Asian organizations partnering with PDPs? Do Asian PDPs exist?

There are certainly numerous Asian organizations involved in this space. In terms of funding, the Global Health Innovative Technology (GHIT) Fund, based in Japan, was launched last year and funds partnerships between PDPs and Japanese pharmaceutical companies and research institutions. Importantly, it creates a new source of funding (which comes from the Japanese government, the top five Japanese pharmaceutical companies, and the Bill & Melinda Gates Foundation) in an area where money is sorely needed. Another key opportunity the GHIT Fund has created has been to help open the doors of Japan’s public and private drug compound libraries to PDPs, which makes possible the screening of tens of thousands of drug candidates for potential new treatments.

Additionally, the International Vaccine Institute (IVI), which has managed numerous PDPs, is based in Seoul. IVI is an international organization with 40 country signatories plus the World Health Organization. It is the only international organization committed to the development of new vaccines for people in developing countries.

In terms of health technology innovation, Japan has long been a global leader in drug development and chemical entity production, and I think companies in other Asian countries will also play an increasingly important role in this area. I expect in the years to come that drug manufacturers in India, China, Thailand, and Vietnam will move up the value chain and start to work on R&D as well. One example of this already happening in China is the role that Chinese companies played in developing the first single-dose Japanese encephalitis vaccine approved for use in children.

Looking ahead to the post-development and post-approval phases, once successful solutions emerge from the R&D that PDPs are facilitating, manufacturers in Asia—particularly in India, Indonesia, and China—will play a critical role in the production and manufacturing of the health solutions after they’ve been approved. Beyond the cost advantage these manufacturers offer for keeping prices low, the ability to produce drugs and vaccines locally is very beneficial for the uptake of these health solutions.

Have PDPs produced any successful health solutions?

The main criticism I see levied at PDPs is that there haven’t been any major breakthrough successes thus far. Certainly, a major breakthrough drug or vaccine could help validate the PDP model, but more importantly such breakthroughs would save lives and end tremendous suffering. There have been modest successful projects that have flown under the radar thus far—MMV’s partnership with Novartis to develop Coartem Dispersible (a pediatric formulation of an anti-malerial drug), PATH Meningitis Vaccine Project’s launch of MenAfriVac (a meningococcal A conjugate vaccine) for under $0.50 a dose, and some fixed-dose combinations of malaria medications (MMV and DNDi). GSK has just announced that it is submitting an approval package for RTS,S to the European Medicines Authority (EMA) and the WHO.

It’s important to keep in mind, however, that novel drug and vaccine development is a very complex and time-consuming process, often taking 10–20 years at considerable financial cost. The oldest PDPs have only existed for 10–15 years. What this means is that, we will just begin to see some results in the next 5 years. But as we know about the probabilities of clinical development, even the experimental medicines that make it to human clinical studies fail over 80% of the time.

PDPs are certainly all striving for those breakthroughs for the 1 billion people who are infected with NTDs and the 2 billion more who are at risk. Motivation is everywhere. Only 1% of all new drugs to reach the market in the past 25 years were for neglected diseases, and these have serious limitations, such as being too expensive, difficult to administer, unsafe, and drug-resistant.

What other criticisms exist of the PDP model, and how do you respond to them?

Another criticism I’ve heard is that PDPs are just middle men in the partnership between donors and pharma companies, which actually do the projects. In response, I’d point out that IDRI does in-house research. And while the RTS,S vaccine research donors in principle could have just worked directly with GSK on funding that project, in my experience many donors prefer to not be the sole funder of a project.

PDPs enable donors to pool funding to achieve greater impact than they would have through individual, sole-donor projects. In addition, PDPs enable donors to fund a portfolio of projects and research that has been carefully selected to achieve the maximum impact. I know when we at IDRI look at a portfolio of products, we want to bet on the best current project, as well as look at next generation products, backup projects, etc. In other words, PDPs allow donors to invest in a full pipeline of ideas rather than betting everything on a single project.

I would also add that even though there can be some perception of conflict if drug or vaccine candidates are internal, PDPs provide value here, too, in offering a third party to arbitrate the selection process.

If PDPs did not exist today, what would happen to R&D efforts and funding for the diseases we have discussed?

The main forces that drove the creation of PDPs are still relevant today and are unlikely to disappear. I do think that if PDPs went away that a good chunk of the funding that’s been dedicated to achieving these health solutions would disappear. As I mentioned, there is a role for PDPs in terms of being able to aggregate funding. It’s much easier for a government to be able to pool its resources into a PDP than to cut a check directly to a pharma company. It just looks better to a government’s shareholders—the voters. And without PDPs, the remaining donors would need to pick and choose their projects by themselves instead of being able to leverage the portfolio management function that PDPs provide.

What is the significance of PDPs in terms of geopolitical relations? Do PDPs have an impact on the U.S.-Asia relationship?

I think PDPs create the potential for increased cooperation in terms of the funding partnerships that I discussed earlier. But there’s also a health impact as well. A lot of the diseases that we are discussing are prevalent in Asia. As a result, global health comes into play as a diplomatic tool. If significant health solutions can be achieved, that could have a positive impact on geopolitical relations, just as the U.S. Navy’s role in coordinating relief operations in Indonesia after the 2004 tsunami created huge amounts of goodwill among that country’s population.

This interview was conducted by Claire Topal, Senior Advisor for International Health at NBR. She provides strategic guidance to NBR’s Executive leadership on the development of NBR’s international health programming. Ms. Topal is the spouse of Dr. Rob Lin. The views expressed in this interview are those of Dr. Lin.

Rob Lin, PhD, is Vice President of Finance at the Infectious Disease Research Institute (IDRI). Previously, he was a member of the Global Health Executive Team and Deputy Director for Global Health Financial Planning and Analysis at the Bill & Melinda Gates Foundation. Prior to that, he worked in corporate development at Millennium Pharmaceuticals and as a Senior Consultant with Dean & Company Strategy Consultants.