The dominance of American biopharma in global innovation has increased since Kneller’s publication in 2010; the USA is responsible for 95% of the increase of 111 total FDA approvals since 2010.

The diversified external R&D ecosystem, emerged since 2008, has led to an increase of more than 160% in the value of external R&D partnership in Europe and the US.

The value of Europe’s partnership deals has have remained stable since 2011, whereas the median value of partnership agreements in the US has trebled.

120 of 363 total FDA approvals between 2011 and 2020 were developed by US based small companies with less than $500 mil in revenue.

The NIH’s CRADA and Intermural grants were directly responsible for the creation of 4 of the 363 new drugs in our cohort; US academic institutions created 10% of all indigenously originated IP.

While most drugs are created by small biotech companies in the cohort, large companies step in after FDA approval with development, marketing, and scale; this appears to increase the efficiency of the Biotechnology ecosystem.

The majority of biologics undergo priority review and target orphan indications at the time of FDA approval between 2011-2020.

The NIH’s role in drug discovery, while vital, is not directly responsible for the development of new therapies.

• The Accelerated Approval (AA) pathway was implemented to help fight AIDs/HIV and has largely been considered a success in addressing areas of high unmet medical needs. However, there is growing sentiment from some payers, academics, and state and federal policymakers that the pathway needs to be significantly altered or restrictions applied to drugs approved through the accelerated approval pathway

• For most of the orphan conditions currently lacking treatment in the US, each condition impacts a maximum of 330 people – an incidence rate less than 1/1,000,000. Substantial changes to the accelerated approval pathway will likely render the potential development of these therapies to treat many rare diseases economically untenable

• The Accelerated Approval therapies’ relative impact on state Medicaid budgets is minimal with an average of one-half of one percent, 0.5%, across all 50 US states and DC

• A three-year delay in Medicaid access in 100% of states would result in roughly 19% – 43% of our therapies having a negative NPV which would therefore render development unlikely

• Revenue reductions have the consequence of increasing risks for developers/investors – even though Medicaid therapies are highly discounted, large revenue reductions do increase the likelihood of fewer therapies being introduced to the market under the Accelerated Approval pathway

21st September 2022



Objectives
There remains ongoing debate regarding the relative efficacy of public (NIH) and private sector funding in bringing biopharmaceutical innovations to market. This paper investigates the significance of each party’s level of funding for obtaining Food and Drug Administration (FDA) authorization.

Methods
A cohort of research projects linked to 23,230 National Institute of Health grants awarded in the year 2000 was audited to account for patents, where the project led to a product in clinical development and potentially FDA approval. A total of 8126 associated patents led to the identification of 41 therapies that registered clinical trials; 18 of these therapies received FDA approved.

Results
NIH funding for the 18 FDA-approved therapies totaled $0.670 billion, whereas private sector funding (excluding post-approval funding) totaled $44.3 billion. A logistic regression relating the levels of public and private funding to the probability of FDA approval indicates a positive and significant relationship between private sector funding and the likelihood of FDA approval (p ≤ 0.0004). The relationship between public funding and the likelihood of FDA approval is found to be negative and not statistically significant.

Conclusion
Our study results underscore that the development of basic discoveries requires substantial additional investments, partnerships, and the shouldering of financial risk by the private sector if therapies are to materialize as FDA-approved medicine. Our finding of a potentially negative relationship between public funding and the likelihood that a therapy receives FDA approval requires additional study.

We model and estimate the impacts of BBBA price reductions for 20 therapies collectively produced by 12 biopharmaceutical companies.

We find that BBBA mandated price reductions impact all 12 companies, causing an average decline in net earnings (EBIT) of 55% :
- The 25% most negatively impacted companies see reductions in their net earnings in excess of 100%;
- Six of the 12 companies see earnings reductions in excess of 70%.

These EBIT reductions would substantially reduce cashflows available for R&D partnerships and pipeline investments into drug discovery and development.

With an average 55% drop in EBIT, our model estimates that - under BBBA - only 6 of 110 approved therapies would be considered “not at risk” of cancelled development.

In the last 20 years, drug prices in Europe declined 75% relative to the United States. We believe that, under BBBA , the US would see similar price declines, and thus declines far exceeding the initial, pre-negotiation, BBBA price reductions (depending on “age” of a therapy) of between 25% and 60%

Importantly, BBBA does not address the increasing challenges posed by higher rebates demanded by PBMs, currently estimated to be at least 50% of companies’ gross revenues.

This study was funded by BIO.

• The Accelerated Approval (AA) pathway was implemented to help fight AIDs/HIV and has largely been considered a success in addressing areas of high unmet medical needs. However, there is growing sentiment from some payers, academics, and state and federal policymakers that the pathway needs to be significantly altered or restrictions applied to drugs approved through the accelerated approval pathway

• To test the impact of these changes to the pathway, Vital Transformation calculated the Net Present Value (NPV) of 93 primary accelerated approval therapies from 2001-2021 (drugs with at least one FDA-approved indication):
- The cost estimates were derived from two peer review publications by Jayasundara and DiMasi, scaled to the actual size of the FDA approved confirmatory trial in our cohort,
- An economic model was built testing the impacts of 2, 3, 4, and 5-year delays in the granting of a full FDA marketing approval to determine the NPV of any accelerated approval therapy.

• For most of the orphan conditions currently lacking treatment in the US, each condition impacts a maximum of 330 people - an incidence rate less than 1/1,000,000. Substantial changes to the accelerated approval pathway will likely render the potential development of these therapies to treat many rare diseases economically untenable.

• The Centers for Medicare and Medicaid Services (CMS) has introduced a draft national coverage determination (NCD) for amyloid-targeting Alzheimer's disease (AD) therapies which brings new uncertainties into investment decisions / ROI calculations.
• This analysis measures the potential impact of this NCD - using assumptions based on the current draft language and historical data about AD R&D trials and investment, we assume that the NCD will add 3 or more years to the time it takes for an AD asset to see any return on investment.
• Of the programs currently in development – IF the proposed NCD was in place at the time of program initiation, 93% of investments would have had negative ROI and therefore would not have likely been made.
• Furthermore, the results of our research find that many existing clinical development programs would likely be halted - this is not only true for amyloid-targeting therapies, but all AD treatments, as neurological disorders often use the same endpoint threshold when applying for CMS program participation.
• The NCD, if implemented, reduces our estimated 39 treatments with a net positive ROI to 3, with an assumed three-year delay; with a four-year delay, we find only one therapy with a positive ROI in our model.
• Finally, the NCD introduces new and material risks to the ROI calculations for potentially all products approved under the accelerated approval pathway, which is vital to supporting the development of treatments targeting high unmet medical needs and significant scientific challenges.

22 December 2021



Early in the Covid-19 pandemic, the case fatality rate was frightening. This metric represents the proportion of all known people infected with a disease who die from it. The World Health Organization initially put it as high as nearly 16% in Algeria.

Several colleagues and I at Vital Transformation began closely following the data on Covid-19 early in the pandemic. We wondered if case fatality rates might be skewed by lack of testing. We collected data on various indictors that early on were thought to be influencing the spread of Covid-19.

• Unprecedented cost increases – in an industry that already experienced serious patient access challenges in 2019, pre-US border policy and pre-COVID-19 – have put manufacturers under considerable strain worldwide.
• As a majority global plasma donations come from the United States, poorly considered, one-size-fits all reimbursement decisions will substantially increase the risk of patient access concerns and negatively impact the sector globally.
• The plasma industry is subject to many of the same pressures of other industries. As ingredient costs rise and reimbursement falls there must be a point where the viability of that industry is in jeopardy.

With US congressional proposals now advocating in favor of government price setting for prescription medicines, the impacts of historical price setting in Europe provides a robust data source to test and predict the impact of price controls in the US on the biopharma ecosystem.

• This study uses statistical and economic modeling to calculate the net impact of EU price controls upon the domestic biopharma ecosystem in Europe; US and EU prices were compared for the top 10 selling drugs in the US for each year from 2003 – 2020*, and impacts upon biopharma R&D ecosystem key performance indicators (KPIs) were measured.

• Our research shows that every 10% drop in the price of medicines in price-controlled EU markets was associated with a:
-> 14% decrease in total VC funding (10% early stage and 17% late stage)
-> 7% decrease in biotech patents,
-> 9% decrease in biotech start-up funding relative to the US
-> an 8% increase in the delay of access to medicines.

• Our model also proved robust at predicting the trend impacts of drug pricing on Japanese biopharma KPIs, which acts as a validation of our methodology; we posit that similar drops measured by biopharma KPIs in the US would be seen over time with similar price controls.

• Drug pricing controls implemented in the US would likely have an even greater impact on biopharma KPIs given its global leadership in investment and innovation.

There is a misguided perception that NIH funding, not private market investment, is largely responsible for the creation and approval of new therapies. This study tests that hypothesis by identifying patents linked to NIH grants from a single year, identifying those associated with clinical trials and approved medicines, and quantifying the public and private investments made for those investigational and approved medicines. Key findings include: 23,230 NIH grants in the year 2000 were linked – by NIH-supported patents – to 18 FDA-approved medicines by 2020. None of these medicines reached approval without significant private investment. In fact, total private investment for the 18 approved medicines exceeded NIH funding by orders of magnitude: $44.2 billion in private investment compared to $670 million in NIH funding. As industry’s share of total investment increased, so did the likelihood of approval. These findings are consistent with the substantial literature describing the complementary roles of public and private R&D funding, and the significant long-term investments shouldered by industry with no guarantee of approval – in fact just 12% of medicines in clinical development are ultimately approved by the FDA. Public policies that would seek to replace private sector investment with publicly-funded drug development or that would reduce industry’s ability to build upon publicly-funded discoveries to bring medicines to market are therefore likely to slow drug development.