With the high costs of drug discovery, Tyler Golato, scientific lead at Molecule, discusses why new business models are needed if innovation is to continue.
Alternative approaches
While patent protections are often a key focus for pharmaceutical companies in terms of their business strategy, they are problematic for collaborative research.
The cost of drug development has increased steadily and significantly over the past 40 years. In the 1970s, a drug could be brought to market for approximately $54 million in the United States. Today, estimates for the cost of bringing a single drug to market range from $800m - $2.5bn.
Patent protection and market exclusivity attempt to incentivise the shouldering of this cost by providing the opportunity for a return on investment. However, while patent protections are often a key focus for pharmaceutical companies in terms of their business strategy, they are problematic for collaborative research. Patents are closed source and monopolistic by nature.
Increasingly, the business model for drug discovery and development is predicated on recouping costs barely manageable for first-world, affluent nations. In an effort to combat this trend, various stakeholders in the drug discovery ecosystem - academia, industry, foundations, governments, and regulators - have been identifying and exploring novel models based on collaboration and distribution of risk that provide new schemes for incentivising and rewarding drug discovery.
However, no breakthrough model has yet led to transformative change in the industry, and patents are still the primary means of ensuring exclusivity over new drugs that are brought to market. This has had severe consequences on innovation: industry is increasingly moving away from research in riskier areas and revenue has become the primary driver of research efforts.
Despite these challenges, a new generation of projects, such as OSP, M4K, and Molecule, have emerged which are attempting to rethink the current pharma business model. One model that shows promise for creating sustainable change in the industry is that of fractionalising IP ownership. This entails the creation of an open, multi-sided marketplace for drug development with a platform for IP creators to generate public markets for new drugs and therapeutics to attract funding.
At its core, systems such as these can use curation markets and crowd-intelligence to discover valuable therapeutics and direct resources towards them. The underlying asset of each market is a patent, or combination thereof, and shares in individual markets represent ownership rights. The overarching goal is to create incentives for a more open source R&D process that will bring down costs, accelerate development, bring more diverse treatments to market, and move stakeholders towards collaboration: new business models for the current broken pharma industry.
These types of platforms can also generate novel funding opportunities for parties with an interest in drug development. For example, organisations can access funding and liquidity from underutilised IP, or alternatively, distribute ownership in IP currently under development to garner funding and further their projects. This fractionalised IP distribution is achieved by providing the infrastructure for individual markets to be established around a single piece of IP (e.g. a patent), similar to the way markets exist for shares in specific companies. This model distributes risk and cost, thereby allowing smaller organisations, such as universities, to collaborate with other institutions via shared ownership models to research and develop therapeutics. It effectively lowers the barrier of entry to drug development, allowing stakeholders that have been priced out of traditional drug development practices to participate and compete.
This shift toward a more transparent, open, and collaborative future for drug development is similar to what open source did for software. As innovation continues to decline in the pharmaceutical industry, open source models could prove useful in reversing the trend.