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Pay for trials or pay for wins
Push funding
Push funding means grants from a government, a philanthropy, or another funder to generate the knowledge directly. One proposal from the Center for Addiction Science Policy and Research is an NIH-led program that funds and runs many trials of off-patent drugs, peptides, and supplements. The RECOVERY trial was push funding at its best, costing maybe $20 million for a result worth over a million lives.
Prizes
A prize works from the other end: whoever proves a drug works for a new use gets a big payout, even though generic competition means the drug itself can't be priced high. The funder pays nothing unless there's a success, doesn't have to pick which drugs will succeed, and lets companies fund the trials themselves. It suits cases where useful knowledge about how drugs are used is scattered across firms. Once proven, a generic drug can be used at a very low price by everyone.
Sizing the prize
A prize has to be much larger than the cost of a trial, because some attempts will fail, and setting its size is hard. If it's too small, it dangles something that has no effect, and if the answer was obvious, the funder could have paid for the trial directly. When there is good reason to be confident about specific candidates, funding those research groups directly skips the guesswork.
Why have prizes worked in other fields?
In 1714, the British Parliament passed the Longitude Act, offering up to 20,000 pounds for a practical way to find longitude at sea. In 1996 the Ansari X Prize offered 10 million dollars for a reusable crewed spacecraft, and SpaceShipOne won it in 2004. The X Prize Foundation reported that the competing teams spent well over 100 million dollars in total.
How does an advance market commitment work?
A funder promises in advance to buy or subsidize a product at a set price if someone develops it, which gives a manufacturer a guaranteed market. In 2009, Gavi, the vaccine alliance, launched such a commitment for pneumococcal vaccines, with 1.5 billion dollars pledged by donor governments and the Gates Foundation. Payment went only to vaccines that met set specifications and were delivered to poor countries.
How did the Orphan Drug Act pull drugs forward?
The 1983 Orphan Drug Act gave companies seven years of market exclusivity, tax credits on trial costs, and fee waivers for drugs treating rare diseases. Before the law, drugs for small patient groups were rarely developed because sales could not repay the costs. Since then the FDA has approved hundreds of drugs for rare diseases under the program.
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