Doing drugs differently: alternative models of drug development

Pharmaceutical giants claim that research and development costs justify the sky-high prices of drugs. But this isn’t the whole truth. Clare Watson dives deep into the data and lays out the cold hard facts. She then asks: What could drug research and development look like if Australia – and the world – prioritised public health over profit?

When pharmaceutical giant Johnson & Johnson got the tick of approval for its drug bedaquiline on the last day of 2012, a new chapter of tuberc­ulosis treatment began. Bedaquiline was the first antibiotic developed for the bacterial disease in nearly 50 years – a breakthrough millions of people across Asia and Africa had been crying out for.

A decade later, bedaquiline has become a latest flashpoint in the searing debate about affordable access to life-saving medicines. Knowing its main patent for the drug would expire in July 2023, Johnson & Johnson sought to extend its monopoly by enforcing secondary patents for an ever-so-slightly altered version in more than 65 countries.

India took a stand. Its Patent Office rejected the company’s application in March 2023, following a four-year global campaign agitating for fair access to the drug. Then, in July 2023, a ­historic deal permitted non-profit organisation Stop TB Partnership to supply cheaper generic versions of bedaquiline to 44 low- and middle-income countries.

While some countries with the highest burden of tuberculosis aren’t covered by the agreement, those that are will be able to buy the drug at half price. The Stop TB Partnership estimates that by the end of 2024, more than 51,000 extra treatments could be purchased with the cost-savings.

The deal is a small concession from a pharmaceutical giant that has reaped the benefits of market exclusivity for a decade, and experts say it’s long overdue. “It raises the question, why couldn’t this have been done earlier?” asks Diego Silva, a bioethicist at the University of Sydney concerned with infectious diseases. “We didn’t need to get to the eleventh hour of a patent expiring for this outcry to happen.”

The story of bedaquiline is just one example of an industry that has long prioritised profit over public health. Companies argue that sky-high prices are necessary to fund research and development (R&D) into new drugs, but the data doesn’t back up this claim. Plus, researchers have repeatedly exposed the pharmaceutical industry’s ­profit-driven motives that shape its clinical trials, skew its drug development and inflate drug prices.

AbbVie made US$208bn from its arthritis treatment adalimumab – which cost about 10% of that to develop. They raised the price 30 times over 20 years.

But does it have to be this way? What – or where – are the alternatives?

Around the globe, a few initiatives are going against the grain of the for-profit pharmaceutical industry, instead prioritising neglected diseases, refusing to patent their drug discoveries and funding research that puts public health first. Their work to develop new medicines for a ­fraction of the cost shows that other models of drug ­development are not only possible – they’re succeeding.

So how do they work, and can we bring these ideas home to Australia?

Fact-checking R&D spending

In a global industry that spent US$141 billion on R&D in 2015, it’s hard to get a clear picture of what it actually costs to develop a drug. “Drugs are expensive to produce, but part of the problem is we’re not entirely sure just how expensive it is,” Silva says.

The industry isn’t known for its transparency. Companies protect their research products with a thick web of patents, and in financial reports they tend to average out their R&D spending across the drug development pipeline.

Researchers like Joel Lexchin, a pharmaceutical policy researcher at York University in Toronto, Canada, analyse the practices of drug companies based on what data is publicly available. It’s enough to see trends emerge. “R&D gets sacrificed to share prices,” Lexchin says bluntly.

While companies do bring to market some truly innovative medicines – like bedaquiline – their business model has changed. Where once they would reinvest profits into R&D, Lexchin says the world’s largest companies now spend more money on marketing their products, buying back their own stocks to lift share prices and paying shareholder dividends.

Health economist Aris Angelis and colleagues laid out the costs in the British Medical Journal in early 2023. Based on financial reports from 1999 to 2018, the 15 largest pharmaceutical companies spent nearly twice as much on “selling, general and administrative activities” as they did on R&D: US$2.2 trillion compared to US$1.4tn over 20 years. Most of those same companies spent US$577bn on share buybacks and dividends from 2016 to 2020 – US$56bn more than R&D during that time, according to a 2021 US government drug pricing investigation.

Rather than investing in discovery research, large companies have also taken to buying up small start-ups that have done the hard yards developing new candidates. For instance, US biopharmaceutical company Gilead Sciences didn’t discover sofosbuvir – an antiviral treatment that transformed hepatitis C care a ­decade ago. It bought the drug from a start-up for US$11.2bn. According to a US Senate inquiry, Gilead recouped nine-tenths of that amount in its first year of selling the drug. “That’s the model drug companies are using these days,” Lexchin says.

“Drugs are expensive to produce, but part of the problem is we’re not entirely sure just how expensive it is.”

The industry claims to be innovating new medicines, which are priced to recoup research costs and offset other failures. R&D budgets of the 14 ­leading pharmaceutical companies grew in the two decades to 2018. But a 2021 systematic review of 19 studies found that companies are spending more for each new drug they produce; in other words, pharmaceutical R&D has become more inefficient over time. Another peer-reviewed study traced this decline back to the 1950s.

Research shows that clinical trials are getting longer and more complex, and failure rates in drug development are rising as the industry pursues high-risk, high-reward medicines. Just one in 10 drugs that entered early-stage clinical trials between 2003 and 2011 got approved.

Drug developers also can’t learn from their competitors’ mistakes, because their work is shielded by patents and companies tend to suppress negative results, so each sinks money into well-trodden paths that lead to repeated failures. For instance, a 2023 study in JAMA Network Open found that starting in the early 2000s, drug companies spent US$1.6bn–2.3bn on 183 cancer trials – involving more than 12,000 patients – to test 16 drug candidates for a popular cancer target. None were approved for treating cancer.

Pharmaceutical companies are also quick to abandon a drug candidate if business priorities change, Lexchin says. The result: companies are outlaying more money than ever before for fewer new drugs – so when they do hit on a breakthrough, patients are paying the price.

The most lucrative medicine on the market, prior to the COVID-19 ­pandemic, was a treatment for rheumatoid ­arthritis called adalimumab. Its manufacturer, AbbVie, spent an ­estimated $US14.7bn on R&D, then grossed 10 times as much globally after the drug’s approval in 2002. Researchers estimate that this income translates to the company netting an eye-watering US$110bn in excess profits – over and above what would be considered a fair margin for the amount it spent on developing, producing and marketing the drug.

Those kinds of blockbuster drugs are a costly exception. According to economists at the Tufts Center for the Study of Drug Development in Boston, it costs US$2.6bn to bring one new medicine to market. This includes lab research and clinical trials, but also accounts for other drugs that don’t make it through to approval and other financial losses.

But leading pharmaceutical policy researchers have labelled that US$2.6bn figure an inflated estimate, pointing out that it’s based on confidential data on just 106 drugs from 10 pharmaceutical companies that no one can independently verify.

Non-profit drug R&D organisation DNDi develops treatments for neglected tropical diseases – cheaply. Even the most expensive drug they’ve developed cost 13 times less than the R&D estimates of the for-profit industry.

Subtract the tax breaks companies received and account for the fact that only the costliest 20% of drugs were included in the analysis, and researchers have revised the number to about one-tenth of the industry’s claimed total. Other more recent analyses of publicly available data have found that on average, the development of one drug costs less than one-third to about half as much as the Tufts estimate.

What’s worse is that the majority of newly approved medicines hardly improve on existing drugs, if at all, says Barbara Mintzes, a pharmaceutical policy researcher at the University of Sydney. Mintzes calls them “me-too” drugs: new formulations of old compounds that provide little advantage over current drugs but which serve to prolong patent protection.

Patents are designed to reward drug developers for innovating new products, giving them exclusive rights for a set period of usually 20 years. However, few new drugs are truly innovative. More than half of new drugs are no better than existing treatment options, according to yearly investigations from French organisation Prescrire International. Another 15% of approved drugs are actually worse; either less effective or poorer safety-wise, says Mintzes.

“When many new drugs do not offer any therapeutic gain to patients, the only beneficiaries are the companies that are marketing them,” Lexchin remarked in a recent commentary in the Journal of the American Medical Association.

So, if pharmaceutical companies aren’t as innovative as we’ve been led to believe, and if the innovation they do provide comes at such a high cost, is there another way?

Exploring the alternatives

Since its inception in 2003, the aptly named Drugs for Neglected Diseases Initiative (DNDi) has developed a dozen treatments for six deadly diseases – with no labs and for a fraction of the industry cost.

DNDi was founded by medical humanitarian organisation Médecins Sans Frontières (MSF) in collaboration with research institutes in India, Brazil, Kenya, Malaysia and France, after MSF realised it often didn’t have the medicines it needed to save lives.

The initiative focuses on advances in patient care for neglected tropical diseases such as dengue fever, malaria and leishmaniasis. These collectively affect nearly 2 billion people worldwide, yet represent only 0.5% of the more than 56,000 candidate products currently in commercial development.

DNDi operates like a virtual biotechnology company. It contracts industry collaborators and academic partners to conduct specific studies at each stage of its drug development pipeline, funded by in-kind donations and philanthropy. For 12 years, Australian-born medicinal chemist Robert Don was at the helm of DNDi’s drug discovery pipeline. Patients were front of mind in every research phase, and “part of every decision we made”, Don says.

One of Don’s proudest achievements sums up the initiative’s mission. DNDi developed a drug for African trypanosomiasis (also known as sleeping sickness), an often-fatal parasitic disease. The medication isn’t registered yet but may one day replace the existing treatment, melarsoprol, which has to be injected over weeks to months. “Patients would flee the clinic because it was so painful,” recalls Don. “We finally got that down to a single pill that had the same side effects as an aspirin.”

After two decades in operation, DNDi estimates it spends US$4 million–$34 million to develop and register treatments that combine or repurpose existing drugs. Developing an entirely new chemical entity costs US$63m–$200m. At its most expensive, that’s still 13 times less than the industry estimate.

Those new chemical entities come from trawling through the huge libraries of chemical compounds that pharmaceutical firms amass. “It took us years [of negotiations] to break in with the first company,” Don says.

“When many new drugs do not offer any therapeutic gain to patients, the only beneficiaries are the companies that are marketing them.”

But once DNDi was granted access, its scientists could screen thousands of chemical entities using robotic assays to see if any were effective in killing pathogens grown in lab culture dishes. They only pursued a promising drug lead if it could be made as tablets, which are easier and cheaper to distribute in remote, humid regions.

Given the diseases it targets, DNDi runs clinical trials in some extremely challenging environments, crossing rivers and rainforests to reach remote clinics in Africa, Asia and the Americas. But their trials are made somewhat easier by the fact they generally aren’t looking for incremental improvements between look-alike drugs as pharmaceutical companies do. DNDi seeks clear improvements in patient care, which are more evident in smaller trials, and smaller trials with fewer patients help to keep costs down.

DNDi also rarely patents its discoveries. To ensure equitable, affordable access to its medicines, the initiative stipulates in its negotiations with drug companies and research partners that their products must be free of any restrictive patents and sold at minimal cost, in all endemic countries, regardless of income levels.

Sharing is caring

DNDi stands in stark contrast to the pharmaceutical industry, but it’s not the only alternative model. In Europe, Italy’s Mario Negri Institute also prides itself on making its research accessible.

Founded in 1963, the Institute was the idea of Italian pharmacology researcher Silvio Garattini, whose working-class background led him to envision a medical research institute devoted to the ­public interest. He sold local philanthropist Mario Negri on the idea, and it came to life.

Based in Milan, the Institute aims to improve health with independent, transparent science. It never patents its discoveries, and all its findings are publicly available – including failures. It eschews placebo-controlled trials, instead designing trials to test if new therapies improve on ­existing treatments. It also investigates harmful side effects that might otherwise go unreported.

Just like any other research organisation, Mario Negri pieces together government grants, industry funding and public donations to fund its work. However, it maintains staunch independence from the pharmaceutical industry and ­governments by ensuring no funding source amounts to more than 10% of its annual budget. This allows it to pursue research, design trials, analyse data and share its findings freely.

“Open sharing of science can lead to advances for all of us much more quickly. We certainly saw that during the pandemic,” Mintzes says. “The Mario Negri Institute is an example that that kind of model can exist and actually flourish.”

It’s also beating the pharmaceutical industry at its main game: large-scale clinical trials. In the 1980s, Mario Negri ran some of the first “mega-­trials” in medicine, which revolutionised clinical trial design. The first of those trials showed an inexpensive treatment administered quickly could prevent deaths from heart attacks. The trial involved nearly 12,000 patients across the Italian healthcare system, yet it was planned, conducted and published in under three years. These days, Mario Negri can run trials at one-tenth of the cost per patient of standard industry trials.

Where DNDi focuses on select neglected diseases, Mario Negri has a wide-ranging program that tackles some of the biggest health problems of our time, including cardiovascular disease, ­cancer and neurodegenerative diseases. The Institute also holds the manufacturing industry and governments to account through investigations of environmental pollution and contamination.

Subscription medicine

We aren’t short of options to change the way we approach drug development. There are plenty of other levers that governments could pull to reorient clinical research towards the areas of greatest need, to prioritise public health over profits.

India is a prime example: its interpretation of patent laws has enabled the country to reject patents from pharmaceutical companies for drugs that do little to improve on existing therapies on multiple occasions.

Before it joined the European Union, Norway also had similar laws to ensure approved drugs were either more effective, easier to take or had fewer side effects than available treatments.

Lexchin says Australia could likewise change its patent laws and tighten up drug regulations to only permit drugs “that really make a difference”. However, the pharmaceutical industry wields strong influence over many national governments and drug regulators. The industry sustains huge parts of national economies in countries like the US, and largely funds regulatory agencies through user fees. As Mintzes says, it would take “quite a bit of bravery and innovative thinking to bring in these kinds of policies”.

“There needs to be pressure from below, from the public, from clinicians and from researchers – and there needs to be political courage from above.”

Although Australia only represents a tiny slice of global drug spending and is too small to influence the research interests of the pharmaceutical industry at large, we’re a wealthy country and could steer R&D by channelling more public funding into specific areas of national need.

“Pharmaceutical companies don’t exist without research that is publicly funded,” the University of Sydney’s Silva points out. “R&D isn’t just the moment when a compound enters phase I testing.” It starts long before that, in university labs and research institutes. Reorienting the R&D pipeline begins with adequate funding for basic science, and in Australia research funding has stagnated over the past decade, reducing the likelihood of chancing upon new drug candidates.

Lexchin agrees that increasing public funding, especially of clinical trials but also of early-stage research, could yield better outcomes. “The public sector plays a much larger role than is currently recognised,” he says.

In fact, 25% of new drugs originate in the public sector – and those drugs have more therapeutic value than the ones coming from industry. Take bedaquiline: researchers estimate that the public sector invested US$455m–$747m in the drug’s development – three to five times as much as Johnson & Johnson spent.

“In many cases, the public will pay twice,” says Mintzes: once for the initial, public investment in a drug’s development, and again when governments subsidise its access because the prices set by drug companies are so high. “We should be incensed,” adds Silva.

Some policy experts argue drug prices should be capped or early access guaranteed if those ­medicines were developed with large amounts of public funding. High prices can restrict access to medicines in the US or Australia, as much as any other country. For example, when Gilead priced their hepatitis C antiviral sofosbuvir at US$84,000 for a course of therapy – a blistering US$1,000 per pill – less than 3% of eligible Americans could access the treatment through Medicaid.

Australia actually had a radical answer to that problem: in 2015, it pioneered a lump-sum payment fee to manufacturers – AU$1 billion over five years – in exchange for an unlimited supply of seven hepatitis C antivirals, including sofosbuvir. Researchers estimate that the government saved AU$6.42bn in those five years and treated 93,413 more patients than if they had paid per packet.

This unconventional approach, dubbed the subscription or Netflix model, has since been adopted by the UK to spur innovation in antibiotic R&D, an area of development that has slowed to a trickle, and Sweden is trying out its own subscription program. Time will tell how effective these pilots will be.

Patent swaps are another idea. Pharmaceutical companies would forgo ­patenting an essential medicine needed in low- and middle-income countries in exchange for a patent extension on a non-essential product sold elsewhere.

It seems unlikely that this piecemeal approach – one patent here, one drug there – will reshape the global R&D landscape, but each of these strategies offers gains in areas of huge need. Progress can come from many small steps, as well as giant leaps.

Bringing it home

If there’s one area where Australia could really take the lead, it would be in the fight against Group A Streptococcus bacterial infections. While we’ve made great strides in quashing dengue fever and reducing tuberculosis, group A strep is a different story. It’s among the world’s deadliest pathogens, causing a whole spectrum of illness and disease, from sore throats to flesh-eating necrotising fasciitis. Yet still there is no vaccine.

The Australian Strep A Vaccine Initiative (ASAVI) is hoping to change that. The initiative formed in 2019 with an AU$35m windfall from the Medical Research Future Fund and the clear goal of progressing a strep A vaccine to phase II clinical trials in the next five years.

It’s an example of another R&D model gathering speed: mission-oriented initiatives that “work on a very specific research problem over a defined period of time, deliver results and then move on,” explains Daniel MacArthur, a population geneticist at the Garvan Institute of Medical Research in NSW.

Repeated or untreated strep A infections can permanently damage the heart, a condition called rheumatic heart disease, which leads to heart failure and stroke.

Australia has one of the highest rates of rheumatic heart disease in the world, particularly in one part of our population. “There is such an enormous burden of rheumatic heart disease, particularly in our First Nations people,” says immunologist and ASAVI project lead Alma Fulurija.

Aboriginal and Torres Strait Islander people account for more than 90% of cases of rheumatic heart disease, and are nearly 20 times more likely to die from the condition than the general population.

Fulurija says ASAVI was created as a “new way of accelerating vaccine development” in an area “that perhaps industry wasn’t as interested in”.

Fewer than 12 vaccines are in early development for group A strep, compared to hundreds in the pipeline for HIV, tuberculosis and malaria, she says. (That’s partly because human trials into strep A vaccines were prohibited for nearly 30 years after the US drug regulator got spooked by safety data from an early study. The ban was lifted in 2006, but still a void of industry investment remains.)

According to Michael Good, a vaccine researcher at Griffith University, no one is interested, commercially, in making a vaccine to prevent rheumatic heart disease because it mostly affects lower-­income countries, which are not the most profitable markets. Pharmaceutical companies may be interested in a vaccine for tonsillitis or strep throat that could be sold in wealthy countries too, Good says, “but that’s not the main reason we’re in this game”.

Penicillin and other antibiotics remain effective against strep A, although some strains are developing resistance. Since the 1990s, Good has been trying to develop a vaccine to protect against strep A infections – and thereby rheumatic heart disease – by scratching together grants and philanthropic funding to sustain his group’s research. Roughly AU$20m and three decades later, they have a vaccine candidate in a phase I safety trial of 45 volunteers.

It’s at this point that university-led research so often stalls – and why ASAVI could be critical. “When you step out of discovery research and move into development, it’s a different kettle of fish,” says Fulurija, who spent 15 years working in the pharmaceutical sector. “What ASAVI can do is bridge those two.”

The initiative is readying for a phase II trial with its candidate, an Italian vaccine nested in the philanthropic arm of biopharmaceutical company GSK.

Ideally, ASAVI could support more than one candidate with additional funding, so the Griffith University team is continuing its work.

Another world is on its way

Organisations like DNDi and the Mario Negri Institute demonstrate that it is possible and beneficial for drug research and development to prioritise public health over profit. But these initiatives and other alternate programs didn’t spring from thin air – changing an industry takes concerted effort on many levels.

“There needs to be pressure from below, from the public, from clinicians and from researchers – and there needs to be political courage from above to make changes,” Lexchin says.

And sometimes, this pressure gets real results. In late September 2023, two months after Johnson & Johnson announced its historic deal, the company dropped its patents for bedaquiline. The company will no longer enforce its secondary patents for the tuberculosis drug in 134 low- and middle-income countries, which represent 99% of global tuberculosis cases. Manufacturers can now make and supply generic versions of bedaquiline years before the secondary ­patents expire in 2027.

Five years ago, the drug cost in-need countries US$67 per patient per month. Competition between generic manufacturers is expected to bring prices down to US$8.