THE FUNDING OF MEDICAL RESEARCH

The completion of the Human Genome Project, announced in 2001, marked the advent of a new age in the ability of medical researchers to understand human biology. The continuing growth of genomic information, plus the advent of new tools, is beginning to permit scientists to generate vast amounts of experimental data about the roles of cells, genes, and proteins barely imaginable only a few years ago.

It is expected that medical research companies that effectively embrace these powerful new tools will make drug discovery and development vastly more efficient. Expectations only a few years after the announcement of the completion of the Human Genome Project were that the new understandings would “massively reduce the time and cost of making new drugs.  In 2010,” some predicted, “the discovery and development process will take half as long as it does now, and costs per drug will fall to a quarter of the current average.”[1]  Today, it is quite clearly recognized that, while these expectations still may be achievable, they will be more difficult to attain than originally hoped.

In many quarters, this expectation continues to be viewed as the gateway to a new golden era of biology.  There is excitement about the potential advent of “personalized medicine” and new targeted treatment therapies.  Biomarkers are beginning to be developed that may make very early stage diagnosis of disease feasible.  As we learn more about the mechanisms of disease, it is believed that we will develop more sophisticated and more effective approaches to treating them.

For both patients who suffer from diseases that may be cured by this new generation of medicine and for investors who provide the financing for medical research, the expectations of this new golden era are ambitious.  Thus far, these expectations have not yet been met.[2][3]  Despite continuing large investments in medical research, an acceleration in the number of new drugs approved by the US Food and Drug Administration has not yet been achieved.

Commercial financing of medical research:

While the pharmaceutical industry has certainly provided highly complex lifesaving products, it has been criticized for being one of the most profitable industries in the US.

In 2005, pharmaceutical firms in the Fortune 500 averaged a 10.3 percent return on assets, compared with a median return of 4.7 percent for all industries.  That return put the drug industry ninth out of the 50 industries ranked that year (it ranked second in 2003 and twelfth in 2004).[4]

These returns have provided the incentive for increasing investments in research and development.  In 2007, the entire industry invested $58.8 billion in research and development.[5]  Historically, the costs to develop new medicines have been extraordinarily time consuming and expensive.  The fully burdened cost to bring a new medicine to the market is estimated to be $1.3 billion (in 2005 dollars).  The cost to develop a new biologic was estimated to require $1.2 billion.[6]  In addition, the process takes ten-to-fifteen years.[7]  The drug development process requires several lengthy steps:

• Pre-Discovery: Understanding the disease;

• Discovery or development of a drug molecule to test;

• Preclinical testing in the laboratory;

• Filing for FDA approval of an Investigational New Drug Application;

• Phase I clinical trials in small groups of health volunteers;

• Phase II clinical trials in a larger group of volunteer patients;

• Phase III clinical trials in a larger group of volunteer patients; and

• FDA review and approval of both the drug and manufacturing.

Complicating this process further is that even the best conceived scientific endeavors often fail.  Half of all experimental drugs that make it as far as costly Phase III trials do not become approved medicines.[8]

Federal financing of medical research:

The dominant funding source for medical research in university and non-profit institutions is the U.S. National Institutes of Health.  In the past fourteen years, in actual dollars, NIH funding has increased by a factor of nearly three.  In 1994, the NIH budget was $11.0 billion.  For 2008, NIH funding increased to $29.5 billion.  While this has massively increased the research enterprise, the budget has leveled off in the past several years.  Since 2003, NIH funding has been essentially flat.

This has created difficulties for academics and other researchers that have relied on federal investments in medical research far in excess of what might be expected.  As writers affiliated with the Federation of American Societies for Experimental Biology write:

"Only four years after completion of a historic “doubling” of the National Institutes of Health (NIH) budget, biomedical researchers in the US are experiencing unprecedented competition for research funding and for many there is deteriorating morale about the prospects for survival in research careers.  Three factors, in combination, account for this dramatic change: Flat funding for NIH has left funded researchers and their institutions vulnerable to the rising costs of biomedical research; reduced funding for competing grants puts research projects in jeopardy; and the increased capacity for research has resulted in a higher demand for funds.  Boom and bust cycles are wasteful and inefficient.  Steady, long-term growth will provide the optimal conditions for progress in science."[9]

Currently, NIH funded research institutions—which include virtually all research universities and non-profit research institutions in the US and many others around the world—are in turmoil.  On the one hand, many have massively expanded their research programs over the course of the last decade and a half.  On the other hand, they are now forced to deal with a very flat budget that, in some years, has been declining after inflation.

The table below illustrates the changes in the budget of the National Institutes of Health.[10]

State financing of medical research:

Increasingly, states are moving to establish funding programs to build and sustain research-based economies.  This year, Massachusetts committed a $1 billion in funding for a biotech initiative.[11]  Maryland Governor Martin O'Malley has announced plans to invest $1.1 billion in the state's bioscience industry by the year 2020.[12]  Other states that have invested funding into their biotechnology sectors in this decade include New Jersey, Ohio, Florida, Pennsylvania, and North Carolina.[13]  Washington State has committed $350 million over ten years to its Life Science Discovery Fund.

Combined, all sources of medical research funding probably exceed $100 billion annually.  Despite the significant challenges of finding and delivering new medicines to the market, research and development teams continue to pursue the goal of finding new cures.[14]

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