Drug Development for Government, Nonprofit, and Developing-World Markets

The market for pharmaceutical development continues to evolve rapidly. One important change is the increasing prominence of drug development for public sector, nonprofit, and developing-world markets. Not long ago, pharmaceutical industry involvement with these sectors was limited to certain government-sponsored vaccination programs, and donations of drugs and vaccines to the developing world were done on essentially a charitable basis. For the most part, these interactions did not significantly impact the business model of commercial pharmaceutical companies, which was supported by developed country (i.e., Western  Europe, US, and Japan) focused sales of blockbuster drugs to high-margin commercial healthcare markets.

During the past decade, global attention to biodefense and pandemic preparedness has given rise to major government-development programs, such as Project Bioshield and the Biomedical Advanced Research and Development Authority (BARDA) in the US. At the same time, nonprofit organizations, such as the Bill and Melinda Gates Foundation, have become important sponsors of drug-development programs, adding to an increased focus on affordable treatments for widespread diseases of the developing world, including neglected tropical diseases (NTDs), such as malaria and tuberculosis. The pursuit of drugs for rare or orphan disease indications also has taken on a higher profile.

These markets are distinct in some ways, but they are similar in that they all challenge the profit margin that supported the development programs of major pharmaceutical companies in the past. The pervasive challenge of lower profitability potential is due to low sales prices or small volumes. Other challenges include complex payer arrangements and attendant “lumpy” revenue streams as well as poor long-term sales visibility with substantial political or policy risks. The unique circumstances faced by customers and end users often impose additional constraints, such as the need for a long shelf life, tolerance to poor refrigeration, or the ability to administer the product safely with a low level of medical oversight. In addition, technology transfer and intellectual property (IP) issues can be unusually challenging. These challenges are outlined in Table I.