Quoting article verbatim in third paragraph under heading "Solution — using pay for success contracts to repurpose off-patent drugs":
Outcome payments are disbursed to the fund by payers upon success of a particular clinical trial. Payment amounts are determined based on savings generated for the payer (e.g., a national health service or private health insurer) which ensures the model is scalable, using standard pharmacoeconomic assessment (e.g., $50k per QALY, or Quality-Adjusted-Life-Year or $100k per additional prevented hospitalisation in treatment arm vs usual care) that considers the incremental cost savings due to showing efficacy of this new off-patent treatment in RCTs versus cost for standard usual care
My preference is to have a payment for a specific robust outcome like per prevented hospitalisation in the treatment arm of an RCT. For most patented drugs, this would be a very high cost (e.g. if 50 patients treated to course of patented drugs costing $50k each for one prevented hospitalisation, society would be paying $2.5m per successful outcome under patent system). This is also more closely linked to how outcome payments for social impact bonds are determined (e.g. $5k per homeless person given a job and put in a home or per prisoner that is given a job and stays out of prison for one year).
Regarding ROI for impact investors, it should be a market rate (5-10% p/a) paid over a period of time (e.g. 5 years) and subject to phase 4 surveillance trials showing the safety and efficacy of the off-patent treatment protocol is maintained over time. The impact investment opportunity can be made more attractive (above market rates of return) if payers such as govts, health insurers or philanthropy also provide matched funding without an expectation of return - effectively acting as follow on investors but relying on the impact investors to lead the round and pick the winners (promising off-patent repurposing RCTs to fund) instead of traditional direct grant funding where payers take on all the risk of RCT failure. I also note that it is over 100x cheaper to repurpose generic drugs, so the cost per QALY should be much more value for money (e.g. $1k per QALY) and would outcompete the patented drugs. Open Source Pharma Foundation are working on a Phase 3 trial of a repurposed off-patent vaccine - https://www.fastcompany.com/90498448/how-open-source-medicin.... Old vaccines can provide broad spectrum protection by boosting innate immunity - see https://www.pnas.org/content/118/21/e2101718118. The lack of private incentives to repurpose off-patent medicines is a massive missed arbitrage opportunity that could generate trillions of dollars in value for society, if only it could get payer backing.
It's not clear to me if you were agreeing or disagreeing (nor does it really matter in this context), but yes, exactly!
Your fleshed out thoughts is exactly the kind of line I wanted to see in the article. Just mentioning QALY is no better than a manager vaguely promising to pay you when the product "scales". You'll end up arguing fruitlessly over definitions. I would have liked to see a concrete example of how an investor would expect to be paid in practice. Until specific examples of what that could translate to in practice have been offered, it's just a buzzword.
I had quoted the section of the article regarding how the outcome payments would be calculated because you mentioned I was sidestepping the issue, but hope it is clearer now in any case! There is also a risk that too much detail might confuse a reader.
I agree that QALYs are vague should only be used as a tool to determine a specific price for repurposing RCT data. The price and "deliverables" (i.e. successful generic drug repurposing RCT data) will be specifically defined in the contractual language and negotiated with a payer in advance. Essentially you ask a payer to state a price they are willing to pay for off-patent RCT data to treat a specific disease (e.g. $100k per prevented hospitalisation in the treatment arm of a Phase 2/3 RCT, and may also require regulatory approval as a condition or "bonus"), then put it to the market in an RFP document. This would be scalable if the price paid is less than the amount of savings for payers. For repurposed generic drugs there is a significant arbitrage opportunity because the marginal cost of generic drugs and it is over 100x times cheaper to conduct RCTs and achieve regulatory approval ($10-15m, enter phase 3 trials immediately) vs patented drugs that take 10-15 years and cost over $1-2b. So even agreeing to transfer 1% of cost savings into a pay for success contract could generate billions of dollars in outcome payments for generic drug repurposing and trillions in healthcare cost savings in the US alone from the discovery of new low cost generic drugs to treat diseases
E.g. from the article:
By way of example only, repurposing the off-patent NSAID ketorolac as a prevention treatment resulting in 10% reduction in breast cancer recurrence would cost $5 million annually (100,000 cases at $50 per case for ketorolac and its administration). The savings would be over $1 billion annually (10,000 patients at approximately $100,000 per patient for the treatment of metastatic disease)
It really isn't that much different from how military contracting works, except the process would be more competitive because anyone would be allowed to conduct the RCTs - the idea is to leverage the market to crowdsource the solution using pay for success, otherwise it's not really much different from the risks of traditional grant funding "picking the winners" (although it still is different in the sense that the the funds are not provided up front from the payer). But like biotech industry, you want everyone to be able to raise money for RCTs and a minimum of bureaucracy (except dealing with FDA and ethics approvals, which is a necessary evil).
The key difference here is that you now have a market for something that is essentially a public good. Ideally, payers should form a syndicate to minimise free riding - this is one of the core benefits of patents: they tend to be enforced globally since GATT/TRIPS, even in India and China. The equivalent would be a global pay for success fund (similar to the proposed Health Impact Fund - see https://en.wikipedia.org/wiki/Health_Impact_Fund, although this is not focussed on incentivising generic drug repurposing to save payer healthcare costs, which would be scalable, but more on developing new therapeutics for neglected/tropical diseases)
> you mentioned I was sidestepping the issue, but hope it is clearer now in any case!
Ahahah, my apologies I didn't realise I was commenting directly to the author, otherwise I would have not have referred to you in the third person.
I disagree about "too much detail" here, in that clarity and simplicity, not vagueness, are the correct remedy to the risk of overinformation.
But yes, your comments here add a lot more clarity to the idea, and it is indeed an interesting proposition, thank you for taking the time to elaborate. Hopefully someone who had the same initial impression as I did might find their way to this thread and be equally satisfied with your added thoughts here.
I'm not sure we are supposed to doxx ourselves here, but yes, I did help write the article. No problem and I really appreciate your feedback - it was the intention here to help get an understanding from technically-minded people what aspects of the proposition may need fleshing out.
Outcome payments are disbursed to the fund by payers upon success of a particular clinical trial. Payment amounts are determined based on savings generated for the payer (e.g., a national health service or private health insurer) which ensures the model is scalable, using standard pharmacoeconomic assessment (e.g., $50k per QALY, or Quality-Adjusted-Life-Year or $100k per additional prevented hospitalisation in treatment arm vs usual care) that considers the incremental cost savings due to showing efficacy of this new off-patent treatment in RCTs versus cost for standard usual care
My preference is to have a payment for a specific robust outcome like per prevented hospitalisation in the treatment arm of an RCT. For most patented drugs, this would be a very high cost (e.g. if 50 patients treated to course of patented drugs costing $50k each for one prevented hospitalisation, society would be paying $2.5m per successful outcome under patent system). This is also more closely linked to how outcome payments for social impact bonds are determined (e.g. $5k per homeless person given a job and put in a home or per prisoner that is given a job and stays out of prison for one year).
Regarding ROI for impact investors, it should be a market rate (5-10% p/a) paid over a period of time (e.g. 5 years) and subject to phase 4 surveillance trials showing the safety and efficacy of the off-patent treatment protocol is maintained over time. The impact investment opportunity can be made more attractive (above market rates of return) if payers such as govts, health insurers or philanthropy also provide matched funding without an expectation of return - effectively acting as follow on investors but relying on the impact investors to lead the round and pick the winners (promising off-patent repurposing RCTs to fund) instead of traditional direct grant funding where payers take on all the risk of RCT failure. I also note that it is over 100x cheaper to repurpose generic drugs, so the cost per QALY should be much more value for money (e.g. $1k per QALY) and would outcompete the patented drugs. Open Source Pharma Foundation are working on a Phase 3 trial of a repurposed off-patent vaccine - https://www.fastcompany.com/90498448/how-open-source-medicin.... Old vaccines can provide broad spectrum protection by boosting innate immunity - see https://www.pnas.org/content/118/21/e2101718118. The lack of private incentives to repurpose off-patent medicines is a massive missed arbitrage opportunity that could generate trillions of dollars in value for society, if only it could get payer backing.