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Assessing the landscape of the pharma industry’s readiness for future pandemics by looking at past pandemics, funding and revenue, and sustainability.
Although the world was not prepared for the widespread COVID-19 pandemic, it has inspired changes in infectious disease investments, approaches to drug development, and regulatory policies that could result in lasting innovation and help mitigate the impact of future pandemics. National governments and the pharmaceutical industry were posed with significant opportunities and challenges, and both have stepped up to find innovative solutions for the current pandemic. However, the global community must learn from this experience by continuing to invest in the research and development infrastructure necessary to combat infectious diseases and build pathways that can expedite the containment of future pandemics.
This article focuses on how to incentivize innovation for pandemics, providing an overview of successful efforts during past pandemics, outlining currently available funding and revenue opportunities, and discussing how the potential financial gaps between investment and commercial sustainability may be bridged. For companies pursuing pandemic-related assets or repurposing their current assets to COVID-19 treatment and prevention, this article will provide guidance on how best to use available resources and shape the environment to ensure sustainable innovation for the present and future pandemics.
Looking back at past pandemics and epidemics, only a few have yielded successful treatments. H1N1 is perhaps the best example of a successful pandemic response: vaccines were available within four to six months of development initiation and a month prior to the second peak of the pandemic in the US. In total, eleven vaccines were granted preauthorization by the WHO and widely distributed. The largest supplier of pandemic vaccines, GlaxoSmithKline, reported sales of $2.95B within the first year after the pandemic began. Dr. Marie Mazur, an infectious disease expert who was directly engaged in the 2009 H1N1 vaccine development reasoned that “the vaccine industry was able to respond quickly by leveraging proven influenza vaccine technology platforms to expedite the H1N1 clinical vaccine development.” Regulators allowed manufacturers to license their pandemic vaccine as a strain change of their seasonal vaccines, eliminating the need for preliminary safety testing and expediting regulatory review & approval. This enabled large-scale vaccine development and distribution faster than would be possible for a novel coronavirus like COVID-19.
Commercial success in Ebola, on the other hand, has been modest to date. Prior to the Ebola epidemic, vaccines were already in development due to several small previous outbreaks. Soon after the 2014 epidemic started, development and production ramped up quickly, but slowed after the outbreak was contained. Merck launched ERVEBO about five years after the initial outbreak in December 2019. Gavi, the vaccine alliance, authorized $187M in funding by 2025 to purchase a stockpile of doses in anticipation of future outbreaks. All other recent pandemics (SARS, MERS, ZIKA, etc.) have had minimal success in encouraging successful innovation.
The COVID-19 pandemic cannot be fully compared to either example given its unprecedented scope and worldwide impact on health, society, and the economy. Although the infrastructure needed for rapid development of a vaccine or therapeutic, one was not in place for COVID-19. Despite prior coronavirus outbreaks, companies rapidly invested significant resources and efforts into identifying a solution. To date, over 200 products are either being repurposed or newly developed by both large pharmaceutical companies and smaller biotechs supported by partnerships. The US government has made several financial commitments between $1.2B and $2.5B to a range of companies, including Pfizer/BioNTech, GSK/Sanofi, Moderna, J&J, AstraZeneca, and Novavax, while the EU has made a commitment to purchase 400 million doses of the AstraZeneca vaccine, 300 million doses of the GSK/Sanofi vaccine and is advancing contracts with other companies. Additionally, the German government has awarded BioNTech & CureVac a combined $745 million to develop their vaccine candidates. Though the success of COVID-19 innovation is still to be seen, the initial clinical outcomes and investment is encouraging.
Currently, funding for pandemic innovation is available, but mostly limited to governmental sources and NGOs focusing on short-term initiatives.
Alongside funding, partnerships are another way to support and nurture innovation by providing access to resources and sharing the burden of risk. However, prior to the COVID-19 pandemic, there was limited academic interest in advanced research on novel pathogens such as coronaviruses, and limited pharma industry interest in investing in this foundational research due to concerns around ROI. This combination created an environment in which novel infectious disease partnerships were not mutually beneficial, despite the need for them today. In light of COVID-19, such partnerships have started to grow to meet the needs of the moment but will require additional support to ensure sustainability.
Currently available funding and partnership incentives for infectious diseases are limited and short term. To overcome these challenges, a range of short- and long-term strategies are presented here to help support sustained innovation for future pandemics.
1. Cross-pharma and cross-industry collaborations to improve efficacy of R&D and manufacturing efforts
As ex-CDC senior advisor Dr. Michael Shaw pointed out, the pandemic “has bolstered the need for early commercial capacities, as many companies were not prepared for such expedited commercialization of novel therapies.” Collaborations across large and small pharma companies can harmonize efforts focused on identifying potential pandemic solutions and support the manufacturing of promising therapies and vaccines. Such partnerships could also remain “dormant” and only awaken and gain full funding if a pandemic occurs, but for which the initial framework of collaboration already exists. A clear example of this is the National Institute of Health (NIH)’s Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV) program, which has brought together numerous manufacturers to identify and push the most promising treatments and vaccines forward.
Additionally, collaborations could be established for pandemic research & development through a consortium of pharmaceutical companies, payers and/or employer groups (in the U.S.) to pre-define reimbursement for new vaccines or therapies created for pandemics. Employers or payers could invest into a pandemic research and mitigation fund that guarantees access to a specified number of pandemic vaccines / therapies to plan members at a no cost or capped price immediately upon regulatory approval. A similar concept (the Embarc Benefit Protection Program) has recently been piloted by Cigna where employer groups pay a monthly membership fee to cover the unexpected cost of gene therapies.
Lastly, cross industry collaborations can also help support the development of pandemic solutions. The COVID-19 pandemic has already brought about several examples of such collaborations including ventilator production partnerships between GE Healthcare and Ford, Ventec and General Motors, Foxconn and Medtronic, and several others. In these cases, one company provides the technical expertise while the other provides materials and manufacturing capacity.
2. Short-term investments to allow for immediate response to a particular pandemic
Current short-term funding primarily comes from governments and NGOs that “push” research and development forward by investing in companies and research labs. However, an alternative to this is a “pull” funding mechanism wherein governments provide advance market commitments (AMCs) promising a set payment for any pandemic vaccines or treatments developed.This strategy has already been employed in multiple instances (e.g., H1N1, Ebola, PCV), but typically only relies on high-income countries and incentivizes only companies that are further along the development timeline.
To address these challenges, international governmental or financial institutions could implement market-driven value-based advance commitments (MVACs), first suggested by the Center for Global development. In this model, individual contributions depend on population size and ability to pay, thereby ensuring contributions across high-, middle- and low-income countries. Low- and middle-income countries gain affordable access to therapies while demand from high-income countries is appropriately monetized. Furthermore, the price can differ according to efficacy and safety to incentivize the development of the most efficacious treatment.
Another option that may address the lack of early stage investment is pandemic bonds, in which investors, pharma companies, and NGOs pool money for a pre-determined period of time. Funds are managed by a third party (NGO or bank) that invests the funds in typical avenues and returned to investors plus interest after the pre-determined time unless a pandemic-related opportunity arises. If a promising candidate and/or pandemic risk is identified based on clear, pre-defined metrics, the funds are released for distribution. A clear example of this is the Pandemic Emergency Financing Facility (PEF) pandemic bond, which was designed by the World Bank to pre-pool money for rapid response ahead of a disease outbreak in low-income countries. In this arrangement, private investors provide upfront funding for three years. If a qualifying pandemic occurs during that time, some of the money is disbursed to governments and pre-approved organizations for pandemic response. Otherwise, investors receive their money back plus interest.
3. Long-term investment to enable ongoing research for future pandemics
One of the primary issues that has been encountered with previous pandemics – and may happen with COVID-19 – is that research and funding for pandemics is ubiquitous during the crisis, and subsequently dries up once the threat is apparently gone. This dis-incentivizes biotech and pharmaceutical companies from pursuing vaccine or drug development given uncertainty of funding availability in the long term. However, as Dr. Mazur points out, the lost GDP on a national level and the lost revenue at the individual company level due to shutdowns and reduced activity “is significantly worse than a relatively small annual public investment in pandemic treatments and vaccines. This is clearly demonstrated with the ongoing COVID-19 pandemic.”
Two different approaches can be taken to address this, focused on either government driven funding or private funding. One, ongoing government and NGO funding should focus on public research for pandemic or infectious disease research rather than relying on individual private companies. Governments can offer ongoing academic funding for the development of a pan-strain vaccine platform, which could be quickly tailored toward a novel virus in case of a pandemic. Going a step further, governments could agree to pay for the development of vaccines against newly discovered viral strains which are not currently pandemics to ensure optimal preparedness for every novel virus. As a result of these measures, any “fairness” concerns over which private companies receive ongoing funding are eliminated and risk of public backlash is limited as there is no profiting from the government grants. Promising candidates could then become the foundation of a partnership with – or be licensed to – biotech and pharmaceutical companies with clinical trial and manufacturing capabilities. Aside from existing government research funds, this approach can be supported by an additional “pandemic preparedness” tax that could be leveraged by the government on all companies similar to a carbon tax.
The second option is a pooled investment fund across large pharma companies to continuously fund ongoing research (e.g., corporate venture). The fund can be managed by a panel or third party and used to invest in promising pandemic technology, potentially becoming self-sustaining in the long term as products are commercialized and profits are re-invested in new solutions.
4. Formal expedited regulatory pathways for pandemic vaccines and treatments
Currently, there are no clear pathways to accelerate vaccine development, which dis-incentivizes participation, particularly during off-periods where the focus is not on pandemic products. During the COVID-19 pandemic, many countries, including the US, made efforts to cut the red tape and speed up approvals for new and repurposed products.
The Food and Drug Administration (FDA) created the Coronavirus Treatment Acceleration Program (CTAP) to provide pharma companies with interactive feedback and expedited trial protocol approval as well as assistance in finding and approving patients for trials or emergency use of products. The National Institutes of Health (NIH) created the above-named public-private partnership ACTIV which also supported streamlining of clinical trial design and approval. The EU took the lead in this area, having created in 2014 the European Horizon 2020 program – the biggest EU research and innovation program ever – to fund and help speed up vaccine development by limiting red tape.
Both the US and EU should work to formalize and standardize expedited pathways for pandemic products, including priority review, reduced clinical trial requirements, and a framework providing explicit guidance on how to access expedited review. Dormant public-private partnerships similar to ACTIV that can be awakened to quickly streamline clinical trial design and assessment represent a promising option to accelerate development while limiting the burden on governments.
In the pharmaceutical and biotech industry, the search for a treatment and vaccine against COVID-19 is already in full swing. Many clinical trials have started, but their outcomes are still uncertain, with some set to become commercial blockbusters, and others to flounder in the face of regulatory requirements. The COVID-19 pandemic is of unprecedented scope and raises more questions than ever about how to sustain innovation in a pandemic. By examining trends showing that current incentives for pursuing innovation lack long-term approaches, governments and industry players can pursue practical solutions that will lead to more sustainable commercialization of pandemic innovations and better preparedness for future pandemics.
Betty Pio is a Partner, Aishwarya Jayagopal is a Senior Consultant, Cameron Pott is a Consultant, and Nicholas Stailey is a Consultant within the global Life Sciences practice at Simon-Kucher & Partners