NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, March 23, 2016

One of the major challenges in developing new medical countermeasures against threats to global health security—be it a new flu pandemic or rapid spread of a neglected disease—is the lack of an underlying commercial market to support the financial investment needed for expeditious drug development and scale-up. This challenge was demonstrated at the outset of the 2014 Ebola outbreak: even though the lethal virus was known for nearly 40 years, there was no cure or vaccine on the market. Paradoxically, while political attention to global health issues has revved up since the Ebola outbreak, funding is as short as ever when it comes to research and development (R&D) to address novel or neglected diseases. The funding shortage could be exacerbated by competing global challenges such as the need to raise money for funding the initiatives of the COP21 and implementation of the UN Sustainable Development Goals.

Defined as any informal or formal arrangement between private and public sector entities, a public-private partnership (PPP) can offer an integrated and systematic approach to the development and purchase of needed vaccines, drugs and therapies for public health challenges. It enables companies to realize shared value while furthering public health goals by sharing risk, mobilizing significant resources for diseases where private entities have no incentive to invest in new drug development and bringing together data or expertise that resides with different parties. PPPs become particularly relevant in dealing with public health emergencies of international concern, when there is an urgent need for pooling of resources not only to accelerate the development of medical countermeasures but also to make large scale manufacturing feasible.

While PPP is increasingly becoming a buzz word in the Chinese economy, pharmaceutical PPPs remain largely alien in China’s new drug development. On the one hand, there are excessive government restrictions on foreign entities intending to get involved in government-funded projects. On the other hand, local researchers remain predominantly government funded and, despite growing state funding, their ability to innovate has been seriously constrained by institutional, policy and capacity-related challenges. In contrast to the market failure in the development of drugs for rare or neglected diseases, what we have seen in China is a government failure behind the unsuccessful efforts to incentivize original drug development.