Milken Institute
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Rethinking financing for global health
By: Milken Institute
April 27, 2010
This year's conference highlighted the vital need for creativity and innovation in our thinking about how to fund medical R&D targeting diseases of the developing world.

Moderator Hannah Kettler of The Bill & Melinda Gates Foundation laid the groundwork by invoking the late C.K. Prahalad, who shaped the world's thinking about the market at the bottom of the wealth pyramid. Although Prahalad, who died last week, did not focus specifically on health, Kettler drew the connection between his broader concept and the market for new medical tools that target diseases disproportionately affecting the poor in developing countries. The question is how to attract more investment of resources, financial and otherwise, from a broader set of actors to help meet the health needs of these vast populations.

Holly Wong of the International AIDS Vaccine Initiative pointed to a proposed product development partnership (PDP) that would rely on a donor-backer bond issue to generate upfront funding while reinvesting some of the proceeds from product sales into the development of new products. The idea, according to Wong, would build more sustainability into the model and allow for cross-subsidization by directing proceeds from one disease area to potentially fund R&D in another.

Eric Easom, Program Leader for Neglected Diseases at Anacor Pharmaceuticals, represented the perspective of a small, privately-held biotechnology company that is collaborating with several PDPs. Easom said that, for smaller companies, "push" funding, which provides capital to companies looking to invest in R&D for developing country needs, is preferable to "pull" funding, which rewards companies for their successful investments.

Perhaps the investment climate for neglected diseases should look more like the one for orphan diseases, which are very attractive to investors because of preferential payment and taxation environments and active patient populations. That was the perspective from Stephen Sands of Lazard Healthcare, who felt that the credit markets and venture philanthropy models could provide a source of capital that is better aligned with the high risk nature of investment in medical research than debt instruments such bonds.