AIHTA framework facilitates the identification of public contributions to the development of innovations in healthcare
Article 57 of the proposal for new EU pharmaceutical legislation is intended to significantly improve the transparency of public funding for the development of medical innovations through mandatory information on cash flows. However, there are limits to the planned mandatory disclosure: for example, the funding period and so-called indirect funding (e.g. in the form of tax relief) do not have to be disclosed. In this context, the Austrian Institute for Health Technology Assessment (AIHTA) is working on a framework for recording and categorizing public contributions to research and development (R&D). This is subsequently intended to support political decision-makers in price negotiations.
Article 57 of the new EU pharmaceutical legislation obliges both applicants and marketing authorisation holders to disclose any direct financial support for research and development (R&D) from public funds. The obligation is not limited to financial support from EU countries. The scope of application is very broad and includes any direct funding of all research and development activities in connection with the development of a medicinal product. Reporting on indirect cash flows (such as regulatory or tax concessions), on the other hand, is not provided for.
The AIHTA framework was developed in the context of the EU project HI PRIX (Health Innovation Next Generation Payment and Pricing Models, Grant Agreement No. 101095593). It is intended to initiate standardized reporting, reduce ambiguities in interpreting direct and indirect contributions and develop the necessary categories. For this purpose, a literature review was conducted, and representatives of various interest groups were interviewed. The evaluation of 26 publications revealed that more than half of all authorised medicinal products and more than 90 % of the target molecules of medicinal products are associated with public sector institutions and/or their spin-offs. Along the value chain, i.e. from basic research to post-market surveillance, the AIHTA identified eight categories of public contributions to medical innovation.
The public pays twice and beyond basic research
In 2017, Global Justice Now estimated that the public sector accounts for two-thirds of all upfront (i.e. pre-authorisation) spending on drug development and around a third of all medicines come from public sector research institutions. Virtually all major innovative vaccines that have come to market in the last 25 years have been developed by public sector organisations. Although most of the analyses evaluated by the AIHTA focused on public contributions to basic research, at least one in four new medicines was also found to have a public contribution in the late stages of development.
"The evidence of public and philanthropic contributions to the development of medical products is undisputed. While the public pays twice, the risks are socialised and the profits are privatized. “Research and development” conceals many activities with completely different objectives," criticises Claudia Wild, Head of the AIHTA. However, the studies trace the development paths of these products, ranging from basic academic research to spin-offs or small biotech companies to late-stage takeovers by large pharmaceutical companies.
How the public sector pays
Based on publications and expert interviews, the AIHTA has identified eight very different categories that can be used to describe public contributions in more detail. They show consistent public involvement in the various phases of medical R&D: from basic research and clinical studies to the authorisation and monitoring of products after their launch, the public sector plays a central role. For example, in technology transfer, in promoting university spinouts (spin-offs from universities) and start-ups. This also includes support with regulatory issues, clinical studies (including in the final stages of development) or evidence generation following market authorisation. Examples of this include the University of Oxford, which produces 15 to 20 new spin-out companies every year, the European Medicines Agency (EMA), which is partly financed by public funds (around EUR 50 million in 2023), or the numerous national and EU-wide support programs for start-ups, for example through the European Innovation Council (EIC) or national public funds.
C. Wild uses the authorisation of advanced therapy medicinal products (ATMPs) as an example: A total of 18 of these had been approved in Europe and the USA by September 2023. "Most of these products originate from publicly funded research institutions or were financed by philanthropic organisations. Ownership of these products is typically transferred following the successful completion of early development phases. Namely, when the risk of failure decreases. With each change of ownership, the company's value subsequently increases in line with the valuation of the product portfolio. This process of "financialisation" is discussed in many studies, and the associated costs are usually included in the expenses for industrial research and development," Wild continues.
Political obligations
In addition to these questions of how direct and indirect public investments can be identified and differentiated, there are also questions of their implementation: I.e. how these findings can be made usable for pricing along the individual public financing categories. However, this requires a political willingness to lay down rules at the regulatory level and to use all transparent information on contributions from the public sector for this purpose. "Some countries, such as Italy and France, are pioneers in the implementation of transparency requirements. However, without clear definitions or sanctions for non-compliance, these efforts will remain ineffective. Effective implementation requires transparent data. In addition to information on the methods, instruments and techniques used, this clearly also includes information on indirect financing," emphasizes Wild.
To initiate a real paradigm shift, the AIHTA proposes several design options - such as standardized reporting on public and philanthropic R&E spending that includes EU-level and national funders. This should be mandatory for industry, include results such as spinouts, patents, etc., and be available to the public and researchers. Finally, clear contractual regulations on conditions and requirements must be made, such as clauses on reasonable prices, free access to intellectual property rights, profit sharing and regulations on the repayment of initial investments or license fees to the public.
Wissenschaftlicher Ansprechpartner:
Contact for content-related questions and interviews:
Austrian Institute for Health Technology Assessment
Claudia Wild
p +43 / 1 / 2368119
Garnisongasse 7/20 1090 Vienna
e-Mail: claudia.wild@aihta.at
Originalpublikation:
Wild, C. and Fabian, D. (2024): The Role of Public Contributions to the Development of Health Innovations. HTA-Projektbericht 158. Wien: HTA Austria – Austrian Institute for Health Technology Assessment GmbH. https://eprints.aihta.at/1499/.
Wild C, Sehic O, Schmidt L, Fabian D. (2024) Public Contributions to R&D of Medical Innovations: a Framework for Analysis, journal article forthcoming.
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