Maier-Rigaud, Frank, Robert Lauer, Laura Robles & Johannes Mattke (2020) Limits to the Development of Causal Treatments in Neurodegenerative Diseases – Indications for Market Failure?, Report for the Yuvedo Foundation.

Pharmaceutical products play a major role in improving health in modern societies, yet for some diseases, the pharmaceutical industry has been struggling to develop a causal or disease-modifying treatment. Some neurodegenerative diseases (NDD) such as Parkinson’s disease (PD), Dementia, or Alzheimer’s disease (AD) are prominent examples of diseases that fall into this category. Despite the discovery of a symptomatic treatment more than 50 years ago for PD, for instance, no disease-modifying treatment is available to date. Likewise, no disease-modifying therapies exist for AD as of now.

While this situation could merely be a reflection of scientific challenges in the development of new drugs, this report explores and compiles possible alternative, economic explanations that may be responsible for the lack of causal treatments. These alternative and possibly complementary explanations, or hypotheses, are developed based on a review of the economic literature, including health economics, industrial economics, regulation, and finance theory, and based on qualitative interviews and existing empirical and qualitative studies in NDD and in particular PD. At the core of these hypotheses are the economic or financial incentives for research and development (R&D) from the perspective of the pharmaceutical industry. By way of simple models, mechanisms and illustrations, firms’ R&D incentives, i.e. how much to invest, where to invest, and when to invest – if to invest at all – are discussed. The economic incentives are analysed against the background of the observed lack of an effective cure in PD and other NDD, and references to that background are made to provide some context for the analysis. This background includes relatively well-working existing treatments for a substantial share of the affected population; lengthy and costly clinical trials; a record of failed projects and the associated risk not to discover a new drug; uncertainty on the size of the population a new drug could treat; and the risk that an innovator may not be sufficiently rewarded for the reduction of the social burden a causal drug could bring.

In addition, normative economics is used to determine if any incentives in place lead to socially optimal market outcomes. The framework developed in this report illustrates how firms’ incentives may give rise to potential market failures, or, considering how firms’ incentives are shaped by the regulatory environment, what could be considered regulatory failures.

The focus of this study is to collect and combine economic mechanisms which may be at play and that may be responsible for the observed lack of causal treatments. This work provides the basis for an empirical analysis targeted at PD and on the question whether the mechanisms described here are in fact responsible for the absence of causal treatments through their effect on the incentives to conduct R&D in that area. We note, however, that absent the empirical dimension, the extent to which the conditions that lead to the described incentives are in place for the development of causal therapies for NDD, in particular PD, remains a question open to empirical analysis. While an empirical study will be needed, the hypotheses presented here may well have applicability for the development of pharmaceutical products beyond NDD, including for example early-stage treatment of cancer.

Only empirical work, however, can bring more clarity if some or all of the particular elements described here actually explain the lack of incentives to develop causal therapies and are therefore responsible for the lack of causal therapies for NDD and in particular PD.

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