A paper by an MIT professor suggests that a revamped way of financing Alzheimer’s research could spur the development of useful new drugs for the illness. (No drugs targeting the disease have been approved by the U.S. Food and Drug Administration since 2003.)
“We are spending tremendous amounts of resources dealing with this disease, but we don’t have any effective therapies for it,” says Andrew Lo, the Charles E. and Susan T. Harris Professor of Finance and director of the Laboratory for Financial Engineering at the MIT Sloan School of Management.
Lo and three co-authors propose creating a public-private partnership that would fund research for a diverse array of drug-discovery projects simultaneously. Such an approach would increase the chances of a therapeutic breakthrough, they say, and the inclusion of public funding would help mitigate the risks and costs of Alzheimer’s research for the private sector.
Sixty-four projects are a lot more than what’s being investigated today, but it’s still way shy of the 150 or 200 that are needed to mitigate the financial risks of an Alzheimer’s-focused fund.
The paper’s model of the new funding approach calls for an outlay of $38.4 billion over 13 years for research; the costs of Medicare and Medicaid support for Alzheimer’s patients in 2014 alone is estimated to be $150 billion.
“Having parallel development would obviously decrease the waiting time, but it increases the short-run need for funding,” Lo says. “Given how much of an urgent need there is for Alzheimer’s therapies, it has to be the case that if you develop a cure, you’re going to be able to recoup your costs and then some.”
The paper’s model estimates a double-digit return on public investment over the long run.
MIT models the odds of success
The paper, “Parallel Discovery of Alzheimer’s Therapeutics,” was published June 19, 2014, in Science Translational Medicine.
The main hypothesis on the cause of Alzheimer’s involves amyloid deposition, the buildup of plaques in the brain that impair neurological function; most biomedical efforts to tackle the disease have focused on this issue.
For the study, the MIT compiled a list of 64 conceivable approaches to drug discovery, addressing a range of biological mechanisms that may be involved in the disease.
“Sixty-four projects are a lot more than what’s being investigated today, but it’s still way shy of the 150 or 200 that are needed to mitigate the financial risks of an Alzheimer’s-focused fund,” Lo says.
The model assumes 13 years for the development of an individual drug. Given 150 trials, the odds of at least two successful trials are 99.59 percent. Two successful trials, Lo says, is what it would take to make the investment — a series of bonds issued by the fund — profitable and attractive to a broad range of investors.
“With a sufficiently high likelihood of success, you can issue debt to attract a large group of bondholders who would be willing to put their money to work,” Lo says.