Earlier this month, the Food and Drug Administration approved a drug called Orkambi, which, for the first time, could treat the causes rather than the symptoms of cystic fibrosis. The approval was a triumph for Vertex Pharmaceuticals, who three years earlier had the FDA approve Kalyedco, which help treat as many as half of the cystic fibrosis patients in the US.
Vertex didn’t get the money to develop these cystic fibrosis drugs from venture capitalists. The seed money came from the Cystic Fibrosis Foundation, which since 1999 has been giving grants to Vertex (and a predecessor, Aurora Biosciences) that totaled $150 million over a fifteen-year period. In 2014 the New York Times reported that the foundation sold rights to the drugs in return for a payment of $3.3 billion—twenty times the foundation’s annual budget.
The Cystic Fibrosis Foundation’s triumph was described by Brady Dennis in the Washington Post as part of a trend where medical charities, including the Michael J. Fox Foundation, the Leukemia and Lymphoma Society, and the National Multiple Sclerosis Society, are increasingly engaging in program-related investments. Is it a good idea for these charities to be funding drug companies—and making big profits if they’re successful?
Medical charities, like many long-lived nonprofits, suffer from mission drift. Recall that the March of Dimes was originally founded to fight polio, and once polio was conquered (thanks to grants from the Scaife family) the organization changed its mission to fight children’s’ diseases in general.
More perniciously, these medical charities have engaged in political crusades. The Capital Research Center has published articles showing how the American Lung Association and the American Cancer Society have signed on to big-government environmental crusades.
Critics who argue that charities shouldn’t be funding drug companies make two arguments. The first is that there is something unseemly about nonprofits engaging in venture capitalism. Stanford pediatric pulmonary medicine professor David Cornfield told the Post that “there’s a reason why corporate America exists, and there’s a reason why philanthropic organizations exist. When that distinction becomes invisible, it becomes very difficult to know where philanthropy ends and venture capital begins.”
Supporters of venture philanthropy counter that for far too long nonprofits have funded academic research which doesn’t lead to funding on clinical trials on drugs that can help fight disease. This is such a common process that it’s known as “the valley of death,” a gap between theory and practice that National Institutes of Health director Francis Collins calls the place “where great ideas, unfortunately, go to die.” Collins, who in 1989 helped discover the cystic fibrosis gene when he was teaching at the University of Michigan, says that “if foundations can pitch in there (with grants), that’s great. . . . We need as many models to get there as possible.”
A deeper criticism is that the drugs funded with grants from medical charities are often extremely expensive. A year’s supply of Kalydeco costs over $300.000. Last year the Wall Street Journal wrote how Arkansas has severely restricted the use of Kalydeco for Medicaid patients in that state, which led some patients to sue, charging that the state was violating their civil rights by denying them the drugs.
In my view, the first criticism is unfounded. Funding research into valuable drugs seems a perfectly valid mission of a charity, provided the basic research about what causes a disease has been found. Louis J. DeGennaro heads the Leukemia and Lymphoma Society, which has put about $40 million into drug research since 2007, and also helps its grantees with red tape and with finding suitable patients for clinical trials. He notes that the Cystic Fibrosis Foundation only began granting funds to drug companies after the cystic fibrosis gene has been found. Funding this basic research should be a medical charity’s first priority.
As for the expense of new drugs—are you arguing that helping poor people pay for drugs shouldn’t be a function of philanthropy? I can’t imagine a better function of medical philanthropy then helping deserving patients pay for the expensive drugs they need.
The goal of medical charities should be to find cures for diseases. Funding clinical trials for these diseases is a worthy part of these charities’ mission. Launching political crusades or being the Environmental Protection Agency’s handmaid is an inappropriate way for medical charities to spend their time or money.