Self-Funding Drug Trials (with Public Good Pharma)

This video provides an in-depth exploration of the misaligned incentive structures within the pharmaceutical industry and introduces a revolutionary funding model for clinical trials called "Interventional Pharmacoeconomics" (IVP), or "self-funding trials." The speakers, Savva Kerdemelidis (Founder/CEO) and Zan Lowe of Public Good Pharma, argue that the current system, heavily reliant on patent protection, filters out potentially superior, lower-cost, generic, or off-patent therapies. They highlight the "massive disconnect" where profitable, patentable drugs (often requiring a $3 billion revenue threshold for development) are pursued, while effective public good treatments (like repurposed generics, diets, or supplements) are ignored due to a lack of commercial incentive.

The core of the discussion centers on the mechanism of IVP, which aims to generate high-quality clinical data for affordable treatments by leveraging existing high-cost specialty drug spend. In a self-funding trial, an employer or payer (like a self-insured group) partners with Public Good Pharma to compare a high-cost standard-of-care drug with a drastically lower-cost alternative (e.g., a generic or repurposed drug). The cost difference (the "Delta") between the two treatments during the trial period generates immediate cost savings for the payer, which are then used to fund the clinical trial itself. This effectively creates a trial that pays for itself, mitigating the financial risk traditionally associated with R&D, especially for unpatentable therapies.

A compelling case study discussed is the comparison between generic ketamine ($2 per dose) and its patented, slightly tweaked, intranasal version, Esketamine (Spravato, costing $30,000–$50,000 per year, or $800 per dose). The speakers note that generic IV ketamine may offer superior bioavailability and clinical outcomes but lacks commercial incentive for large-scale trials. By enrolling patients currently prescribed Esketamine into an IVP trial comparing the two, the employer could realize guaranteed cost savings (e.g., 20% upfront) while generating the necessary data to prove the efficacy of the lower-cost option. If successful, the employer gains access to the generic drug at a 90%+ cost reduction perpetually, secured via an Advanced Market Commitment (AMC).

Furthermore, the speakers extend the IVP model beyond generic drugs to include behavioral and nutritional interventions, such as those competing with GLP-1 medications or dietary protocols (like the ketogenic diet for cancer). They argue that the primary barrier preventing these highly effective, non-pharmaceutical interventions from entering mainstream clinical practice is the lack of rigorous, funded data to compete with pharmaceutical-level studies. By using the cost savings from expensive drug spend (e.g., GLP-1s) to fund head-to-head trials against behavioral protocols, the IVP model can bridge the "Valley of Death" between academic research and patient care, ultimately leading to truly personalized medicine where treatment protocols are based on individual biomarkers and data-driven algorithms (AI), rather than commercial profitability.

Key Takeaways:

• The Patent System's Flaw: The current pharmaceutical patent system incentivizes the development of the "most patentable" molecules, often resulting in slightly tweaked, high-cost drugs (like Esketamine) rather than the most clinically effective or affordable treatments. This creates a massive opportunity gap for generic repurposing.
• Interventional Pharmacoeconomics (IVP): This methodology provides a path to fund clinical trials for lower-cost therapies by using the cost difference (Delta) between the high-cost standard of care and the lower-cost alternative to cover the trial's expenses. This makes the trial self-funding or even net-negative cost.
• Targeting Specialty Drug Spend: Employers and payers should analyze their high-cost specialty drug spend (e.g., immunotherapies, GLP-1s, specific mental health drugs like Esketamine) to identify opportunities for IVP trials where a lower-cost, medically derisked alternative exists.
• Advanced Market Commitments (AMCs): To incentivize the first mover (the payer funding the trial), the model includes an AMC, guaranteeing the employer access to the proven, lower-cost drug or protocol at the lowest possible price (e.g., 90%+ savings) after the trial's successful conclusion.
• Data as the Public Good: The primary value generated by IVP trials is high-quality clinical data. This data, regardless of whether the low-cost alternative is superior or inferior, is a "public good" that can be used to update formularies, inform clinical guidelines, and advance personalized medicine globally.
• Bridging the Health/Wellness Divide: IVP can fund rigorous head-to-head studies comparing expensive pharmaceutical interventions with non-patentable alternatives, such as dietary protocols (e.g., ketogenic diet for cancer) or behavioral interventions (e.g., for weight loss/GLP-1 alternatives), thereby validating effective, non-drug treatments.
• AI and Personalized Medicine: The ultimate goal is to generate enough data to enable personalized medicine, where AI algorithms analyze patient-specific data (DNA, biomarkers) to match them to the most effective treatment protocol, potentially including enrollment in ongoing clinical trials for continuous optimization.
• Regulatory Navigation: The model relies on navigating FDA-approved clinical trial frameworks to legally test and compare off-label or repurposed generic drugs against the expensive standard of care, ensuring the generated data is credible and actionable for regulatory and formulary changes.
• Risk Reduction: Unlike traditional drug development, IVP focuses on therapies that are "medically derisked" (already known to be effective or highly likely to be effective), reducing the informational and financial risk associated with R&D.

Key Concepts:

• Interventional Pharmacoeconomics (IVP): A clinical trial funding mechanism where the cost savings generated by substituting a high-cost drug with a low-cost alternative during the trial period are used to pay for the trial itself.
• Evergreening/Product Hopping: The practice by pharmaceutical companies of slightly tweaking a drug's formulation or delivery system near the end of its patent life to obtain a new patent, thereby extending market exclusivity and maintaining high prices.
• Advanced Market Commitment (AMC): A contractual agreement guaranteeing the trial sponsor (payer/employer) long-term access to the proven, lower-cost therapy at a deeply discounted rate, providing a financial incentive for initial investment.
• Valley of Death: The funding gap between promising academic scientific research (often involving off-patent or non-patentable discoveries) and the massive investment required for large-scale clinical trials and commercialization.

Examples/Case Studies:

• Ketamine vs. Esketamine (Spravato): Esketamine (J&J) is a patented, intranasal version of generic ketamine, costing $30k–$50k annually. Generic IV ketamine is $2 per dose and may be clinically superior. An IVP trial comparing the two would be funded by the massive cost difference, potentially leading to widespread adoption of the cheaper, more effective generic.
• GLP-1 Alternatives: IVP can be used to fund trials comparing expensive GLP-1 medications (like Ozempic or Wegovy) against rigorous behavioral or nutritional protocols, aiming to prove equivalent or superior long-term outcomes for weight management and diabetes reversal.
• Rare Disease Price Gouging: The model can be applied to high-cost rare disease drugs (e.g., those costing $700k–$800k annually) where the underlying molecule is off-patent, allowing for the development and testing of a much lower-cost version (e.g., a pro-drug) funded by the cost delta.