Bill Would Seek to Bridge Development Gap for Rare Disease Drugs with Megafund

Rare Daily Staff

A federal bill intended to address what its authors call the “ever-widening funding gap” between basic research and clinical development would authorize a pilot program that allows the U.S. Treasury Department to establish a privately owned and operated investment fund for rare disease therapeutics.

Rep. Juan Vargas (D-California), Scott Peters (D-California) and Tom Rooney (R-Florida) introduced the legislation in the House of Representatives. The Rare Disease (RaD) Fund Act (HR 6801) would allow for the creation of a rare disease drug megafund as way to reduce the risk of investing in drug development with the hope of attracting institutional investors who would normally not invest in the space.

“Unfortunately, thousands of potentially lifesaving drugs are being severely hampered because of a lack of early-stage investment,” said Rep. Vargas. “The RaD Fund removes the funding barriers currently in place by implementing a novel financial structure aimed to motivate large institutional investors to finance cures for rare diseases.”

This pilot program would create a $700 million investment fund to allow several biomedical projects to be funded by one entity. The authors of the legislation say that the size of the fund would drive down the risk and encourage the life science industries to leverage the significant capital in the U.S. bond market.

The idea for the fund grows out of research led by Andrew Lo, professor of finance and the director of the Laboratory for Financial Engineering at the MIT Sloan School of Management. The researchers conducted a series of simulations demonstrating that a successful megafund model for rare diseases could be implemented with just $400 million in capital and as few as ten to twenty compounds.

This is not Rep. Vargas first effort to pass legislation to address the translational development gap for rare disease therapies. In 2015 he introduced a similar bill that would that would have created a rare disease therapeutics fund organized by the National Institutes of Health with the ability to issue bonds guaranteed by the United States.

“Too many promising biomedical treatments and genetic therapies have been unable to obtain the funding needed to continue research, so the benefits are left unrealized,” said Rep. Rooney.  “The creation of this fund is a necessary step to combat rare diseases and help individuals that are fighting them.”

September 19, 2018