The SMART Model: A Simplified Model for Assessing the Resilience of Therapeutic Program Financial Viability

INTRODUCTION

The U.S. military faces countless medical threats to deployed personnel and veterans. Biopharmaceuticals are key to defending against these. The (DoD)’s formidable health research capabilities were responsible for many triumphs of 20th-century medicine, but this historical record is under threat. Developing a single new drug now costs billions, especially when the cost of developmental attrition is properly accounted for. Worse, biopharmaceutical research and development (R&D) productivity has fallen steadily for decades.1,2 Private-sector costs are directly relevant to DoD medical countermeasures because they compete for the same limited reservoir of development resources (contract manufacturing, contract research organizations, and other development inputs). High development costs therefore threaten to outstrip available military research funding.

Even after FDA approval, the funding challenge continues. Maintaining FDA-grade manufacturing capacity for a single biopharmaceutical intervention costs tens of millions of dollars annually. Even a brief funding gap can threaten the long-term availability of an approved therapeutic when the military is the sole buyer. International sales are increasingly important for financial viability, so these challenges may be more severe for medical products subject to export restrictions.

For many military needs—those with no plausible private-sector utility—it seems certain that the DoD must shoulder the burden alone. But fiscal sustainability increasingly means sharing development costs with private investors where possible. Many groups within the military have come to recognize this and increasingly require discussion of commercial viability in funding applications.

However, none yet require empirical modeling, which is unfortunate. Most in the field are aware that drug development is risky, but few appreciate that, even after approval, most new drugs fail to earn back their development costs. Like many things in finance, drug launch sales follow a rough Pareto distribution (Figure 1).3 Peak sales for most drugs never exceed development costs.4 Financial sustainability requires the few winners to pay for a long tail of losers. Expanded use of financial modeling during planning—particularly at earlier development stages—may improve the success rate of military investment in such public–private drug development collaborations.