The Emerging Role of Research-focused Rare Disease Foundations in Therapeutic Development

Abstract

Several innovation incentives for rare disease product development exist, yet more than 90% of the 7,000 conditions have no treatment options. Over the last two decades, a novel type of nonprofit – the patient-led, research-focused rare disease foundation (RDF) – has emerged in many of these underserved markets with a singular goal to accelerate progress toward a cure. However, the collective role of RDFs in shaping product development for otherwise unattractive markets has been largely overlooked by the literature. In this paper, I assemble a new dataset to provide clarity around the role of RDFs and propose a conceptual framework to explain how RDFs lower the risk of therapeutic development for firms by proactively engaging in activities that build a research infrastructure within the disease. Empirically, I show that when an RDF adopts an active strategy characterized by generation of data, creation of research tools, and establishment of collaborations across stakeholders, new clinical trial activity in the disease increases at a faster rate than when an RDF takes a passive, grant-funding approach. I supplement this finding with a quantitative case study describing one RDF’s success engaging biopharmaceutical firms. These findings have implications for managers of foundations as they urgently pursue cure-seeking missions and biopharmaceutical firms as they decide which diseases merit investment.