OnCo
ideasIdea

Government reinsurance for phase 2 failures of first-in-class cancer drugs

Investors avoid genuinely new cancer drugs because most fail in mid-stage trials. A public insurance scheme would repay part of the loss when a first-in-class drug fails honestly, making the bet worth taking.

A publicly-backed reinsurance pool that pays a fraction (for example 40%) of documented phase 2 trial costs back to sponsors of qualifying first-in-class oncology programmes when the trial fails on pre-registered efficacy criteria, with a premium paid by participants and conditions on data disclosure (the failure must be published with full data within twelve months). This directly lowers the risk premium that steers capital toward follow-on assets, and produces a public record of negative results as a by-product. Export credit agencies and crop insurance are analogous risk-sharing designs; the biotech-specific precedent is milestone-based grant funding by CPRIT and BARDA.

Hypothesis
A phase 2 reinsurance pool increases the share of oncology phase 2 starts that are first-in-class by at least a quarter among participating sponsors within five years, at a net public cost per additional novel programme below the equivalent grant subsidy.
Rationale
Venture and pharma portfolio managers explicitly price the higher attrition of novel mechanisms; insuring the downside is a cheaper way to change the expected value than subsidising the upside, and it conditions payment on transparency, which addresses hidden failures.
What would test it
Capitalise a pilot pool for a defined cohort of first-in-class programmes, pre-register the counterfactual using historical pipeline composition, and evaluate pipeline shift and disclosure compliance after five years.
Maturity
speculative
Who has to act
policy
Cost to try
Large (over $50M)
Years to first evidence
5
Bottlenecks it attacks

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