Gates Foundation billions change pharma landscape

By Ben Hirschler

LONDON (Reuters) - The billions of dollars thrown at global health problems by the Bill & Melinda Gates Foundation are changing the game in drug discovery, posing big challenges to the world's top drugmakers, according to a report on Tuesday.

Pharmaceutical information group IMS Health Inc. said the emergence of megabuck philanthropy was both a threat and a collaboration opportunity for manufacturers.

"Pharma companies need to develop an explicit strategy to deal with this phenomenon," IMS said in its annual Intelligence.360 report on factors shaping the industry.

The power of the Gates Foundation was bolstered last year when Warren Buffett signed over much of his fortune to the organization, uniting the world's two richest people in a bid to fight disease, reduce poverty and improve education.

The move will roughly double the foundation's size to $60 billion, giving it plentiful resources to compete in the medical research arena with both government-funded institutions and commercial pharmaceutical firms.

As a result, even if drug companies succeed in making key discoveries first, they may still find it attractive to partner with the Gates Foundations, from a practical and public relations point of view, IMS believes.

AIDS VACCINE

A $287 million grants program announced last July -- creating an international network of 16 labs to try new approaches to making a vaccine against AIDS -- exemplifies the ground-breaking approach pioneered by the foundation.

It aims to transform the so-far unsuccessful AIDS vaccine effort by rewarding individual labs that come up with innovative ideas and helping them develop those ideas, while also ensuring they collaborate with rivals.

To get quick results, the new Collaboration for AIDS Vaccine Discovery may need to access and use patented compounds still under development at pharmaceutical and biotech firms, IMS said.

That will raises fresh debate over the ethics surrounding patents on life-saving AIDS drugs and vaccines -- of which there are more than 200 in development.

Leading makers of AIDS drugs include GlaxoSmithKline Plc and Merck & Co. Inc., both of which are also working to develop vaccines.

Drugmakers, in future, could face mounting pressure to collaborate with the foundation, even if this impacts their bottom line.

"Whether or not the Gates Foundation effort succeeds, it benefits pharma companies to stay in the game, working synergistically with the foundation," IMS said.

"The alternative is for pharma to allow itself to be perceived as indifferent to global health concerns -- or to be unseated in the pursuit of advances in world health."

Bill Gates, the world's richest person, co-founded and remains chairman of software company Microsoft Corp., while Buffett built the world's second-biggest personal fortune running Berkshire Hathaway Inc., an insurance and investment company.