{"entity":{"id":"idea-fund-phase-two-failure-reinsurance","kind":"idea","name":"Government reinsurance for phase 2 failures of first-in-class cancer drugs","aka":[],"tldr":"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.","summary":"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.","asOf":"2026-09-08","links":[{"label":"Bottleneck evidence (Incentives reward me-too drugs and marginal gains): Upadhaya et al., PD1/PDL1 inhibitor clinical trial landscape (Nat Rev Drug Discov 2022)","url":"https://doi.org/10.1038/d41573-022-00030-4"}],"tags":[],"related":["idea-fund-sovereign-first-in-class-coinvestment","idea-fund-trial-data-trust","idea-fund-first-in-class-prize"],"cancers":[],"sections":[],"technologies":[],"targets":[],"drugs":[],"companies":[],"institutions":["cprit"],"pathways":[],"terms":[],"trials":[],"people":[],"bottlenecks":["b-incentive-misalignment","b-translational-valley"],"keyPapers":["paper-upadhaya-nat-rev-drug-discov"],"journals":[],"dependsOn":[],"notes":[],"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.","test":"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","actor":"policy","cost":"large","horizonYears":5},"route":"/ideas/idea-fund-phase-two-failure-reinsurance/","neighbours":{"idea":[{"id":"idea-fund-trial-data-trust","kind":"idea","name":"A single oncology trial data trust with mandatory deposit within eighteen months","route":"/ideas/idea-fund-trial-data-trust/"},{"id":"idea-fund-first-in-class-prize","kind":"idea","name":"Milestone prizes for first-in-class mechanisms reaching human proof of concept","route":"/ideas/idea-fund-first-in-class-prize/"},{"id":"idea-fund-sovereign-first-in-class-coinvestment","kind":"idea","name":"Public co-investment in first-in-class phase 1 with a royalty return","route":"/ideas/idea-fund-sovereign-first-in-class-coinvestment/"}],"institution":[{"id":"cprit","kind":"institution","name":"Cancer Prevention and Research Institute of Texas","route":"/institutions/cprit/"}],"bottleneck":[{"id":"b-incentive-misalignment","kind":"bottleneck","name":"Incentives reward me-too drugs and marginal gains","route":"/bottlenecks/b-incentive-misalignment/"},{"id":"b-translational-valley","kind":"bottleneck","name":"The valley of death between lab and product","route":"/bottlenecks/b-translational-valley/"}],"paper":[{"id":"paper-upadhaya-nat-rev-drug-discov","kind":"paper","name":"Challenges and opportunities in the PD1/PDL1 inhibitor clinical trial landscape","route":"/key-papers/paper-upadhaya-nat-rev-drug-discov/"}]}}