There is a new social entrepreneurial movement afoot, which seeks to find cures to some of the world’s most challenging diseases. Medical entrepreneurship is, in my view, the very best hope we have for accelerating the pace of finding medical cures. A good example and arguably the pioneer of this movement is Michael Milken’s Prostate Cancer Foundation. Milken has taken on a decidedly entrepreneurial approach to providing capital and human resources to accelerate the pace of research into cures for cancer, particularly that of the prostate. From 1999 to 2006 we have seen a 25% drop in the death rate for prostrate cancer. There is little doubt that Milken’s leadership has been one of the greatest catalysts in this improvement.

Another leader in the movement is Henry McCance, who co-founded the not-for-profit Cure Alzheimer’s Fund, which I first wrote about last year. The Cure Alzheimer’s Fund is another example of a cure accelerator, an organization using a venture approach towards medical research. Out of full disclosure, I recently joined the Cure Alzheimer’s Fund’s advisory board. And while I care deeply about diseases such as Alzheimer’s, I am mostly fascinated and hopeful that a more maverick VC-like business model applied to the search for medical cures will be a better approach to solving some of the big medical challenges we have.

The medical research model as we know it today is broken. Why? Three words: insufficient, inefficient, and ineffective. This is both the big problem and the big opportunity for medical entrepreneurship. Today’s model is insufficient because typically 1% or less of the amount spent each year on diseases goes towards cure research, with the balance going to caring for people with the disease. Alzheimer’s, for example, costs our country hundreds of millions of dollars each year, yet we spend just one cent out of every $4.00 available towards a cure. That is an astonishing 400x delta. The story is similar for diabetes and cystic fibrosis. While care is obviously critical, we need more dollars to go to finding the cure — or the country is at great risk of a healthcare-induced bankruptcy. Henry McCance and Professor Bill Sahlman of Harvard Business School recently gave an excellent overview of this at Venture Summit East and I draw on many elements of their talk in this blog post.

The current research model is highly inefficient because researchers spend too much time writing grants. By our estimates at the Cure Alzheimer’s Fund, the very best researchers in the field spend up to 30% of their time writing grants, and should they win the grant they may have to wait months or even a year to get the funding. As well-intended and needed are organizations such as NIH (National Institute of Health), there is an embedded trade-off between the robustness of review and the approval of grants to new and innovative projects. Imagine any venture capitalist going to Netscape or Yahoo to validate funding to Google or expecting an entrepreneur to spend a third of his time writing a business plan and then waiting a year for funding. This is the frustration that many of the best researchers in our country feel.

Finally, the medical research model is ineffective because it is, by design, risk averse with regard to the projects it pursues. Grant proposals that win funding are usually those that seek out small, incremental discoveries — it is the very nature and policy of the grant making bodies to look for ideas that slowly build on existing knowledge. Breakout ideas are not able to happen under an incrementalist research model. Even worse, as we’ve heard anecdotally from some researchers, some people write grants for questions whose answers are already known.

Pioneers of the medical entrepreneurship movement are taking bigger risks on researchers, asking them to focus their energies on the initiatives that have the largest potential impact as opposed to those that would get traditional grant funding. They are also doing so faster. Milken’s Prostate Cancer Foundation, for example, makes awards based on applications that are limited to five pages and has a 90-day turn-around time. FasterCures has become a think tank and resource-sharing center for this new approach.

Focus on the big ideas that can lead to the big goal of curing a disease, eliminate bureaucracy, and give smart people more capital, faster, and you have a formula for change. What proof exists that the change is positive? Thousands of lives have been saved by the advances in prostate cancer understanding by medical innovators in that field. The Cure Alzheimer’s Fund was recognized last year by Time Magazine for one of the top ten medical breakthroughs of the year for work that identified over 100 genes associated with the disease. A number of other dynamic organizations, including the Harvard Stem Cell Initiative and the Myelin Foundation are making significant contributions to cures.

Across multiple diseases, researchers have been conditioned to make progress with bond-like returns. While some of this is necessary, it cannot be sufficient. As in any portfolio, we cannot maximize returns if we hold all our eggs in one big conservative basket. We need to invest more behind higher risk initiatives that can yield equity-like returns, and hopefully real cures.