Venture-capital funding of drug research and development has shifted in recent years to specialty and rare-disease medicines, according to a report released Monday by BIO, the biotechnology trade organization.

Those medicines often carry high price tags that insurers have thus far fought less than some other drugs because there are no or few alternatives.

"VCs will pull back from areas that are seen as having unfavorable or unpredictable regulatory and reimbursement hurdles," the BIO report said. "This has had some impact on tilting investment over the last few years toward drug R&D for small populations and rare diseases."

The report also said that developers of biologics - medicine with living cells - now get 50 percent of venture-capital funding, and that less money is going to novel drug research for diseases with large populations in areas such as diabetes and gastrointestinal, respiratory, and cardiovascular conditions.

Big patient populations sometimes do matter, however. Pain medicine is already profitable, whereas a cure for Alzheimer's disease remains a distant dream. The BIO study said three times as much venture-capital funding went to companies working on improvements of previously approved pain drugs than for novel drug R&D for Alzheimer's.

The study used the recession as a dividing line and concluded that total venture-capital funding of drug R&D fell 21 percent, from $21.5 billion to $16.7 billion, when comparing the five-year periods 2004 to 2008 and 2009 to 2013.

R&D for new medicine can take years with no guarantee. The bet is made or not, in part, by looking at the present. The health-care landscape is shifting as rising costs weigh more heavily on the budgets of families, companies, and governments.

As the BIO study notes, venture capitalists care about their exit strategy, which can mean being bought out by a large pharmaceutical company, with some profit from the sale going to the initial investors. But with Big Pharma now being challenged on price by payers, the calculation is changing. Insurers and federal regulators are more inclined to demand extra clinical studies, beyond pre-approval safety and efficacy, that show value and no nasty side effects over time.

In the United States, rare diseases are defined as affecting fewer than 200,000 patients. The number of rare diseases may vary between 5,000 and 7,000, but the National Center for Advancing Translational Sciences estimates that 25 million to 30 million Americans have one.

Spark Therapeutics, which was spun off Children's Hospital of Philadelphia and attracted venture capital, hopes to cure rare forms of childhood blindness using gene therapy. Cures, vs. treating symptoms, also change the equation for pricing and investment.

Spark's stock began trading Jan. 30. Soffinova Ventures was an early investor.

"We see significant interest in rare diseases as gene therapy technologies mature and generate meaningful clinical data and returns for investors," Soffinova Ventures partner Jim Healy said in the BIO report.