WHO listed 17 illnesses, ranging from Alzheimer's to tuberculosis to alcoholic liver disease, which need urgent attention.
The report was commissioned by the Dutch presidency of the European Union, and focused on what Europe can do.
''Pharmaceutical research and development are based on a market-driven incentive system relying primarily on patents and protected pricing," said the report. ''As a result, a number of health needs are left unaddressed."
It laid out a grim scenario for a global flu pandemic that it said was overdue and which could be far worse than the 1918-19 outbreak that killed an estimated 40 million to 50 million people.
The European Union has allocated less than $5.2 million to support flu vaccine research, said the report.
The United States has spent $50 million to $100 million, but even that was ''modest compared with investments in developing vaccines for other diseases," it said.
The report, Priority Medicines for Europe and the World Project, points to areas of public health for new incentives and initiatives, including a program combining public and private financing.
It said new approaches are needed to treat bacterial infections, because antibiotics are used so commonly that many strains now resist them.
Drug companies see too little incentive to develop antibacterials.
The report points to changing patterns of disease due to aging populations. Chronic illnesses common in Europe, like heart disease, smoking-related problems and diabetes, are now spreading to developing countries.
It also listed ''neglected diseases" that are uncommon in Europe but which can be devastating in developing or tropical countries, like malaria and tuberculosis, to which the commercial pharmaceutical companies pay little attention.
Financing also is required to move several diseases, like trypanosomiasis, or sleeping sickness, from basic research to clinical trials and the development of medicines for the market, it said.
