The FDA's role in ensuring that medicine is safe and effective is critical to public health and trust in medical innovation. The Kefauver-Harris Amendment was passed in 1962, requiring pharmaceutical manufacturers to prove the efficacy of their drugs. The amendment was adopted because of the Thalidomide catastrophe where mothers who took thalidomide for morning sickness during pregnancy gave birth to children with physical handicaps.
However, the drug approval process has become overly costly and time-consuming. This disincentivizes pharmaceutical innovation and harms patients’ finances and health. It takes an average of over ten years and $2.5 billion dollars from development to pharmacy shelf. Additionally, there is high-level of regulatory uncertainty. A company may spend years and millions developing and testing a drug only for its application to get rejected. The industry spends over 12 billion dollars on development every year, and that number doubles roughly every five years.
The Orphan Drug Act provides guidance on how to increase innovation while maintaining safe standards. President Reagan signed the act in 1983 to make it economically viable for pharmaceutical companies to develop drugs for “Orphan”diseases. An Orphan disease is a rare disease that affects fewer than 200,000 people in the United States. Currently, there are over 30 million Americans, mostly children, with Orphan diseases. The Orphan Drug Act has been a massive success. In the ten years before the ODA was passed, ten drugs were developed for rare diseases. In the 25 years after, the FDA has approved 300 orphan drugs. The ODA facilitated innovation through a tax credit equal to half of the development costs, grants for development, fast-track approvals, and seven-year market exclusivit
Regulatory burdens can be lessened by reducing reliance on Phase III trials. Phase III trials can incur around 90% of a drug’s development cost. A conditional approval system where drugs that are found safe in Phase I and Phase II can win support to limited segments of patients would be helpful. Patients would get access to life-saving drugs while the government can continue to collect data on safety and effectiveness. The drugs should be administered through medical centers with the best database and analytical technologies, allowing reliable patient monitoring. Excessive regulatory burden and unpredictability make pharmaceutical, and biotech companies take enormous risks. This system also prevents start-up biotech and drug companies from challenging the hegemony of multinational pharmaceutical corporations.
For drugs with a limited consumer base, marketing exclusivity has a strong track record for innovation. Some worry that pharmaceutical companies may unfairly benefit from marketing exclusivity when the use of the drug expands past rare diseases. Incentive programs can be implemented to encourage fairness. Ideas include reducing exclusivity for drugs that have found a wider commercial use or reimbursing the government for a portion of its grant.
Incentivizing innovation would do more to reduce drug costs than regulation ever could. Congress should focus on ways to facilitate rapid and effective drug development to create a dynamic and competitive pharmaceutical marketplace. For example, Gilead’s highly effective hepatitis C treatment, its list price was 84,000 dollars. When a competing drug hit the market in 2014, insurers forced the two drugs to compete, driving costs down up to 46%. Price controls would only lessen innovation; a 40 to 50% cut in prices would lead to 30 to 60 percent fewer R&D projects.
Increasing the pace of the FDA bureaucratic machinery would go a long way in expediting the time it takes drugs to come to market without any cost to safety or consumers. Review times have been found to be highly variable across the FDA’s 12 divisions. The most productive divisions approve drugs roughly three times faster than the slowest unit with the same resources. The FDA should be incentivized to review drugs faster and receive funding to be better equipped for a speedy review. Allowing stipends to paid by trial participants would also help the shortage of volunteers.
People are quick to point out the damage of unsafe drugs hitting the market. But the effect of life-saving drugs being delayed and off the market should also be quantified. Based on a model that factors in willingness to pay, patient income, and the year in which the patient’s disease begins, a year’s treatment, with HAART to an HIV/AIDS patient is worth an average of$16,000. To the entire population of HAART patients, a year’s access was worth $19 billion. To all the patients using rituximab for non-Hodgkin’s lymphoma, a year’s access is worth $850 million.
Attacks on pharmaceutical prices threaten to stifle progress at a time when we are on the cusp of many landscape changing discoveries. In 2014, as a percentage of healthcare spending, the United States spent 12.3% on pharmaceuticals, the same as Finland and lower than many OECD countries with price controls. Faster review processes and incentives such as marketing exclusivity will help the United States remain the world leader in pharmaceutical innovation; more drugs means more competition which provides better and more affordable treatment.
Navid Kiassat is a contributor to E21.
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