What's to Blame for Fewer New Pharmaceuticals?

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The drug development pipeline is getting drier. As evidence, a new report by the Government Accountability Office (GAO) points out that while pharmaceutical R&D increased by 147 percent between 1993 and 2004, the number of new drug applications (NDAs) increased only 38 percent. Why? Sen. Richard Durbin (D-Ill.), one of the three Democratic senators who requested the GAO report, tells the Washington Post, "The findings…raise serious questions about the pharmaceutical industry claims that there is a connection between new drug development and the soaring price of drugs already on the market." Maybe.

But Sen. Durbin doesn't mention another significant GAO finding–that regulatory uncertainty and over-caution at the FDA is a major contributor to the drier drug development pipeline. Among other things, FDA regulators spooked by a few high profile withdrawals of drugs on safety grounds, have boosted data requirements for approval which have run up R&D costs. This may be the right decision (though as I explain here I don't think so).

Higher R&D costs encourage drug companies to focus R&D on fewer drugs that they hope will be blockbusters. As Pfizer's recent halt of its expensive phase III clinical trial of torcetrapib, which aimed to boost good cholesterol, shows this focus on blockbusters doesn't always work out. So consumers get fewer innovative non-blockbuster drugs and perhaps even fewer innovative blockbuster drugs.

Why have FDA regulators become more cautious? Because, as Harvard Business School professor Regina Herzlinger explains in her May, 2006 article, Why Innovation in Health Care is So Hard (not online): "Officials know they will be punished by the public and politicians more for underregulating-approving a harmful drug, say-than for tightening the approval process, even if so doing so delays a useful innovation."

I will venture to suggest that the FDA's increased obsession with safety may be killing more people than it saves. How about a GAO study on that question? After all, if it takes the FDA ten years to approve a drug that saves 20,000 lives per year that means that 200,000 people died in the meantime.

Disclosure: As faithful H&R readers must surely know, I own small amounts of a variety of biomedical stocks. If anything in this blog item persuades you to invest or not invest in biomedical companies, may whatever Deity you believe in help you.

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25 responses to “What's to Blame for Fewer New Pharmaceuticals?

  1. Hmmmm.

    FDA requires Pfizer to safety test its new blockbuster product.

    Pfizer does and blockbuster product fails the safety test and pulls the product due to the safety concerns.

    Ron Bailey complains that the government needs to fund a cost-benefit study to show that Pfizer’s blockbuster’s advantages would outweigh the harms discovered during the required FDA testing.

    Then Sam Franklin happens by. You know he is going to make some kind of sneering crack, but what? How can he lay into Bailey’s seemingly unassailable logic here? looks like he’s gonna say something:

    Pfizer can pay for its own d**n cost-benefit analysis. If the capitalization is low, they should take money out of Ron Bailey’s dividend checks. When they finish the study, they should publish the results here at HnR as a gesture of appreciation to Ron for funding the good work with his foregone dividend checks.

  2. The findings…raise serious questions about the pharmaceutical industry claims that there is a connection between new drug development and the soaring price of drugs already on the market

    Only if big pharma is using the revenue from drugs already on the market for something other than drug development. Durbin would have a point if the dollars invested in R & D were declining.

    But wait, we see in the same study that big pharma is cranking up its investment in R & D!

    From this, I think we can safely conclude that Dick Durbin is a total tool.

  3. Either that or the R&D numbers are cooked.

  4. Sam: As Princeton University health economist, Uwe Reinhardt (who is no friend of pharmaceutical companies) has pointed out, “I once calculated that if you rebated all the drug company profits to patients, health spending would only go down by 1.2%.” In other words, seizing drug company profits would do nothing to address the current health care spending “crisis,” but it would shut off the flow of funds to academic and corporate biomedical researchers and drastically slow the discovery and development of new and more effective drugs.

  5. While a l(L)ibertarian, I do believe that there is some role for govt. oversite in some areas, pharmaceuticals is one.

    But the authority to approve or dis-approve a drug is too much, too expensive and too daunting to researchers and sellers. We are seeing that in the loss of so many drugs to market due to regulatory and cost considerations. Orphan drugs are not a very new problem.

    I think a different scheme that requires a defined minimum of research before going to market, with no ability to ban a drug, would open up innovation. That minimum should also not be onerous.

    All drugs should be able to go to market, with whatever restrictions the manufacturer thinks prudent due to side effects and targeted use.

    All research and all reports of effects other than those expected would be reported to the FDA. The FDA would become a central repository for all research, and all reports, on all drugs. This should be publically available on any marketed drug.

    Pharma companies and doctors would be responsible for how the drugs are used. With full liability for mis-use.

    There would be penalties for failing to report research or unexpected or bad side-effects, steep enough to encourage compliance, and with protections for reporting them, such as some protections against asbestos-like law suits.

    The only prior-restraint authority I can see being reasonable would be restrictions on drugs such as anti-biotics, to prevent incorrect use that could dimminish effectiveness, and perhaps on teratogens, (sp?), to prevent dispensing to fertile young people or pregnant women, without due caution and supervision. Even then, no bans, only supervision. I wouldn’t fight for or against that authority, I just can see reason for it.

    That is a germ of an idea, not completely thought through, so ignore it, run with it, shoot holes in it, whatever.

    OK, that is my (arrogant) two-bucks-worth.

  6. I’d be interested to find out how much R&D is really spent on drugs that have a substantial cure/lifesaving effect, vs. how many are mass market near placebos like many allergy medicines.

    Take torcetrapib. The supposed goal, of raising good cholesterol artificially, is not even something we unambiguously know is a positive thing (its one thing for the level of something to rise via other means and it be associated with good health, quite another to artificially cause the body to produce more of it, which may not be). But it sure SOUNDS great to those with high cholesterol, and I’m sure it will sell like blockbusters. However, it is very very far from the “cutting edge” of R&D into the puzzle of dealing with high cholestorl, and far more into the realm of designing easy to take moneymaker pills with few side effects, and potentially few effects at all.

  7. I was just thinking: what America needs more than anything are more drugs, er, pharmaceuticals.

  8. Should we consider also what kind of drugs the companies are spending R&D money on?

    Seeing a total R&D expenditure is useful, but in what areas are the R&D dollars being spent and how much will the public gain from these new drugs?

  9. In other words, seizing drug company profits

    But, see, Ron, I don’t want to seize all drug company profits. rather, I only want to seize (well, allocate for further research, but same diff) the profits of specific shareholders having the chutzpah to cry out for corporate welfare to profitable companies at a blog dedicated to free markets.

    I call it the too-much-chutzpah tax.

  10. Disclosure: As faithful H&R readers must surely know, I own small amounts of a variety of biomedical stocks. If anything in this blog item persuades you to invest or not invest in biomedical companies, may whatever Deity you believe in help you.

    So basically, the point here is that you’d make more money if the companies that you own a stake in were allowed to sell unsafe products?

    Good thing the evil government grants you limited liability in case something goes wrong…

  11. btw, I basically agree with what tomWright is saying and have proposed similar schemes here at HnR before. I was not able to quickly find any links, but the main difference between my proposal and tomWright’s is that I think the FDA should set some clear labelling standards both for communicating the amount that a drug has been studied for safety and effectiveness (none, a lot, a little), and also labelling to make sure that the safety designation of the drug that fairly reflects the extent of testing, as well as any favorable or unfavorable results. I think the FDA’s contribution would be to evaluate the amount and nature of the studies done and then boil that down into easy to understand labelling (eg, color codes, simple categories, etc.).

    Under tomWright’s scheme he suggests full liability for mis use. it is not clear what that means. Is every drug side effect a mis use? Are any? In my scheme, the basic touchstones for liability on the part of pharmaceutical co’s would be: (1) hiding data from the FDA; and (2) not following the labelling requirements set by the FDA.

    Anyway, good to see that at least tomWright sees these problems and preferred solutions somewhat, at least, like I do.

  12. “Sam” (aka “Dave W.”), will you once and for all please admit to your significant holdings in various homeopathic medicine companies, your role as vice president for public affairs of the North American Trepanation Society and your ownership of a West African leech farm?

    HnR readers deserve to know the truth; namely, that your carefully crafted persona of an inane and pathetic troll pathologically fixated on the illusory misconduct of others is a brilliant subterfuge to conceal your own numerous personal conflicts of interest.

  13. For the record, I have not accused Ron of misconduct, at least in this thread. Rather, I have accused Ron of supporting corporate welfare here. because that is what a government-funded medical study that benefits Pfizer is. Corporate welfare.

    Frankly, this is one of the few times I actually wish a Reasonwriter would have 2d thoughts and delete a blog post. it is all fun and games to me when Ron calls for Ayn-Rand-level caveat emptorness and an end to product liability torts. I can see why a libertarian would call for those things, even though my personal position on these issues is somewhere between Ron’s stance and how things actually work in the real world right now.

    However, this post, calling for government funds to Pfizer shouldn’t be allowed here at all. We already have enuf problems with the public thinking that libertarians are soft on corporate welfare. we don’t need a Reasonwriter actively soliciting it here. it is just bad pr.

  14. tomWright: By kind of endorsing your proposal, Sam almost made me rethink it. Actually, if you have a chance to read my previous article (The End of Old Regulatory Rituals) to which I linked, you will see that we are both pretty much on the same page. Phase III testing will be out the window and all new drugs will be in more or less permanent Phase IV testing.

  15. Sam: At the risk of agitating you so much that you’ll have to boost your medications again–where did I come out in favor of “corporate welfare” in this blog post? BTW, why don’t read the GAO report–it really does offer some interesting insights into our ailing drug approval system.

  16. “I will venture to suggest that the FDA’s increased obsession with safety may be killing more people than it saves. How about a GAO study on that question?”

    That part. The study costs money. The study helps Pfizer. Pfizer is a corporation. Money spent to do a study to benefit a corporation is corporate welfare. or maybe that is just my crazypills talking.

  17. Note that “Sam” does not deny the charges! Just as I suspected!

  18. “My proposal is to change who makes the ultimate decision of whether a drug is safe from the FDA to the patient. However, the patient can only make that decision if they know the risk. So my proposal is to simply require drug manufacturers to identify all side effects in their drugs and put down a conservative estimate of the risk of each side effect. If the published risks are accurate (or erring on the “safe” side) and inclusive — well, that disposes of FDA safety testing and disposes of the problem that Bailey’s company is having with its new product launch.

    The quid pro quo is that if the drugmaker does not identify side effects, or if it underestimates risk, then it pays in tort for all the damages occasioned. A big incentive to get the risk numbers correct and complete so that patient’s really can assess the risk of a medicine relative to an auto risk or a terrorism risk. that is what we think should be happening after all, isn’t it?

    So, Smacky, since I am proposing to cut waaaaaay back on FDA nonsense, I think you can see I am not exactly anticorporate (antigov’t, yes, antitrust, sure). But if patients really are trying to evaluate risks as Bailey suggests and I agree they should, then these patients need a reliable basis to work from. I propose exchanging the FDA for a consumer labelling requirement enforced with some serious teeth. The sad suffering people with MS deserve no less, I think. Maybe the pain is so bad that they want to take a drug with a 99% fatality rate? Great — just make sure that goes on the label.”

    -excerpt of 8 March 2006 post at HnR (yes, it was a Bailey thd)

  19. Actually, it sounds like a GAO study on the relative analysis paralysis suffered by the FDA is rather self-reflexive, and even though corporations might benefit from the outcome of a study of (in-)efficiency.

    Analyzing what is wrong with something to eventually correct its failures is something private businesses engage in everyday; why not apply the same process to government?

  20. Sen. Richard Durbin (D-Ill.), one of the three Democratic senators who requested the GAO report, tells the Washington Post, “The findings…raise serious questions about the pharmaceutical industry claims that there is a connection between new drug development and the soaring price of drugs already on the market.”

    Isn’t it obvious that fewer NDAs means that those R&D expenses have to be allocated among fewer new products, making the price of each one all the higher?

  21. For the record, I have not accused Ron of misconduct, at least in this thread. Rather, I have accused Ron of supporting corporate welfare here. because that is what a government-funded medical study that benefits Pfizer is. Corporate welfare.

    That’s a pretty broad interpretation of Corporate welfare. So, do you consider the study that proved breast implants were not actually dangerous was corporate welfare to Du Pont?

    – R

  22. I think there are fewer pharmas because we are figuring out we can fix everything with pot, coke and heroine. In my case they not only work better and are cheaper, but I don’t have to worry about them getting yanked off the market like Vioxx every time some Grandma has a heart-attack.

  23. I have just a thought.

    Great discussion but I am interested in Tom Wrights proposal for a solution to this madness. I have my own thoughts on a proposal. Rough idea coming:

    1. If said drug company wants to create a new drug, then it must undergo 3 years of testing provided by an independent private company. Such as Underwriters Laboratory or other respected institution. (This removes the politicians from making it political so to speak, ask me more about it).

    2. After 6 months of testing on the experimental drug, and initial findings are published and circulated, any patient who wishes to use the drug may do so knowing full well that they can not hold liable the drug company for any ill effects as testing is not yet complete. The patient would be supervised by a medical provider of their choosing without interference from the State or Federal Government. (This is more for patients who have terminal illnesses and painful afflictions, and might wish to try it quickly.)

    3. Once any drug is approved for distribution by the independent source, the product is sold over the counter, unless the dose has to be constantly monitored by a professional. (Think IV doses). (This removes pharmacist from the equation and reduces prices.)

    4. Potential side effects of the medication must be clearly marked on each box, as well as, any potential conflicts with other medications.

    The savings alone on a streamlined process would be immense. Drug prices would fall and people would be free to choose their medications.

    If people choose not to do their homework on the side effects of any drug then they can’t blame ignorance for any problems they might have. Just look online or visit your doctor for more information on what drug might be best for you.

    Again, a rough idea but it removes the government from the equation for the most part and reduces cost.

    Thoughts?

  24. So, do you consider the study that proved breast implants were not actually dangerous was corporate welfare to Du Pont?

    It depends on who paid.

  25. Case in point in cancer medicine:

    With Ovarian Cancer, after 25 years of prospective, randomized clinical trials to identify the best treatments to give to the average patient, there has been absolutely no progress. A meta-analysis of all trials showed that there was no difference. During those 25 years, Taxol (Paclitaxel) came along. Two large clinical trials showed that Taxol/Platinum combinations were better than single platinum regimen. And Taxol became one of the most remunerative cancer drugs of all time. So Taxol/Platinum became “standard” therapy.

    But then two more very large trials were done, showing that there was no advantage to giving Taxol/Platinum over single agent platinum (like Carboplatin). And Taxol/Platinum also wasn’t any better than another non-Taxol combination (not previously tested against Taxol/Platinum). But Taxol/Platinum remained “standard” therapy. Now that Taxol went off patent, some academic oncology groups have (as their major ovarian cancer project) clinical trials to show that Platinum/Docetaxel (a drug like Taxol, but still on patent) can now be the new “standard” therapy.

    Patients are treated with Taxol/Carboplatin. If Taxol/Carboplatin doesn’t work, they’ll be crossed over to Docetaxel (Taxotere), a drug which is mostly (if not completely) cross resistant with Taxol, for which the cancer clinic will collect several thousand dollars from the large pharmaceutical company if and when they are treated with this drug.

    All the while doing this, the American Society of Clinical Oncology is refusing to suggest clinical trials of “cell death endpoint” cell culture assays because, lacking something patentable or proprietary, all assay-testing laboratories can offer is free assays and not the millions of dollars that a pharmaceutical company can offer to push its Docetaxel (Taxotere) trials.

    With Breast Cancer, this is what passes for a successful experiment in clinical oncology. Henderson, et al, entered 3,100 breast cancer patients in a prospective, randomized study to compare cyclophosphamide + doxorubicin alone versus cyclophosphamide + doxorubicin plus Taxol (in the adjuvant, pre-metastatic setting). The results were microscopically positive, at best, and cannot begin to justify the enormous financial and human resources expended (while making no effort at all to test and improve methods to individualize treatment).

    But these results changed the face of the adjuvant chemotherapy of breast cancer.

    Cyclophosphamide + Doxorubicin + Taxol became standard of care. Taxol recently went off patent. Now the thrust is to identify on-patent therapy which is microscopically better in clinical trials of one-size-fits-all treatment. Already, the community-based oncologists are migrating to Cyclophosphamide + Doxorubicin + Docetaxel (expensive/remunerative) so what was the purpose of doing that 3,100 patient prospective, randomized Henderson study?

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