What's to Blame for Fewer New Pharmaceuticals?

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.