Pharmaceutical Innovation
| Fri Aug. 21, 2009 11:41 AM PDT
Right now, it's arguable that government ground rules give pharmaceutical companies too little incentive to innovate. If FDA regs forced them to demonstrate more than just superiority to a sugar pill, drug company incentives might be aligned a little more strongly toward finding genuinely effective new therapies instead of yet another statin or ED pill or a slightly different heartburn formulation.
Or maybe not. It's an argument worth having. But the current system is by no means the free market juggernaut conservatives like to pretend it is. Changing the ground rules might very well increase innovation, not stifle it.
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Comments
So, let's just forget the
Submitted by Anonymous (not verified) on Fri Aug. 21, 2009 12:53 PM PDT.
So, let's just forget the other mere detail: most innovation comes from academic research using NIH funding, none of which are "free market". Almost none comes from Pharma which spends vasts amounts on advertsing, wining and dining clients and congresscritters, and me-too drugs (Nexium and Prevacid, anyone?)
Before I was in finance, I was in Pharma
Submitted by The Lounsbury (not verified) on Fri Aug. 21, 2009 1:39 PM PDT.
Obviously having a taste for highly regulated sectors. And I was in emerging markets as well - operationally.
Generally I rather agree, proper pharma markets can't exist without a decent level of government regulation - not so much from the POV of protecting return on investment in innovation, as protecting the legitimate investment in Pharma from fraudulent cures and related scams. Where that is not controlled for, it is a serious issue.
Innovation and IP protection, I am less sure the relationship is clear. Frankly, I think it has tipped too far towards IP protection, as I don't believe the investment relationship really pays off after a certain point. Diminishing returns and all that.
I'm worried about losing
Submitted by Anonymous (not verified) on Fri Aug. 21, 2009 3:37 PM PDT.
I'm worried about losing innovation in heartburn medications. Rush needs them. I've sent him all the prevacid I can afford.
Say What?
Submitted by an old guy (not verified) on Fri Aug. 21, 2009 3:45 PM PDT.
"Crypto-Socialist"??? Not having a right-wing-nut dictionary handy, what the heck is that supposed to mean? I suppose it is a term of opprobrium of some sort.
Don't Cry For Pharma, Argentina
Submitted by Riggsveda on Sat Aug. 22, 2009 7:15 AM PDT.
Old Guy---a "crypto-socialist" is someone who outwardly appears capitalist, but covertly or privately supports socialist policies. Academic jargon gone wild.
Kevin, do you know anything about pharmaceutical companies? My husband has worked for GlaxoSmithKline for 13 years, pre- and post-merger, in both R&D and Admin. The amount of money they piss away is mind-boggling. Especially since the merger, the incompetence and wasted effort resulting in lack of progress is almost impossible to comprhend. As anonymous above notes quite correctly, they depend to an enormous degree on academia and government-sponsored health research as a starting point for the manufacture of their products. They farm out most of their clinical trial work, and even much of their drug development, to smaller subcontractors. More and more of thier money is spent on DTC (direct-to-consumer)adverts that the Reagan administration made possible for them when it lifted the laws against them in the 80s. The high-level employees (and they have a zillion VPs) get astronomical amounts of money, often to do very little substantial or timely work. They spend billions to bribe health care providers to buy their products and to bribe the FDA to let them rush incompletely-tested materials onto the market.
All this aside, they work in a field of captive consumption---their customers will always always need medicine, and do not have the option of refusing to take it. If we took even 75% of their profit away from them they would STILL be "incentivized" as you call it, to continue making meds, because it's just so damned profitable, and there's so much waste they could trim. Please don't lose any sleep over these guys. They will always be with us, just like the poor who can't afford their product. No health care reform will be effective unless we require negotiating for discounts as part of the plan.
Actually, the standard for
Submitted by Anonymous (not verified) on Sat Aug. 22, 2009 10:09 AM PDT.
Actually, the standard for approval of a therapy is not better than a sugar pill or placebo; the new therapy has to be better than the standard of care or alternatively no worse than the standard of care and offer some other advantage (often reduced burden on the patient). A placebo is used only if there is not a standard of care or if the therapy is an add-on to the standard of care.
More importantly though superiority is more significant than you are making it out to be. If you are talking about a trial that requires superiority (vs. non-inferiority), in order to reach statistical significance the estimated treatment effect (or benefit) usually must be fairly large. It is the FDA's job when the trial design is approved to make sure that treatment effect they are assuming does correlate to real clinical benefit. The issue of clinical benefit does often come up at FDA advisory board reviews.
Most people really only know about a small section of the pharmaceutical market (the drugs marketed on TV). These tend to be vary profitable drugs that will be taken for a while that don't treat very serious diseases. Marketing them is profitable. While you may not go to doctor requesting the specific acid reflux medication you saw in the ad, the ad did make you aware there is medication to treat your acid reflux, so you may be more likely to go to the doctor about your acid reflux and you may end up with their drug. There are a lot of drug trials that could have big impacts on disease that are quite serious (think advanced/metastatic cancer), but you don't hear much about these.
Sure, most innovation seems to come from government grants/academia and small companies that you never heard of, but this how most technology fields work (when you buy a hard drive do you complain that all of the real innovation for it was done by academics). When the small companies come up with a new therapy that seems promising, they will often be bought by the large companies who know how to run the clinical trials and market drugs.
Now, I do think that the FDA approves drugs that offer little or no benefit over current therapies. Drug development (not innovations but more the clinical trials process) is very expensive for most drugs, but there still needs to be some effort to change the pricing/patenting (maybe offering a longer period of protection if the makers accept some price limits). It is easy to blame the ad budgets, but in theory the ads pay for themselves (now this could be by encouraging you to pay more for the medications).
It would probably all be a lot easier if there was single payer. I don't think that this would stop innovation. Pricing of drugs just would need to take into account the expense of development. Any drop in pricing could be offset by increased access to drugs.
Drug Innovation
Submitted by bobbyp (not verified) on Sat Aug. 22, 2009 1:59 PM PDT.
Free market theory sez MR=MC. The marginal cost of making that added pill is virtually nothing. So why the high price?
Discuss.
Longer patent periods is also counter-innovative
Submitted by Nancy Irving on Sat Aug. 22, 2009 9:27 PM PDT.
The trend towards ever-longer patent (and copyright) periods also tends to lessen incentives to innovate. When pharma companies own long-term patents on cash-cow drugs, there is a tendency to coast on what they've got; the pressure to innovate increases to fever pitch only when those patents are ready to expire.
If patent periods are too short, pharma companies can't make back their investment in R&D; but that doesn't mean that ever-longer patent periods are always better, past a certain point. It is not a linear function.
The intellectual property lobby has been too successful in lengthening patent (and copyright) periods. It's time for reform here also.
Sure, most innovation seems
Submitted by Luther on Mon Aug. 24, 2009 12:30 AM PDT.
Submitted by Anonymous
Sure, most innovation seems to come from government grants/academia and small companies that you never heard of, but this how most technology fields work (when you buy a hard drive do you complain that all of the real innovation for it was done by academics).
I was under the impression that hard drives and their rapid advancement were due to IBM almost exclusively.
http://en.wikipedia.org/wiki/Reynold_B._Johnson
In 1952, IBM sent Johnson to San Jose, California, to set up and manage its West Coast Laboratory. In 1956, a research team lead by Johnson developed disk data storage technology, which IBM released as the IBM 305 RAMAC. Although the first disk drive was crude by modern standards, it launched a multibillion dollar industry.
In general, one associates academia with basic research, commercialization of inventions with business, and government labs with sloth.
Actually inventors produce commercial innovation, i.e., patentable inventions, not corporations, universities, or government. You'll never find a corporation or institution listed on a patent as an inventor, only as an assignee. If we really wanted innovation, we'd get rid of "hired-to-invent" and compensate employed inventors as they do in Japan and Germany. There are very simple reasons why Japan and Germany are high tech exporters and increasingly the innovators, and Americans dump US clunkers for Toyotas and buy everything from China: 1. incentives, and 2. immigration.
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