Using Marketable Vouchers to Speed Up Drug Approvals
The Food and Drug Administration recently approved a new drug for leishmaniasis, an extremely rare disease which is spread by sand flies in poor countries. Why would a for-profit company invest in inventing a drug for which there is no way to make a profit?
T
he FDA offers a prize to any firm that invents a therapy for one of sixteen rare diseases: A priority review voucher (PRV). A company that wins a license for a neglected drug wins a PRV that it can use to get priority review for another drug: Perhaps a new treatment for depression or cancer that will bring in billions of dollars of revenue. In that case, the PRV will be worth between $150 million to $300 million. The company which invented the drug for leishmaniasis makes no bones about the value of the PRV to its business:
Knight Therapeutics, of Montreal, is eager to cash in on the voucher. “We’re going to try to sell it for as much as we can,” Jeffrey Kadanoff, Knight’s chief financial officer, tells Shots. “We’d love to make a big headline.” (NPR)
The PRV is best explained by one of the economists who thought it up, Professor David Ridley of Duke University’s Fuqua School of Business, in this video. The PRV is not perfect, but it is an excellent innovation. It reduces some of the deadweight loss of the FDA’s bureaucratic inertia by redirecting some of the energy devoted to overcoming it to the benefit of the world’s least fortunate patients.
This will be interesting how competitive it will become to get one of these PRVs.
I wonder if it would incentivize companies who are in the running to receive one of these, to hold off on releasing its “golden egg” of a drug in favor of having a priority review.
I could see companies holding on releasing an depression or cholesterol medication, trying to obtain a CRV to expedite the process.
Thank you for your comment, but I doubt that incentive exists. There are still very few drugs for the 16 neglected diseases (only four so far) so not a liquid market in PRVs. However, because they can be bought and sold, the company developing a potential blockbuster should not have its incentives perverted. The PRV is just an option it can buy if it wants.
This will definitely increase competition among companies as well as increase the quality of medications.
“It reduces some of the deadweight loss of the FDA’s bureaucratic inertia by redirecting some of the energy devoted to overcoming it to the benefit of the world’s least fortunate patients.”
Not to mention it will mean more profits for the companies who developed and marketed the drugs, as quicker approval means more time on the market while it is patented.
drug gets to those who need it quicker. win.
longer time on the market with patents. win.
pretty much a win/win.