A New Deal for Drugs

Let the FDA ensure safety: give drug companies incentives to prove efficiency.

We can reduce the cost of the drug companies’ bet by returning the FDA to its earlier mission of ensuring safety and leaving proof of efficacy for post-approval studies and surveillance. It is ensuring the efficacy—not the safety—of drugs that is most expensive, time-consuming and difficult. All the usual mechanisms of ensuring the safety of drugs would remain firmly in place.

In exchange for this simplification, companies would sell medications at a regulated price equal to total economic cost until proven effective, after which the FDA would allow the medications to be sold at market prices. In this way, companies would face strong incentives to conduct or fund appropriate efficacy studies. A “progressive” approval system like this would give cures for rare diseases a fighting chance and substantially reduce the risks and cost of developing safe new drugs.

Entire WSJ article advocating incentives for drug companies through the FDA.

Comments (4)

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  1. John R. Graham says:

    I liked the article, and agree that the reform which they recommend would be very beneficial. However, I have a philosophical problem with one of their reasons.

    They have confused intellectual property (protected by patents) with regulating efficacy and safety of Rx via the FDA. There are all kinds of patented products that are not regulated by the FDA and have quick access to the market. (Just think of the recent auction of Nortel patents for which Google competed and lost. IT companies can roll out their patented products without delay.)

    So, there is an error in the authors’ statement that “Today’s system for drug approvals is based on a social contract. We grant the drug companies lucrative profits through government-protected, 20-year monopolies on their discoveries. In return, the companies submit to a costly regulatory structure designed to ensure their drugs are safe and effective.”

    First, “we” (by which they mean the government)does not grant one penny of profit via granting a patent. If the patent-holder cannot sell the product for a profit, no profit is forthcoming.

    Second (and closely related), the patent does not grant a monopoly. Monopoly describes a market, not a product. The patent recognizes the patent-holder’s ownership of the intellectual property behind the product.

    For example, there is a class of drugs called statins. They are very widely used for lowering cholesterol and rightly defined as “blockbusters.” The first successfull statin was lovastatin, patented by Merck and branded as Mevacor. However, Merck soon moved on to simvastatin, branded as Zocor.

    This does not mean that Merck had a monopoly on cholesterol lowering drugs. On the contrary, the profitability of these medicines prompted competition from other drug makers, which invented other statins with different therapeutic effects, giving people with high cholesterol, and their doctors, lots of choice.

    Pfizer invented atorvastatin, branded as Lipitor, which outpaced Zocor.

    Zocor’s patent expired in 2006, and it is now available at generic prices. Lipitor is still patented in the U.S., but it will soon be available in generic versions.

    It is almost certain that none of these statins would have been invented without effective patents. Monopoly stifles innovation. On the contrary, patents stimulate innovation.

  2. Stephen C. says:

    I like the proposed New Deal.

  3. Jeff says:

    @ John Graham

    John, thanks for those clarifications. That was helpful.

  4. Ken says:

    I liked both the article and the comments by John.