GAO: Drug Innovation Lags Despite High Drug Prices

The drug industry's mantra that it costs over $1 billion to develop a new drug gets trotted out every time someone in Congress wants to do something about the high price of drugs. With the incoming Democratic Congress pledging to force Medicare to wrestle lower drug prices from drug firms, the industry's counteroffensive has begun. I've already seen several full page image ads (as opposed to product-specific ads) in the nation's leading newspapers.

The industry's claim rests on a simple proposition. Without high prices, research and development will be cut back. For the millions of Americans suffering from cancer, heart disease, Alzheimer's, and (fill in the blank with your most feared disease here), the fervently hoped for miracles that are just over the horizon will not emerge from industry's labs.

It's a compelling story, and total hogwash, as a new report from the Government Accountability Office released by leading Congressional Democrats today shows. Rather that replicating the Tufts Center for Drug Development methodology that generates the industry's much ballyhooed "cost per drug" number, the GAO investigators interviewed dozens of experts in an effort to explain why medical innovation is lagging.

The numbers are stark. Industry's inflation-adjusted investment in R&D jumped 147 percent to nearly $40 billion between 1993 and 2004, but the number of new drugs rose just seven percent. If one looks at all the new drug applications approved by the Food and Drug Administration over that decade, one finds that just 23 percent were rated as "priorities" by the agency. In other words, three out of every four drug applications involved drugs that either replicated the action of medicines already on the market or were new formulations that at best added minor conveniences for patients and doctors.

"Increases in research and development expenditures during the period have not led to a commensurate increase in the innovative potential of NDAs (new drug applications) submitted to the FDA," the report said.

Okay, so why hasn't more money for the drug industry led to more innovative drugs? The most important reason, the report said, was that "the complexity of the diseases to be addressed have increased." In other words, the low-hanging fruit of the drug revolution has been picked. The diseases that an aging population needs to address are diseases that have defied man's ingenuity for decades -- no, centuries. Is more money the answer? Or must we await a better understanding of the underlying mechanisms?

I think it is the latter. Yet, between 1983 and 1998 there was a 22 percent decline in the number of physician-scientists working on these questions, the report noted. Physicians willing to test new drugs in their patients are a dime a dozen, and industry has hired plenty of them. But "lengthy training and relatively lower compensation for physicians who are scientists" has undercut our society's ability to do the hard work that might one day lead to real innovation.

The second major reason for lagging innovation in the drug industry most innovative drugs "do not offer the same revenue-generating potential as blockbuster drugs," which frequently must be tested on thousands of patients because they offer only marginal health benefits -- like cholesterol-lowering drugs, for instance. Moreover, once one company comes up with a blockbuster, then the rest of the industry follows suit with their own versions, the so-called "me-too" drugs.

Even if you buy the industry's argument that that these me-toos offer "choice" for patients (I'm skeptical, but let's accept the premise for argument's sake), the bottom line is that they require huge investments for marginal gains in health, thus driving up the overall cost of industry R&D that ultimately gets passed along to consumers.

I'm glad to see the GAO, no bastion of radicalism, saying that drug innovation depends on the further evolution of basic science, and not pouring more money into the coffers of the drug industry. This is a point I've made over and over in the speeches that I've given since my book, "The $800 Million Pill," came out in 2004. The GAO analysis suggests that high prices for drugs will only lead to more me-toos, not real innovation.

That powerful grist for the mills of Senators Ted Kennedy (D-Mass.) and Richard Durbin (D-Ill.) and Rep. Henry Waxman (D-Cal.), who released today's report. The bottom line is that in the coming debate over Medicare drug price negotiations, industry's trump card is a joker.

If Congress is really concerned about innovation, it would take some of the money saved from lower Medicare prices and put it into the training a new generation of physician-scientists who are willing to work in the public sector and dedicate their lives to understanding and curing disease.

Posted by gooznews at December 19, 2006 02:40 PM