HOW OBAMA WOULD STIFLE DRUG INNOVATION

October 21, 2008

The pharmaceutical industry has begun to give up on developing drugs for routine medical problems in favor of discovering "specialty" drugs for rare diseases and unmet medical needs like cancer.  House Democrats, however, are proposing controls on access to and eventually pricing of the specialty drugs, says Dr. Scott Gottlieb, a practicing physician and resident fellow at the American Enterprise Institute.

Yet these new controls -- based on a view of medical care as a commodity to be purchased at the lowest price, with little allowance for innovation -- cold push drug development over a tipping point, says Gottlieb:

  • The high price of specialty drugs reflects the difficulty of developing them, and the regulatory process for getting them approved is more uncertain.
  • Enrolling patients with rare conditions is also expensive: they are harder to recruit and often need to undergo extensive testing to monitor progress.
  • For example, it costs less than $5,000 to enroll a patient in a trial for a blood pressure bill, but up to $70,000 for a big cancer study and more than $100,000 for some very rare diseases.

The most economically pernicious effect of price and access controls is how they distort future investment decisions.  They will lower expectations that untreated diseases can continue to be re-priced, even with very effective new drugs.  However, there are policy options to address these troubling issues without preying on medical innovation and its health contributions, says Gottlieb:

  • Drug companies need to explore alternative pricing mechanisms.
  • Health insurers need to provide new policy holders with clear, up-front disclosures on co-pays and not stick patients with unbearable bills only after sickness strikes.
  • The Food and Drug Administration can also help lower overall drug spending by adopting reasonable regulatory pathways for diagnostic tests that would enable doctors to target drugs more efficiently to patients most likely to benefit.

Source: Scott Gottlieb, "How Obama Would Stifle Drug Innovation," Wall Street Journal, October 18, 2008.

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