NCPA - National Center for Policy Analysis

Stifling New Cures: The True Cost of Lengthy Clinical Drug Trials

April 30, 2012

Though the United States urgently needs new treatments for common illnesses such as heart disease, stroke and diabetes, the nation's system for drug approval discourages innovation and investment, especially for our most pressing public health challenges.  In this paper, Avik S. A. Roy, a senior fellow at the Manhattan Institute, finds that the main culprit is the high cost of Phase III clinical trials, which are required for U.S. Food and Drug Administration (FDA) approval of most drugs.  Roy examined drug development in four major public health areas and discovered that for any given drug on the market, typically 90 percent or more of that drug's development costs are incurred in Phase III trials.

  • The enormous cost and risk of Phase III trials create incentives for researchers and investors to avoid work on medications for the chronic conditions and illnesses that pose the greatest threat to Americans, in terms of health spending and in terms of the number of people affected.
  • This avoidance, in turn, harms overall U.S. health outcomes and drives up the cost of health care.

The current Phase III trial system forces pharmaceutical and biotechnology companies to take enormous financial risks and burdens them with needless and unpredictable regulatory delays.  The current system has, in particular, prevented start-up biotech companies, mostly based in the United States, from challenging the dominance of large, multinational pharmaceutical concerns.  It also, perversely, encourages more innovation in drugs for very rare diseases than it does in drugs for common conditions that afflict hundreds of millions of Americans.

Roy recommends replacing the current "all or nothing" FDA approval system with one that reflects the realities of scientific research and the profiles of chronic long-term conditions.  Such a reform would allow drugs that have been found safe and promising (in Phase I and Phase II clinical trials) to win approval for limited marketing to patients.  This would give patients early access to innovative new therapies, while the FDA would retain the ability to collect information confirming the drugs' safety and effectiveness and to revoke a drug's marketing authorization later, when appropriate.

Source: Avik S. A. Roy, "Stifling New Cures: The True Cost of Lengthy Clinical Drug Trials," Manhattan Institute, April 2012.

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