NCPA - National Center for Policy Analysis

Unclogging the Drug Pipeline

November 2, 2012

The U.S. Senate recently introduced a bill that would increase innovation in the research and development of medicine for chronic health conditions. However the bill fails to address government regulations that have become a significant obstacle for drug developers and a disincentive for potential investors. Bringing a drug to market takes 12 to 15 years and costs more than $1.4 billion, says Henry I. Miller, the Robert Wesson Fellow at the Hoover Institution.

  • Manufacturers recoup their research and development costs for only one in five approved drugs.
  • Thirty-six percent of venture capital firms say they will increase investments in life science companies in Europe.
  • However, only 13 percent plan to increase investment in U.S. companies.
  • Furthermore, 31 percent of respondents claim they are planning to decrease their current investments in U.S. life science companies, compared to 7 percent of respondents that want to decrease their investments in European companies.

The U.S. Food and Drug Administration (FDA) continues to burden drug companies with increasingly unnecessary requirements. For instance, the FDA has invented a criterion that includes a requirement to demonstrate that the new drug is superior to existing drugs. This has the effect of reducing competition. Furthermore, if a drug can't reach the market unless it is markedly superior, then there is a risk of supply shortage if the production of one drug gets disrupted.

In addition to that, the FDA's excessive risk aversion has forced many companies to make clinical trials longer, more complex and more expensive. Instead, Congress should use its authority to remove obstacles set forth by the FDA. One example would be to get rid of an FDA policy that slows drug development and increases cost by giving drug-review and drug safety offices equal responsibility over safety issues that are under review or already approved.

Moreover, Congress should send a signal that the FDA should continue its policy of "accelerated approval" for drugs that are intended for life-threatening diseases. The FDA has more or less disregarded this and continues to take its time when approving drugs.

In an effort to increase efficiency, Congress could outsource some of the FDA's function to outside experts. This would allow better input on complex drug and pharmaceutical issues that bureaucrats are in no position to make decisions on.

Source: Henry I. Miller, "Unclogging the Drug Pipeline," Hoover Institution, October 26, 2012.


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