It now costs about a billion dollars to develop a new drug which means that many potentially beneficial drugs are lost. Economist Michele Boldrin and physician S. Joushua Swamidass explain the problem and suggest a new approach:
Every drug approval requires a massive bet—so massive that only very large companies can afford it. Too many drugs become profitable only when the expected payoff is in the billions….in this high-stakes environment it is difficult to justify developing drugs for rare diseases. They simply do not make enough money to pay for their development….How many potentially good drugs are dropped in silence every year?
Finding treatments for rare disease should concern us all. And as we look closely at genetic signatures of important diseases, we find that each common disease is composed of several rare diseases that only appear the same on the outside.
Nowhere is this truer than with cancer. Every patient’s tumor is genetically unique. That means most cancer patients have in effect a rare disease that may benefit from a drug that works for only a small number of other patients.
…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.
Harvard Neurologist Peter Lansbury made a similar argument several years ago:
There are also scientific reasons to replace Phase 3. The reasoning behind the Phase 3 requirement — that the average efficacy of a drug is relevant to an individual patient — flies in the face of what we now know about drug responsiveness. Very few drugs are effective in all individuals. In fact, most are not effective in large portions of the population, for reasons that we are just beginning to understand.
It’s much easier to get approval for drugs that are marginally effective in, say, half the population than drugs that are very effective in a small fraction of patients. This statistical barrier discourages the pharmaceutical industry from even beginning to attack diseases, such as Parkinson’s, that are likely to have several subtypes, each of which may respond to a different drug. These drugs are the underappreciated casualties of the Phase 3 requirement; they will never be developed because the risk of failure at Phase 3 is simply too great.
Boldrin and Swamidass offer another suggestion:
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.
Instead of price regulations I have argued for more publicly paid for efficacy studies, to be produced by the NIH and other similar institutions. Third party efficacy studies would have the added benefit of being less subject to bias.
Importantly, we already have good information on what a safety-only system would look like: the off-label market. Drugs prescribed off-label have been through FDA required safety trials but not through FDA-approved efficacy trials for the prescribed use. The off-label market has its problems but it is vital to modern medicine because the cutting edge of treatment advances at a far faster rate than does the FDA (hence, a majority of cancer and AIDS prescriptions are often off-label, see my original study and this summary with Dan Klein). In the off-label market, firms are not allowed to advertise the off-label use which also gives them an incentive, above and beyond the sales and reputation incentives, to conduct further efficacy studies. A similar approach might be adopted in a safety-only system.