Government expands on failure. All too often, government failure is treated as evidence that we need more government. Instead, government failure indicates that we should look for alternative results in the competitive marketplace. Unfortunately, the creation of the new National Center for Advancing Translational Sciences (NCATS) is a near perfect example of how government failure leads to further government interference with markets, in this case the market for new medicines.
Over the past 15 years the number of new drugs that have been making it to patients’ bedsides has been falling. In addition, after rising steeply for many years, research spending by large drug makers has recently declined. “I am a little frustrated to see how many of the discoveries that do look as though they have therapeutic implications are waiting for the pharmaceutical industry to follow through with them,” said Francis Collins in The New York Times. Collins, as head of the National Institutes of Health, is spearheading the creation of the NCATS.
The problem is that Collins is frustrated with the wrong target. Most of the reason for the decline in new drug discovery can be encapsulated in just three letters: F-D-A. The Food and Drug Administration’s drug approval process has become so onerous and expensive that pharmaceutical companies have been cutting back on the number of new drugs that they submit for approval. In 1996, the FDA approved 53 new chemical entities (novel drugs). New Molecular Entity (NME) approvals by the FDA fell to just 18 in 2007, bumping up to 21 this past year.
But is the FDA really to blame? Anti-pharmaceutical company activists complain that the drug companies spend twice as much on marketing as they do on research. In addition, the drug companies allegedly concentrate far too much on creating “me-too” drugs that are similar to those already successfully treating illnesses and not on innovative new drugs. While both claims have some truth in them, they are affected by the onerous regulations imposed by the FDA. If a pharmaceutical company knows that it can afford to get only one or two new drugs through the regulatory gauntlet per year, it will focus its research priorities on possible blockbusters that can be used to treat millions rather than engage in more speculative research on drugs aimed at treating tens of thousands. Thus FDA regulations narrow the drug development pipeline and slow research on pharmaceuticals aimed at treating serious but relatively uncommon diseases.
Drug companies are in the business of making money by selling medicines to sick people and they, just like any other businesses, set their prices based on what the market will bear. However, at the margin, a thin development pipeline encourages drug companies to flog the pharmaceuticals that they have already managed to get approved in the hopes of wringing as much profit out of them as possible before they go off patent. If companies could afford to have more drugs under development, they could count more securely on a future stream of profits.
“The drug companies do almost no innovation now. It's just turning out one more drug that's similar to a blockbuster,” asserted fierce drug company critic Marcia Angell, a Harvard University senior lecturer in social medicine, in 2003. “These are called copycat drugs, or ‘me too’ drugs. That's their major business now.” Not so. Angell simply gets it wrong about how these drugs are developed. In fact, most research on so-called “me-too” drugs is done simultaneously by competing drug companies. They are not copy-catting one another, they are racing one another. In addition, the amount of time that a new drug enjoys market exclusivity has shrunk from five years to just over one year. This means that price competition breaks out between the new drugs faster than ever.
Although overall biopharmaceutical research and development spending continues to grow, R&D spending by big drug makers peaked at $47.9 billion in 2007, falling to $45.8 billion in 2009. This is significant because the big drug makers are the companies that can afford to spend $1 billion to get a new drug through the FDA’s recondite approval process. The advent of the Great Recession no doubt had an impact on their R&D funding, but it is also likely that fears that the Obama administration’s health care mandates will evolve into a system of drug price controls also contributed to the cuts.
Just how much is government slowing new drug development? A new study [subscription] by oncologist David Stewart and his colleagues at the M.D. Anderson Cancer Center in Houston, Texas, in the June 10, 2010 issue of the Journal of Clinical Oncology, sheds some depressing light on this issue. The article notes that the time from drug discovery to marketing increased from eight years in 1960 to 12 to 15 years now. They calculate that five years of this increase is the result of ever tighter regulations boosting the costs and lengths of clinical trials. The more stringent clinical trial regulations aim at the laudable goal of protecting cancer patients from harm, especially from death as result of drug toxicity. However, the M.D. Anderson Center researchers note that toxic death rates in clinical trials has in fact not significantly decreased. In 461 Phase I cancer trials between 1991 and 2002 involving nearly 12,000 patients, there were only 58 toxic deaths. In 227 trials between 1979 and 1990 involving about 6,500 patients there were 52 toxic deaths. Considering that they are afflicted with a terminal disease, the risks to cancer patients in clinical trials are quite small.
Without going into detail, the researchers calculate that the clinical trial regulations cost $2,700,000 per life-year saved. In contrast, dialysis costs $43,000 to $104,000 per life year saved; statin drugs cost $19,000 to $25,000 per life-year; and colorectal cancer screening costs $14,000. The regulations appear to save about 16 life-years over the course of drug development. On the other hand, the authors conservatively estimate that increased regulatory delays in drug approvals results in the loss of nearly 300,000 life-years in the U.S. Sixteen life-years versus 300,000 life-years! The authors conclude, “The current regulatory situation is unacceptable and seems to be unethical.” A similar story of pervasive government failure holds for drug development aiming to treat other diseases.
Since the government is hampering the development of new medicines, the obvious solution would be to get the government to stop doing that. Unfortunately, the perpetrators of government failure (bureaucrats and Congress members) cannot see that they are the problem. As muckraker Upton Sinclair once observed, “It is difficult to get a man to understand something when his salary depends on his not understanding it.” So instead of doing the right thing and reducing regulatory burdens, the government is responding as it is nearly always does by asking for more government. Thus is born the new NCATS, which is slated to be operational by October with an initial budget of $1 billion.
Instead of exacerbating government failure, what would a modernized system of drug development and approval look like? First, cut through the thickets of paperwork that are strangling the clinical trial process. The M.D. Anderson Center researchers estimate that review and documentation requirements delay research by as much as two years. Second, employ validated biomarker and surrogate endpoints when testing for safety and efficacy, enabling researchers to identify quickly specific populations of patients that will benefit from a new drug and those who will not. And restructure the drug review process to permit conditional approval of drugs based on shorter and smaller clinical trials. Informed patients initially treated with conditionally approved new drugs would essentially be monitored as though they were in phase three clinical trials confirming treatment effectiveness.
“The N.I.H. is not likely to be very good at drug discovery, so why are they doing this?,” asked Dr. Mark Lively, a biochemist at Wake Forest University in The New York Times. That’s a very good question. Creating the new NCATS amounts to adding what will turn out to be another dysfunctional government widget to an already baroque and broken drug discovery and approval process.
Ronald Bailey is Reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books. This column first appeared at Reason.com.