Global Drug Discovery: Europe Is Ahead
By Donald W. Light
Health Affairs
August 25, 2009
It is widely believed that the United States has eclipsed Europe in pharmaceutical research productivity. Some leading analysts claim that although fewer drugs have been discovered worldwide over the past decade, most are therapeutically important. Yet a comprehensive data set of all new chemical entities approved between 1982 and 2003 shows that the United States never overtook Europe in research productivity, and that Europe in fact is pulling ahead of U.S. productivity. Other large studies show that most new drugs add few if any clinical benefits over previously discovered drugs.
Policy Reflections
Congressional leaders and others concerned about high prices of new patented drugs will be heartened by this analysis, because lower European prices seem to be no deterrent to strong research productivity. A previous analysis using industry-based data showed that pharmaceutical companies recover all costs and make a good profit at European prices. Europeans are not “free riders” on American patients–another myth promoted by industry that assumes that countries are separate R&D/market silos that should each pay for themselves.
The real innovation crisis for patients and society is not the recent decline in new molecular entities but the small percentage over many years of new molecular entities that provide clinical advantages to patients over existing medications. This longer pattern stems from defining “effective” as better than placebo and using soft surrogate endpoints, or substitute criteria, instead of hard clinical endpoints. As a result, the vast majority of new drugs that constitute 80 percent of U.S. pharmaceutical costs offer few therapeutic advantages and greater risks than good drugs discovered in prior years. High prices for these new drugs enable companies to spend two and a half times more on marketing than on R&D, to persuade physicians to prescribe them and patients to want them. Thus, current incentives reward better marketing more than better value.
If we want new drugs to be clinically superior to existing ones, we need to reward companies for developing them and not for developing drugs that are merely superior to placebo. Arjun Jayadev and Joseph Stiglitz propose a key strategy: pay in terms of clinical value added, as some large purchasers already do and as Consumer Reports Best Buy Drugs does by comparing value with price. Jayadev and Stiglitz also recommend having clinical trials independently run and paid for by a public body such as the National Institutes of Health so that they can be designed to measure comparative advantages and risks over existing treatments. Publicly funded trials would also reduce cost and risk for pharmaceutical companies and increase competition from smaller firms by lowering the high cost barrier that company-funded trials pose. These are some ways in which incentives can be restructured to foster greater competition for clinically superior drugs and to lower overall spending.
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.5.w969v1
Arjun Jayadev and Joseph Stiglitz, “Two Ideas To Increase Innovation And Reduce Pharmaceutical Costs And Prices,” Health Affairs, 28, no. 1 (2009): w165-w168
http://content.healthaffairs.org/cgi/content/abstract/28/1/w165
Our uniquely American health care system is noted for its high prices for relative mediocrity. Some contend that our pharmaceutical industry provides an exception. It doesn’t. We are paying high prices for new chemical entities that over 85 percent of the time are providing us with no real benefit over existing products.
Many contend nevertheless that innovations provided by U.S. pharmaceutical firms are well worth our very high prices. Yet productivity of European pharmaceutical firms remains even higher, and they are able to provide new products at much lower prices.
When reform advocates look at the excessive costs of U.S. health care, two favorite targets are the private insurance industry and the pharmaceutical firms. Policies that would reduce these burdens are no secret. Physicians for a National Health Program has described policies that would eliminate the private insurance burden. Arjun Jayadev and Nobel Laureate Joseph Stiglitz, in the article cited above, provide examples of policies that would increase value in our purchasing of pharmaceuticals.
So what is Congress’s response? They intend to expand the dysfunctional private insurance markets, and use more of our tax money for subsidies. For the biotech industry they are expanding data exclusivity thereby keeping generics off the market for longer periods. Reform is going to bring us more overpriced, inadequate private insurance plans and more overpriced pharmaceuticals/biologics.
Tell Congress that reform is not about enhancing the business models of the insurance and pharmaceutical firms. It’s about making health care affordable and accessible for everyone. Go back and get it right.