FDA drug approval reform: Moving to a Safety-Only System

Thanks heaps to Tyler Cowen for this heads-up on drug development. The ideas are blindingly obvious once explained. The outmoded idea behind the laborious FDA system is now known to be false (that average efficacy is relevant to an individual patient). Read this, then contact your elected representatives about reforming the FDA. One of the lives saved could be yours.

It seems likely to me that part of the problem with the current scheme is regulatory capture. Big pharma benefits by completely eliminating any small (startup) innovators from competing. That’s a typical incumbent strategy – get the regulators to erect barriers preventing new entrants.

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.

Addendum: Kevin Outterson at The Incidental Economist and Bill Gardner at Something Not Unlike Research offer useful comments.

[From FDA: Moving to a Safety-Only System]

The drug pipeline: the numbers on innovations

Organic chemist Derek Lowe’s commentary on drug discovery at “In the Pipeline” is a valued source for insider perspectives. In Where Drugs Come From: The Numbers Derek examines the Nov 2010 Robert Kneller paper. Hopefully this work will provide the numbers to quiet the ongoing arguments over who does the heavy lifting (e.g., “pharma doesn’t discover important compounds”). The Kneller study is focused only on the 252 new drugs approved by the US Food and Drug Administration over the decade from 1998 to 2007. Excerpt:

(…) A new paper in Nature Reviews Drug Discovery takes on all 252 drugs approved by the FDA from then through 2007, and traces each of them back to their origins. What’s more, each drug is evaluated by how much unmet medical need it was addressed to and how scientifically innovative it was. Clearly, there’s going to be room for some argument in any study of this sort, but I’m very glad to have it, nonetheless. Credit where credit’s due: who’s been discovering the most drugs, and who’s been discovering the best ones?

First, the raw numbers. In the 1997-2005 period, the 252 drugs break down as follows. Note that some drugs have been split up, with partial credit being assigned to more than one category. Overall, we have:

58% from pharmaceutical companies.

18% from biotech companies..

16% from universities, transferred to biotech.

8% from universities, transferred to pharma.

That sounds about right to me. And finally, I have some hard numbers to point to when I next run into someone who tries to tell me that all drugs are found with NIH grants, and that drug companies hardly do any research. (I know that this sounds like the most ridiculous strawman, but believe me, there are people – who regard themselves as intelligent and informed – who believe this passionately, in nearly those exact words). But fear not, this isn’t going to be a relentless pharma-is-great post, because it’s certainly not a pharma-is-great paper. Read on. . .

Read the whole thing »

Ann do read the comments — e.g., commenter Virgil added some useful background the impact of university “indirect costs”.

Long answer… When Universities get funding from NIH, it comes with “indirect costs” (to pay for administration, lighting, AC, building maintenance etc.) The indirect cost rate runs anywhere 50-90% depending on the University, and is pretty hard to change – it gets reviewed by independent panels. So for example, when I get a $1m grant, the University gets an extra $530k (in my case) to pay for all the fluff.

The problem is, many granting agencies do not pay “full indirects”. American Heart Association only pays 10%. Most industry sponsored clinical trials pay 20%. A lot of charities and foundations pay nothing at all. So, when faculty get these grants, they’re bringing in dollars to do research, but those dollars do not bring in enough indirects to support all the background stuff.

Typically, the indirect cost recovery rate for most Universities is in the 75% range, meaning that they bring in enough indirects to support about 75% of the total cost of doing research. If all research grants paid full indirects (i.e. everything was NIH funded) this would not be a problem. One of the biggest budget problems facing a lot of Universities today, is how to make up that gap of 25%. The old fashioned way was to use the endowment (now shot to bits by the recession), to skim money off the profit from the adjacent hospital, as is the case at most University Medical Centers (now shot to pieces by medicare/medicaid reimbursement rates, and coming healthcare reform), or to rely on other revenue streams (medical student fees, licensing and patents, charitable donations).

The cynical way to look at this is “for every research dollar we bring in, we have to find an extra 25c from somewhere to cover the real costs, so research actually costs us money”. As you may guess, such a message does not sit well with the faculty at many Universities. Nevertheless, the old business model wherein research is a profitable enterprise at Universities, is simply no longer sustainable. Only those Universities with very big endowments, are surviving the current financial crunch without big cost cutting measures (typically, firing administrative staff and cutting back on support – goodbye core facilities, etc.)