Drug development is failing because it’s too expensive and takes too long

Innovative new drugs can be miraculous, often representing quantum advances in health. Recent examples include the unprecedented benefits of antiviral drugs to treat hepatitis C, gene therapy, checkpoint inhibitors and CAR T-cells for cancer. Many drug developers are working on complementary products and technologies to make these recent advances even better, as well as new innovative approaches.

Often, however, they are monumentally expensive, with a course of treatment running into the hundreds of thousands of dollars per patient. In order to reduce prices, some have advocated shortening periods of marketing exclusivity — the time from the approval of an innovative drug to the appearance in the marketplace of a generic competitor.

Consider atorvastatin (Lipitor), the best-selling drug of all time that was approved in 1996 and the first atorvastatin generic hit the market in 2012. Drug developers point out that exclusivity periods are vital to recoup development costs for all drugs in development, the overwhelming majority of which never reach the market and to provide a return to investors for the use of capital. That presents a conundrum, but with smarter, innovative regulatory policies, we can improve health at a lower price.

In our combined 50 years in health-care investment. we have met with thousands of companies engaged in Phase 1 and 2 clinical drug studies. We continue to be amazed that the basic science discoveries underlying their drugs in development had been made a decade or two earlier. Compared to the technology sector, the development cycle in pharmaceuticals is excruciatingly long once a discovery is made — applied research (4.5 years), preclinical testing (1 year), clinical Phase 1 (1.5 years), Phases 2 and 3 (2.5 years each) and application submission to approval (1.5 years). In addition to the length, the cost of drug development is estimated to be on average $2.5B, with the clinical trials by far the most expensive.

To bring down the price of innovative medicines, we need to shorten the development cycle and reduce the cost of development. By doing so, generic competition — and the accompanying drop in drug prices — could be permitted sooner and the elements of pricing that are driven by cost, time, uncertainty and failure will be lessened. In other words, a win for patients, drug developers, payers and society.

This is where the FDA can have the greatest impact. Instituting a codified approval paradigm based on four tiered levels of clinical effectiveness (biomarkers, clinical signs and symptoms, disease modification and clinical outcomes) — with evidence regarding clinical utility progressively increasing — would greatly reduce the regulatory uncertainty and subjectivity, as well as the time to approval of innovative medicines.

Moreover, the four tiers, coupled with a commitment to apply state-of-the-art technologies (Apple Watch, telemetry and other health monitoring systems) to obtain clinical evidence would allow for additional learnings from use of drugs by practicing doctors treating real world patients. This knowledge would unearth additional uses, information that can be added to the product label to allow safer and more effective use of drugs and the identification of drug combinations that lead to even greater health benefits.

Although the prices of new drugs are very high, total drug costs pale in comparison to the overall system costs of treating chronic diseases that affect over one-hundred million Americans and are the most important drivers of health-care spending — diabetes ($327 billion in 2017), COPD (projected to be $49billion in 2020), heart failure (estimated to be $53 billion in 2030) and Alzheimer’s Disease ($277 billion in 2018).

Drugs are very effective in keeping patients with chronic diseases out of hospitals and in reducing surgical procedures to address the sequelae of end-stage chronic diseases. Of the fifty-nine new drugs approved by the FDA in 2018, thirty-four (58 percent) were for patients with rare diseases, many of which are severely debilitating, but afflict only a tiny fraction of patients with diabetes.

Disappointingly, in the CDER (Center for Drug Evaluation and Research) 2018 New Drug Therapy Approvals report there were no innovative new drugs approved for diabetes. One new drug was approved for COPD (Yupelri, revefenacin), no new drugs for heart failure and no new drugs for Alzheimer’s Disease, which is projected to eventually bankrupt Medicare. This state of affairs bodes ill for patients and for the future of spending on health care.

If we fail to advance the state-of-the-art of drug development, review and approvals, we fall further behind. The FDA can and must fulfill its full potential in promoting health. The right kinds of policies and practices can also reduce drug prices and the overall cost of medical care for Americans.

Jacob J. Gottlieb MD is the chief executive officer of Altium Capital. Joseph Gulfo MD, MBA, is a senior analyst at Altium Capital; an adjunct fellow at Niskanen Center; a senior fellow at the Progressive Policy Institute; and author of  “Innovation Breakdown How the FDA and Wall Street Cripple Medical Advances.”