GAO looks at Pharma innovation

The Government Accountability Office (GAO) yesterday released a new report on New Drug Development. The report was a response to a requested by Senators Kennedy and Durbin and Congressman Waxman, who raised a concern about the process.
The report finds that the effectiveness of pharmaceutical R&D has been declining:

Although the pharmaceutical industry reported substantial increases in annual research and development costs, the number of NDAs [new drug applications] submitted to, and approved by, FDA has not been commensurate with these investments. From 1993 through 2004, industry reported annual inflation-adjusted research and development expenses steadily increased from nearly $16 billion to nearly $40 billion–a 147 percent increase. In contrast, the number of NDAs submitted annually to FDA increased at a slower rate–38 percent over this period. Similarly, the number of NDAs submitted to FDA for NMEs [new molecular entities] increased by only 7 percent over this period.

While it did not undertake its own analysis of the reason for this decline, GAO did systematically solicit the views of experts:

Results from the discussion among panel members, our interviews with drug development experts and analysts, and our review of academic and industry reports identified several factors affecting the types of drugs being developed, and the length, costs, and failure rates of drug development. These factors include limitations on the scientific understanding of how to translate chemical and biological discoveries into safe and effective drugs; business decisions by the pharmaceutical industry that influence the types of drugs developed; uncertainty regarding regulatory standards for determining whether a drug should be approved as safe and effective; and certain intellectual property protections that can discourage innovation. Together, these factors have been cited as affecting the cost and length of the drug development process, as well as the types of drugs being produced. Faced with these issues, some of the panelists, other experts we contacted, and the literature we reviewed, suggested ways to expedite drug development and find more innovative drugs. These include generating greater numbers of scientists who possess the skills needed to translate drug discoveries into effective new medicines; restructuring regulation of the drug review process to allow for conditional approval of drugs for therapeutic areas that currently lack effective treatments based on shorter clinical trials using fewer numbers of patients; and altering the length of patent terms to encourage innovation. Some of the experts have cautioned that adequate measures to ensure safety need to be implemented along with any changes to expedite the regulatory review process.

One of the most intriguing suggestions was to create a variable length patent for new drugs:

The federal government could consider providing financial incentives or disincentives to affect the innovative potential of drugs produced by the industry. The government could achieve this by extending or reducing the period of patent protection associated with a drug based on its therapeutic value. One of the panelists suggested that a patent could be extended to 25 or 30 years for drugs considered innovative, or offering high therapeutic potential; while patents for drugs offering less innovative benefits could be only 10 years.

I don’t know whether such a system would be useful or even workable. However, the idea deserves greater attention. It also highlights a broader issue with the patent system: the one-size-fits-all nature of the current system. If a customized IPR system is needed for pharmaceuticals, then we should look at a number of ways to better mold the system to the needs of the specific technology.
I doubt that the unitary patent system will disappear any time soon. But it is clearly time to start serious discussions on how to better customize the system. After all, customization to customer needs is one of the hallmarks of the I-Cubed Economy

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