Health FDA Reform, Pharmaceuticals
April 24th, 2012 2 Minute Read Report by Avik Roy

Stifling New Cures: The True Cost of Lengthy Clinical Drug Trials

Though the United States urgently needs new treatments for common illnesses such as heart disease, stroke, and diabetes, the nation's system for drug approval discourages innovation and investment, especially for our most pressing public health challenges. In this paper, we find that the main culprit is the high cost of Phase III clinical trials, which are required for FDA approval of most drugs. We examined drug development in four major public health areas and discovered that for any given drug on the market, typically 90 percent or more of that drug's development costs are incurred in Phase III trials. These costs have skyrocketed in recent years, exacerbating an already serious problem.

The enormous cost and risk of Phase III trials create incentives for researchers and investors to avoid work on medications for the chronic conditions and illnesses that pose the greatest threat to Americans, in terms of health spending and in terms of the number of people affected. This avoidance, in turn, harms overall U.S. health outcomes and drives up the cost of health care.

In this paper, we examined drug development in three such areas: obesity, adult-onset diabetes, and cardiovascular disease. We also examined the less burdensome regulatory situation in drugs for rare diseases, as an opportunity for contrast. We find that the current Phase III trial system forces pharmaceutical and biotechnology companies to take enormous financial risks and burdens them with needless and unpredictable regulatory delays. The current system has, in particular, prevented start-up biotech companies, mostly based in the United States, from challenging the dominance of large, multinational pharmaceutical concerns. It also, perversely, encourages more innovation in drugs for very rare diseases than it does in drugs for common conditions that afflict hundreds of millions of Americans.

As a result of our analysis, we recommend replacing the current - all or nothing - FDA approval system with one that reflects the realities of scientific research and the profiles of chronic long-term conditions. Such a reform would allow drugs that have been found safe and promising (in Phase I and Phase II clinical trials) to win approval for limited marketing to patients. This would give patients early access to innovative new therapies, while the FDA would retain the ability to collect information confirming the drugs' safety and effectiveness and to revoke a drug's marketing authorization later, when appropriate.

While the FDA currently has the legal power to create its own conditional approval process, it has little political latitude to do so. For this reason, we believe that Congress must create clear standards for such a pathway. Congressional action would allow regulators and companies to develop new tools that are better suited to the realities of modern drug development.



Are you interested in supporting the Manhattan Institute’s public-interest research and journalism? As a 501(c)(3) nonprofit, donations in support of MI and its scholars’ work are fully tax-deductible as provided by law (EIN #13-2912529).