To Speed Drug Development, Government Must Get Out of the Way

The Obama administration proposes in its latest budget to create a new billion-dollar federal agency to help develop new medicines. The reason? The government is concerned that private companies aren’t doing enough to get new drugs to market.

Patients and taxpayers would better served if the government would instead use the money to modernize the regulatory process that is discouraging private investment and clogging the pipeline of new drugs.

Dr. Francis S. Collins, director of the National Institutes of Health, says the government’s effort is urgent because promising discoveries are stalled at pharmaceutical companies that lack the funds or the will for new research into new drugs that are urgently needed.

Good medicine begins by diagnosing the root of the problem, and that is where Dr. Collins should start. For decades, navigating the lengthy and extraordinarily expensive drug approval process has been the primary challenge for companies in getting new drugs, biologics, and medical devices to market. But instead of working to bring new technologies to bear to speed drug approval, the government has been setting up new hurdles that block companies’ access to markets even after the Food and Drug Administration has determined their product to be safe and effective.

This is dampening investment in new drug research. Private pharmaceutical companies invested $46 billion in research in 2009. The cost of bringing a single drug to market can exceed $1 billion and takes an average of 12 years of clinical trials.

Instead of investing money in Dr. Collins’ proposed new “National Center for Advancing Translational Sciences,” he should get the FDA and the Centers for Medicare and Medicaid Services together to investigate what they are doing now to interfere with drug development, such as denying payment for drugs the government apparently deems too expensive.

The latest example is the FDA’s decision in December to withdraw its approval for Avastin to treat late-stage breast cancer.

Avastin slows the growth of cancer by cutting off the blood supply to tumors – a novel cancer-fighting technology. The FDA approved the drug six years ago for the treatment of colon cancer, and the agency has since approved it to treat other cancers, including for lung, brain, and breast. The ruling to deny payment for treatment of breast cancer has been appealed by Avastin’s manufacturer, Genentech.

In addition, the Centers for Medicare and Medicaid Services (CMS) is conducting a review of whether it will pay for a pioneering, FDA-approved vaccine to treat prostate cancer, Provenge.

These are cutting-edge medicines that could lead to a new era of medical treatments. Provenge, for example, is a “therapeutic vaccine” that attacks cancer cells. The drug is created individually for each patient and costs $93,000 for the required three treatments.

But CMS has the power to smother this novel science in its infancy by denying access to payment through Medicare – the health program that the great majority of men are on when they are diagnosed with prostate cancer.

CMS also is picking winners and losers in its competitive bidding program for medical equipment, drying up competition and driving out suppliers whose unique products may be vital to patients’ survival. The competitive bidding program could eliminate up to 90 percent of suppliers in some markets, limiting choice of preferred equipment and devices, and disrupting supplies.

And the government is planning even more interference going forward. CMS and the FDA last year signed a memorandum of understanding in which they agreed to work together in “evaluating the safety, efficacy, utilization, coverage, payment, and clinical benefit of drugs, biologics, and medical devices.”

There are many more examples: A CMS hearing on red blood cell boosting medicines in mid-January was the second in a year by a federal review panel. An FDA panel last fall held a meeting to review whether even stricter restrictions should be placed on access to these blood-building medicines – called erythropoiesis stimulating agents (ESAs).

The Medicare payment panel will decide whether it thinks the evidence exists that the treatments are “reasonable and necessary” and for which patients. If CMS puts stricter limits on use of the drugs, patients who are receiving the treatment today could be denied access. Meetings are planned throughout 2011 to review other medicines.

Further, the new Independent Payment Advisory Board and the Patient-Centered Outcomes Research Institute will have sweeping authority over payments and access. In other countries with government-run heath systems, bodies like these lead to explicit rationing.

If investors believe that, no matter how good the new drug may be, a panel of regulators could block access to FDA-approved drugs, biologics and devices, investment dries up.

Instead of setting itself up as a competitor in drug development, the government should get out of the way by fulfilling its crucial goal in modernizing its out-dated technologies for FDA review and stop blocking payment for drugs that are proven effective.

Published on RealClearMarkets.com, Feb. 18, 2011.

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