Can FDA Do Anything About The Price of Drugs to Consumers?
[Posted on: Thursday, September 14, 2017]
Why are drugs expensive; is it because the cost of developing new drugs is very high, or that there are onerous regulatory processes for market approval, or may be it takes too long to develop a new drug? And if all these were addressed would it lead to cheaper drugs? This week the FDA Commissioner talked about several FDA efforts to reduce the cost of drug development with an indication that it would eventually lead to lower drug prices. But a review of how drugs are priced quickly dispels any link between the cost of developing a new drug and what the company would want to charge patients for it. The true cost of developing new drugs is highly debatable. The industry has long claimed a cost of more than $2.5 billion and about 10 years to develop a new drug product. Newer estimates show that the cost is about $600 million or about 20% of the widely held belief. Per these new estimates it takes about 7 years to get market approval. In about 4 years post-approval, the drug company had made about 10 times its investment or about $7 billion on an average. Although the cost-profit analysis was done only for cancer drugs, it can be argued that most drugs cost a lot less and make a lot more than claimed. For me-too drugs such as 505(b)(2) drugs and orphan drugs, the cost-profit ratio is much more favorable to the developers. But still, we are talking of hundreds of millions to dollars and several years to develop a new drug product. Compared to a successful software application, it is still not for the faint of heart to develop new drugs. But that’s not the point; it is getting increasingly obvious that the drug industry’s justification for charging astronomical prices for its life-saving and life-improving products is on shaky grounds. It is not helped with cases such as Epipen and many generic drugs where the owner company has done nothing but decided to gouge the price of their products anyway because they could. Several new life-saving drugs approved with as much as 12 years of market exclusivity and patent protection, have been priced to assure an astronomical financial windfall for their developers. So, can FDA do much about these prices by making it further easier for drugs to come to market? It would seem not much. FDA has a good argument that more drugs will increase market competition and lead to lower prices, but public may not have the patience to wait for these trickle-down savings. In every country in the World, where the same drugs cost a lot less than they do in the US, it is because of price control by the governments. A similar price control in the US is practically impossible politically. There is no doubt that FDA has good intentions and it has done a remarkable job to make it easier to develop new drugs in the last two decades, but the Agency is getting to a saturation point in terms of the incentives it can give to the industry to foster innovation and hope that the industry would return the favor in reasonably priced products. It is a no-win situation for FDA. One has to acknowledge that FDA has no practical role in the price of drugs and it cannot do much more than already has to reduce drug development cost under the current laws. It is not fair to the FDA and shifts the blame unfairly to where it does not belong. FDA should not be a party in the discussions about drug prices; it is the Congress that needs to pass laws to control drug prices.