2014 ndi 6ws fitzmier, Lundberg, Abelkop deep ocean neg privatization cp



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Pharma Adv CP

Reform CP---1NC

CP text: the United States federal government should:

-reform and strengthen the domestic intellectual property system

-improve access to and health care coverage of new drugs

-increase certainty and transparency in the Federal Drug Administration drug review process




Intellectual property and regulatory reform is single most critical issue for pharmaceutical companies – most comprehensive study proves decline inevitable absent reform


Battelle 09 (“The U.S. Biopharmaceutical Industry: Perspectives on Future Growth and The Factors That Will Drive It”, The Pharmaceutical Research and Manufacturers of America, 2009, http://www.phrma.org/sites/default/files/pdf/2014-economic-futures-report.pdf)

However, while opportunities abound for advancing biopharmaceutical R&D and manufacturing in the U.S., future growth is not a given as other nations race to compete for the economic benefits that these innovative activities bring. Given the economic contributions of this and other R&D-intensive industries, the U.S. is now facing increasing competition not just from developed countries that want to expand their own innovative capacity in these areas, but also from emerging economies such as Brazil, China, and Singapore that are laying the groundwork for future growth. This report focuses on some of the key measures of the U.S. innovative biopharmaceutical industry’s economic contributions and explores policies critical to enabling future growth and sustainability in the years ahead. The report authors identified 10 broad policy areas central to improving the business climate for the biopharmaceutical industry, composed of a total of 38 sub-attributes. This report is unique in that it provides an assessment of the relative importance of these policy factors by combining a quantitative approach with a real-world perspective incorporating the knowledge and insights of senior-level strategic planning executives from biopharmaceutical companies representing approximately 75 percent of U.S. biopharmaceutical sales. These individuals are directly involved in making real-world decisions about where to locate biopharmaceutical R&D and manufacturing operations and have substantial expertise in identifying and evaluating the most critical factors shaping biopharmaceutical investment decisions around the world. Key findings of the report include: • As the ability to innovate is increasingly becoming the most important determinant of a nation’s future potential for economic growth and global competitiveness, the biopharmaceutical industry ranks among the most innovative advanced manufacturing industries in the U.S. economy. This is reflected by a number of indicators including R&D investment, intellectual property (IP) generation, venture capital investment, and share of total R&D employment among manufacturing industries. • While the U.S. is currently the world leader in innovative biopharmaceutical R&D and manufacturing, industry executives expressed concern that U.S. leadership cannot be taken for granted. Global trends suggest that U.S. leadership will be challenged as emerging economies implement more favorable policies to attract R&D investment and spur growth in their own innovative capacity in biopharmaceutical manufacturing to meet domestic demand. The three policy factors identified as most critical for enabling innovation and the resulting economic contributions in biopharmaceutical R&D and manufacturing are: (1) coverage and payment policies that support and encourage medical innovation; (2) a well-functioning, science-based regulatory system; and (3) strong IP protections. Of the 38 sub-attributes assessed, the single most important attribute identified as critical to driving future biopharmaceutical industry growth in the U.S. is a domestic IP system that provides adequate patent rights and data protection to sustain continued investment in the lengthy and costly R&D process needed to develop new medicines. Insights from industry executives informed the development of two potential growth trajectories for the innovative biopharmaceutical industry in the U.S. over the next 10 years, with well over 300,000 retained and newly created jobs at stake between the two scenarios. The industry executives viewed the likelihood of achieving these alternative futures as highly dependent on policy choices made in the U.S. - According to the industry executives, if negative trends in key policy areas continue, exacerbating uncertainties in the business climate, domestic R&D and manufacturing activities in the biopharmaceutical industry are expected to record only modest gains over the next decade. However, even with modest growth projections, jobs supported by the biopharmaceutical industry are expected to decline over the next 10 years due to continued productivity gains projected across all manufacturing industries. Accounting for expected productivity gains, up to 149,000 jobs may be lost across the economy over the next decade if there are little to no improvements in the key policy areas that foster biopharmaceutical innovation. - The perspective of industry executives informed an alternative growth scenario – whereby modest improvements in key policy areas – e.g ., more favorable coverage and payment policies for medical innovation, improvements in regulatory policy to create efficiencies in the R&D process, and improvements in IP policy to incentivize R&D investment – would foster the continued growth of biopharmaceutical R&D and manufacturing capacity in the U.S. This could conservatively lead to the creation of more than 185,000 additional jobs across the U.S. economy over the next 10 years, resulting in well over 300,000 retained and newly created jobs when comparing the two scenarios. As an industry rooted in science and propelled by advanced manufacturing, the innovative biopharmaceutical industry is uniquely positioned to help maintain U.S. leadership in new technologies and scientific breakthroughs that will continue to create high-quality, high-wage R&D and manufacturing jobs and enhance America’s global competitiveness in the future. Today, the U.S. biopharmaceutical industry supports a total of 3.4 million jobs across the U.S. economy – including over 810,000 direct jobs – contributes $789 billion in economic output, and is responsible for about one in five dollars spent on domestic R&D by U.S. businesses.

1AC Solvency Advocate

Regulatory reforms are key to a successful pharmaceutical industry – their 1AC ev


Washington Post, 2014 (Pharmaceutical Research and Manufacturers of America, “One Perscription for U.S. Economic Growth”, May 5, http://www.washingtonpost.com/sf/brand-connect/wp/enterprise/one-prescription-for-u-s-economic-growth/)

What are the factors that promote growth? The report outlines a number of recommendations, including the following: Increase understanding around the costs of new product development. Ensure appropriate protection for intellectual property and promote access to innovative medicines to give biopharmaceutical companies the incentive they need to continue to develop cutting-edge therapies. Ensure that startup efforts have the private financial backing they need to develop new medicines. Revise the drug-approval process to help get new medications to market more quickly. Back educational efforts to create a strong workforce. Provide economic innovation incentives to fuel growth. The current regulatory climate without these changes may stifle growth and have a negative effect on innovation. “This report vividly illustrates the inextricable link between a healthy biopharmaceutical R&D system and the health care policy environment,” says Robert J. Hugin, PhRMA Immediate Past Chairman and CEO of Celgene Corporation, in a written release. “Sustainable, market-based access and reimbursement for innovative medicines today is essential to incentivize the long-term, high-risk investment needed for new medical innovations in the future.”



Generic Solvency---2NC

Biopharmaceutical industry proves – regulatory, intellectual property, and review reform is the critical factor for future growth


Battelle 09 (“The U.S. Biopharmaceutical Industry: Perspectives on Future Growth and The Factors That Will Drive It”, The Pharmaceutical Research and Manufacturers of America, 2009, http://www.phrma.org/sites/default/files/pdf/2014-economic-futures-report.pdf)

The views of senior-level biopharmaceutical executives were sought to help examine the many issues shaping the environment for innovation and the future growth of the U.S. biopharmaceutical industry. The executives were surveyed regarding the leading factors that would be most significant in improving the business operating environment in the U.S. and result in generating higher growth for the U.S. biopharmaceutical industry. The results of the survey offer a unique insider’s view of what it will take for the U.S. industry to stay competitive and maximize growth. The executives were asked to weight the relative importance of 10 primary attributes for advancing biopharmaceutical business operations in the U.S. over the next 10 years (see text box for listing). These attributes of the business operating environment were selected based on previous studies which have suggested that they are essential for providing the level of certainty needed by biopharmaceutical companies to make R&D and manufacturing investment decisions. Three broad attributes stand out as critical to the competitiveness of the U.S. business operating environment for biopharmaceutical innovation: • Coverage and payment policies that value and support the use of new medicines – New medicines not only save and extend patients’ lives by halting or slowing disease progression, they also improve quality of life, prevent unnecessary hospitalizations, reduce side effects, and provide options for patients with previously unmet needs. Often the full value of a medicine is not known upon Food and Drug Administration (FDA) approval as value evolves over time with new indications and uses, including demonstrated benefits in other disease areas, at earlier stages of disease, or in different patient populations. There is a perception among the executives that U.S. payers increasingly are not adequately valuing new treatments and are narrowly focusing on reducing prescription drug costs or creating cost-offsets in the short-term. The uncertainty regarding whether a payer will provide coverage and adequate payment for medical innovation can make companies more risk adverse and impact R&D decisions now and in the future. • A well-functioning, science-based regulatory system – While the FDA has long been viewed as the gold standard for a science-based regulatory system, the number and complexity of regulatory requirements has increased over time. Some of the executives expressed concern that U.S. efforts to create efficiencies and improve R&D effectiveness may not be moving fast enough and they are concerned that the U.S. regulatory process may soon be less favorable than that of other countries. The European Medicines Agency, for example, is seeking to expand its collaboration with industry to improve the regulatory review and approval process. The emerging nations, as their regulatory systems evolve, have the potential to compete with the leadership position historically held by the FDA, according to interviews with the executives. The executives’ comments make it clear that, similar to other operating factors, the regulatory environment is becoming a competitive issue, not just with Europe and Japan, but increasingly with China and other emerging economies. It is not sufficient for the U.S. regulatory environment merely to improve—it must improve relative to the regulatory environments of other nations to remain competitive. • Strong IP protections in the U.S. and abroad – While the executives surveyed viewed IP rights and enforcement as an area that the U.S. was fairly competitive in, they were particularly concerned with increased uncertainty related to patent challenges occurring earlier and more frequently and continued efforts by the Administration and some policymakers to reduce the favorability of IP rights in the U.S., such as efforts to reduce the data protection period for biologic medicines. The respondents noted that the importance of IP protection cannot be overemphasized because it is directly linked to their ability to potentially recoup the significant investments needed for biopharmaceutical R&D and to provide the revenues needed to make up for the many R&D failures and continued investments in the future. Likely in response to generally flat government agency budgets and the impact of sequestration, executives expressed concern that increased emphasis should be placed on ensuring that the U.S. Patent and Trademark Office can function effectively and efficiently. While each of these broader attributes may have stood out for different reasons among the executives, a review of the specific sub-attributes associated with each area is valuable for identifying those which were, in their view, most critical to advancing a more favorable business operating environment in the U.S. and therefore, key to fostering the continued growth of the biopharmaceutical industry in the U.S.

From a policy perspective, these sub-attributes reflect more specific directions about issues that need to be prioritized to strengthen the U.S. biopharmaceutical industry. Altogether, respondents rated the importance of 38 sub-attributes across the 10 primary attribute areas. The sub-attributes (and their rank) viewed as most critical to the future growth and sustainability of the U.S. biopharmaceutical sector were: • Ensuring a robust IP system that provides adequate patent rights and data protection. (1) • Supportive U.S. government health policies and regulations to account for and encourage biopharmaceutical innovation in coverage and payment policies. (2) • Similarly, ensuring broad patient access to new medicines in public programs, such as through payment and coverage policies that recognize the value of innovative medicines (e.g., Medicare and Medicaid). (3) • High level of certainty in FDA review and approval process. (4)


Regulatory reform solves pharmaceutical innovation


Fitzwater 13 (Ron, “Perspective: Pharmaceutical industry in need of regulatory reform”, News Tribune, 12/3/13, http://m.newstribune.com/news/2013/dec/03/perspective-pharmaceutical-industry-need-regulator/#.U8V1avldWSo)

With the recent government shutdown still fresh in our memories, our elected officials should forge a consensus on the most pressing economic concern for businesses, regulations. Working in the pharmaceutical industry has shown me the challenges businesses face in keeping up with the size and scope of increasing regulations, and I wonder whether our regulators understand the real burden of these policies. Of course, there are good and prudent reasons for regulation and licensing, especially in the pharmaceutical industry. The expertise and good judgment of the local pharmacist is crucial to sustaining a first-rate health care system and protecting the health of our customers. No one I know in the industry would dispute that. The problems with regulations come when community pharmacies are subject to multiple, overlapping regulatory jurisdictions that are absorbing more and more time and expense. For example, we’re dealing with not just the Food and Drug Administration, but a maze of other agencies, like the Drug Enforcement Agency, occupational safety regulators at the state and local levels, and trucking and shipping regulators. All of these regulations come in addition to the massive regulatory expansion that attends the implementation of the Affordable Care Act. America’s community pharmacies generate more than $93 billion in economic output annually and employ more than 240,000 nationwide. Lately, I hear more and more busin ess owners talk about how they simply can’t invest, expand or hire because the unpredictability of these regulations make it difficult for industries, to invest in the future. It’s no secret that in the wider businesses sector government intervention in the economy has been increasing dramatically. Currently, there are some 3,500 new federal regulations in the Washington pipeline. And I read that since 2006, there has been a 60 percent increase in “significant” regulations, or those having a direct economic impact of $100 million or more. Reading these numbers, you get a concrete picture of why small businesses are backing off hiring and investing. Some say they wouldn’t even have started a business if they’d known how burdensome the regulatory demands would have become. One of the quickest, most effective and least costly ways to begin to forge consensus is on regulatory reform. While regulations play an important role in protecting the public and the environment, the current regulatory system has become a drag on economic growth and job creation. Fortunately, Missouri’s U.S. Sen. Claire McCaskill, the Democrat chair of the Subcommittee on Financial and Contracting Oversight, could prove a highly influential role in reform. Her committee has jurisdiction over federal financial management, acquisition, and procurement in Homeland Security and Government Affairs. This position allows Sen. McCaskill to be a catalyst for change, relieving businesses from the unnecessary challenge of inconsistent regulations. We can work toward a system of openness, where research and data models that underpin decisions are shared with business. Reviews of new regulatory proposals should be conducted by experts, with a thorough cost/benefit analysis. Enforcement actions should be exercised with good judgment, allowing innocent mistakes and paperwork errors to be resolved without inordinate penalties and fines. We cannot afford to make keeping up with regulations a full-time job.

Regulatory reform key to bringing drugs to market – pharmaceutical industry will wither without it


Miller 12 (Henry, “Red Tape and Pink Slips: Obama’s Imaginary Regulatory Reform”, The American, 2/2/12, http://www.american.com/archive/2012/february/red-tape-and-pink-slips-obamas-imaginary-regulatory-reform)

Many of us who follow drug and medical device development and their regulation have seen this coming. Bringing a new drug to market now requires 12 to 15 years and costs more than $1.4 billion, and the number of drugs approved by the FDA annually is trending downward (in spite of years of significant increases in the agency's budget). Consider the numbers of approvals during recent five-year intervals. From 2007 to 2011, the FDA approved 123 new drugs; from 2002 to 2006, 129 drugs; and from 1997 to 2001, 178 drugs. That trend is destined to continue because in 2010 the number of applications for approval of new drugs was the lowest in decades. Another metric that reflects what the drug companies are experiencing is the plummeting success rate of Phase 2 clinical trials, in which the efficacy of a new drug candidate begins to be assessed; from 28 percent in 2006-2007, it fell to 18 percent in 2008-2010, according to an analysis published in the journal Nature Reviews Drug Discovery last May. Facing regulatory uncertainty or obstructionism, companies are simply abandoning projects that in a more positive regulatory environment might have yielded medically useful, profitable products. This lowers the probability that an American research-intensive company will come up with The Next Big Thing, for either its initial indication or subsequent ones. But perhaps the most ominous statistic of all is that drug manufacturers recoup their R&D costs for only one in five approved drugs, a deterioration from one in four about a decade ago. Is it any surprise that potential investors are disenchanted? The current sorry state of pharmaceutical development reflects the FDA's excessive risk aversion, unchecked by congressional oversight, which has forced companies to perform ever-larger, longer, more complex, and more expensive clinical trials. Expressing industry's frustration at the FDA's capriciousness and intransigence, Fred Hassan, then CEO of drug company Schering-Plough, said of the regulatory climate: "What will it take to get new drugs approved? The point is, we don't know." Kenneth Kaitin, director of the Tufts Center for the Study of Drug Development, described the obstructionist culture at the FDA as having caused it to become viewed as "an agency that is supposed to keep unsafe drugs off the market, not to speed access to life-saving drugs." Illustrating the kind of policy-making that has frustrated corporate innovators, regulators have concocted additional criteria for granting marketing approval of a drug. The new criteria are above and beyond the statutory requirement for the demonstration of safety and efficacy and could inflict significant damage on both patients and pharmaceutical companies: Seemingly arbitrarily, the FDA sometimes requires that new drugs be not merely effective but actually superior to existing therapies, a new standard that is often difficult and extremely costly to meet. For example, although the law requires that to be marketed a drug must simply be shown to be safe and effective, the agency denied approval of Merck's Arcoxia, a COX-2 enzyme inhibitor for the relief of arthritis pain, because the drug needed to be shown to be superior to existing drugs. Robert Meyer, director of the FDA office that oversees arthritis drugs, claimed that the agency's advisory committee had sent a clear message that "simply having another drug on the market . . . didn't seem to be sufficient reason" for approval. But whether or not the advisory committee meant to convey that (and in any case, advisory committee recommendations are not binding), it is specious reasoning—and it epitomizes the flawed, anti-innovation decision-making that prevails at FDA and other regulatory agencies. For several reasons, it may be important to have “another drug on the market" even if it appears from clinical trials data to be no better than the alternatives. First, there are often critical differences between drugs that act through similar mechanisms: Different COX-2 inhibitors and statins, for example, were shown long after the initial approvals to have distinct advantages and disadvantages; depending on a variety of factors, physicians can select one over another. Second, if two drugs are each effective for 40 percent of patients with a given symptom or disease, it may not be clear whether they work for the same 40 percent. Thus, if the drugs are effective in different patient populations, the failure of regulators to approve the second drug could deprive a large number of patients of access to an efficacious drug. At best, practitioners and patients would have fewer choices. Third, a 2006 study by M.I.T. economist Ernst Berndt and his collaborators found that "supplemental," or secondary, approvals of drugs—which include new dosages, formulations, and indications—accounted for substantial use and public health benefits of the drugs. If the drug is not approved because the initial studies do not show superiority to comparators, these later benefits are lost. Finally, in a study published last year, Joseph DiMasi and Laura Faden of the Tufts Center for the Study of Drug Development persuasively debunked the myth that drug companies purposely produce duplicative me-too drugs. They carefully examined drug development patterns and timing and found that the process is best viewed as "a race in which several firms pursue investigational drugs with similar chemical structures or with the same mechanism of action before any drug in the class obtains regulatory marketing approval." In other words, companies are not starting out to develop a me-too product any more than a marathon runner starts a race intending to be an also-ran. DiMasi and Faden concluded that "the distinctions that are often drawn between the relative innovative value of the development of the first-in-class and the me-too drugs in the same class may be misguided." Other Regulatory Overkill Regulatory excesses harm more than just industries and individual companies. The diversion of resources to comply with regulation (useful or not) exerts an “income effect” that shows a correlation between wealth and health, an issue popularized by the late political scientist Aaron Wildavsky. It is no coincidence, he argued, that richer societies have lower mortality rates than poorer ones. To deprive communities of wealth, therefore, is to enhance their health risks. Wildavsky's argument is correct: Wealthier individuals are able to purchase better healthcare, enjoy more nutritious diets, and lead generally less stressful lives. Conversely, the deprivation of income itself has adverse health effects—for example, an increased incidence of stress-related problems including ulcers, hypertension, heart attacks, depression, and suicides. It is difficult to quantify precisely the relationship between mortality and the deprivation of income, but academic studies suggest as a conservative estimate that every $7.25 million of regulatory costs will induce one additional fatality through this “income effect.” The excess costs in the tens of billions of dollars required annually by excessively precautionary regulation for various classes of consumer products would, therefore, be expected to cause thousands of deaths per year. These are the real costs of regulators running amok in the guise of “erring on the side of safety.” The expression “regulatory overkill” is not merely a figure of speech. Not only have we experienced several years of slow economic growth and job creation but for the third year in a row, the United States has slipped in the World Economic Forum's (WEF) annual competitiveness survey. Obama has too often advanced policies that inhibit innovation, discourage R&D, blunt wealth creation, and kill jobs. If the president were serious about regulatory reform to boost the economic recovery, he would clean house and replace political appointees at the gatekeeper agencies which approve products such as pharmaceuticals, pesticides, and genetically engineered plant varieties.

IP Solvency---2NC

Patent reform independently solves the economy and innovation


Black 4/30 (Edward J., “Senate's Turn to Act on Patent Reform This Week”, Huffington Post, 4/30/14, http://www.huffingtonpost.com/edward-j-black/senates-turn-to-act-on-patent-reform_b_5232913.html)

As I've written before, patent trolls drain billions of dollars from the U.S. economy every year by exploiting a complex patent system to extort money from thousands of legitimate companies around the country. The troll business model is as simple as it is malicious: Because the patent system is heavily weighted towards patent owners, it's easy for a patent troll to mount an infringement suit and it's costly -- often $2-5 million -- for others to defend against it. That means large and small companies alike are willing to pay a troll solely to settle and avoid the time and expense of a protracted legal battle. Because the costs of being a patent troll are comparatively low, this business model can be extremely profitable, and more and more companies are starting up for the sole purpose of using patents to extract money from honest businesses. Nobody is immune to being a patent troll target, and that fact is beginning to drive some innovators away from founding new startups. President Obama recognizes the problem; he called for patent reform both a year ago and again in his State of the Union address this year. And the House of Representatives has already passed the Innovation Act by an overwhelming bipartisan vote (325-91). Now it's the Senate's turn to act, and the Senate Judiciary Committee has been working long hours on its bill. Just before the Senate left for a two-week recess earlier this month, Chairman Patrick Leahy (D-Vermont) announced a "broad bipartisan agreement" on patent reform. Senator Leahy plans to release the revised bill when the Senate returns. The drafts that have circulated so far include balanced, bipartisan solutions that would address the patent troll problem in a few ways. First, they would require a patent holder to provide basic but important details, most critically what the defendant is actually accused of doing. Under the current law, a patent owner need only identify the patent it's asserting and state that the defendant is infringing, without having to point to anything more specific. This leaves businesses in the frustrating position of having to spend thousands of dollars just to find out what they're being accused of. Second, the drafts also discourage frivolous patent infringement suits by making it easier for those unfairly targeted to obtain an award of fees and expenses. Until now, courts have rarely awarded attorney fees even in meritless cases. And by putting limits on discovery, the Innovation Act can prevent the trollish tactic of driving up discovery costs as a way to bully defendants into negotiation and settlement. These provisions work together to disincentivize the troll business model of manipulating patent litigation.


FDA Solvency---2NC

Federal Drug Administration reform solves – key to combat disease in time and increase GDP


Philipson and Von Eschenbach 13 (Tomas J. and Andrew, “FDA Reform Can Lift U.S. Economy”, Bloomberg View, 2/28/13, http://www.bloombergview.com/articles/2013-02-28/fda-reform-can-lift-u-s-economy)

Without a growing economy that creates more high-paying jobs, both President Barack Obama and congressional Republicans face the unpalatable prospect of much higher taxes or reductions to popular programs (or both). Growth is the best way to cut this Gordian knot. One place to start is by lowering unnecessary barriers facing innovative U.S. companies that are trying to bring new products to market, particularly in the biopharmaceutical sector. Less sensitive to the business cycle, with jobs that pay about double the average private-sector salary, biopharma is a leading U.S. exporter. Both Democrats and Republicans know that excessive regulation is slowing innovation in the industry. Shortly before the 2012 election, the President’s Council of Advisors on Science and Technology released a report, which received bipartisan praise, asserting “broad agreement that our current clinical trials system is inefficient.” One inefficiency the report identifies is outdated regulation. The inability of the Food and Drug Administration to keep pace with changes in medical science threatens both economic prosperity and public health. The drug-approval process is glacial: It takes about 12 years and $1.2 billion to develop a single new drug that is approved by the FDA. The council’s report establishes an ambitious, yet reachable, national goal: doubling the current annual output of new medicines for patients. We believe existing evidence suggests this goal can be met by altering the FDA’s onerous clinical-trial requirements. CLINICAL TRIALS The FDA regulates the quality and safety of medical products, only granting marketing approval after increasingly laborious, expensive, three-phase clinical trials. Phase 1 trials involve a few dozen patients and focus on safety; Phase 2 trials are larger and look for evidence on optimal dosage and effectiveness; Phase 3 trials are focused exclusively on effectiveness. Clinical trials account for a large share of industry research and development costs, with Phase 3 trials accounting for about 25 percent and requiring (on average) three years for completion. Manufacturers that are obliged to satisfy shareholders and stay financially viable may choose not to take promising products into the prolonged Phase 3 process, often called “the valley of death.” For medicines that make it to market, the long process delays sales and shortens effective patent life, severely damping the industry’s incentive to invest in new treatments. These Phase 3 clinical trials served us well in the past. Today, in an era of precision or personalized-drug development, when medicines increasingly work for very specific patient groups, the system may be causing more harm than good for several reasons. First, because of their restrictive design and the way the FDA interprets their results, Phase 3 trials often fail to recognize the unique benefits that medicines can offer to smaller groups of patients than those required in trials. Second, information technologies have created improvements in our ability to monitor and improve product performance and safety after medicines are approved for sale. Post-market surveillance can and should reduce dependence on pre-market drug screening in Phase 3 trials. Third, reducing reliance on Phase 3 trials is unlikely to introduce an offsetting harm induced by more dangerous drugs, since evidence supporting safety is produced in earlier phases. Manufacturers also have powerful incentives to maintain drug safety, since they take enormous financial hits -- well beyond the loss of sales -- when drugs are withdrawn after approval. GLOBAL PRESSURE Finally, enormous global pressures for cost control have insurers demanding real-world evidence about product quality and effectiveness. For example, under the cost-sharing agreements in effect in many European countries, payers reimburse drug companies only if patients respond to therapy. Such arrangements provide an alternative to Phase 3 effectiveness trials after safety and baseline efficacy have been established in earlier phases. Reducing Phase 3 requirements would be particularly effective for some chronic diseases such as obesity, where options are often few, and the FDA typically requires large Phase 3 trials to catch rare side effects (which patients often are willing to endure anyway). Before July 2012, the FDA hadn’t approved any new obesity drugs in 13 years, after serious heart-valve problems with an earlier approved drug, Fen-Phen, led the agency to pull the drug in 1997. Afterward, the agency remained extremely wary of new obesity medicines. One new drug approved by the agency, Qsymia, is a combination of two older generic drugs. Still, the FDA required the drug’s maker,Vivus Inc., to conduct large Phase 3 clinical trials and agree to 10 post-marketing requirements, including a long-term study on heart safety. Under our proposed system, the drug could have come to market after promising early-stage research in targeted patients, with appropriate post-marketing studies required. Payers and patients would be the ultimate judge about the quality of the product, and companies could learn from the experience to develop superior products if needed. Companies would still be liable for unforeseen side effects, but patients and doctors would be warned -- through the drug’s labeling -- that the product had been approved based on promising but provisional research. Gradually replacing or reducing dependence on Phase 3 trials with smaller, faster adaptive trials and post-market surveillance would have a positive impact on medical innovation and the U.S. economy -- and meet the council’s goal of doubling medical innovation. FASTER APPROVALS Here’s how: consider that the profit margins for innovative drug development are about 10 percent greater than their costs. Based on data from the widely cited Tufts Center for the Study of Drug Development, doing away with Phase 3 trials would reduce development costs by 25 percent. Doing the arithmetic, if the profit margin was 10 percent before, lowering costs by 25 percent increases the profit margin to 47 percent above costs. In the absence of Phase 3 trials, revenue would start coming in about three years earlier. This raises the present value of revenue by about an additional 10 percent, boosting returns further -- to about 60 percent more than development costs. A study by the economist Daron Acemoglu of the Massachusetts Institute of Technology and other research suggest that a 1 percent increase in innovative returns would raise the number of new products introduced by at least 4 percent. Boosting returns to 60 percent, then, implies a 240 percent gain in new products. Even if we assume a much more conservative effect -- say, less than half of that -- the increase in new products would be 100 percent, doubling medical innovation. The benefits to patients and the economy from this innovative surge would probably be enormous. The U.S. biopharmaceutical industry makes up about 2 percent of the national economy. Existing evidence, gathered across diverse drug classes that treat HIV, cancer and cardiovascular disease, suggests that the gain to patients beyond the sales of treatments (what economists call “consumer surplus”) ranges from five to nine times the sales. That is, patients gain more in health and longevity than they pay for their treatments. Thus, the value to patients from doubling an industry that is 2 percent of gross domestic product would range from 10 percent to 18 percent of GDP. Examining peer-reviewed research on how costs and profits affect innovation, as we have done, suggests very large patient benefits from reducing the burden of Phase 3 requirements. Doubling innovation, to reach the presidential council’s goal and adding value on par with a tenth of GDP, is thus entirely feasible. It would promote economic growth and pay huge dividends in better health for millions of patients. What’s needed is the courage in the White House and Congress to make the necessary changes.




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