Barriers to innovation - World Health Organization

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8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
1

Priority Medicines for Europe and the World

"A Public Health Approach to Innovation"





Background Paper







Benefit, Risk and Innovation in Pharmaceutical
Research and Development:

Opportunities and Issues






By Warren Kaplan, Ph.D., JD, MPH


7 Octo
ber
2004



8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
2


Table of Contents


Executive Summary

................................
................................
................................
.........................

4

8.3.1

Introduction
................................
................................
................................
..........................

5

8
.3.1.1

What is Pharmaceutical “Innovation”?

................................
................................
.........

5

8.3.1.2

What Drives Pharmaceutical Innovation?

................................
................................
....

7

8.3.1.3

Trends in Pharmaceutical Inno
vation

................................
................................
...........

8

8.3.1.4

Pharmaceutical Innovation and so
-
called “me too” Drugs: A Public Health
Viewpoint

................................
................................
................................
........................

11

8.3.2

Benefit, Risk and Pharma
ceutical R&D: Aspects of the

"Demand" Side

................................
................................
................................
...............................

13

8.3.2.1

The Pharmaceutical Industry

................................
................................
.......................

14

8.3.2.2

National Governments

................................
................................
................................
..

15

8.3.2.3

Regulatory Authorities

................................
................................
................................
..

15

8.3.2.4

Patients

................................
................................
................................
............................

16

8.3.2.5

Payers

................................
................................
................................
..............................

16

8.3.3

Risk, Benefit and Pharmaceutical R&D: Recent Ways of

Thinking About the Problem

................................
................................
................................
......

17

8.3.3.1

U.S. FDA: Critical Path Research

................................
................................
.................

17

8.3.3.2

Coping with an Expanded EU (EMEA Road Map to 2010)

................................
.....

18

8.3.3.3

European Union Perspective

................................
................................
........................

18

8.3.3.4

Industry and Regulatory Perspectives (Middleton and Rawlins)

...........................

19

A.

Middleton
................................
................................
................................
.................

19

B.

Rawlins

................................
................................
................................
.....................

20

8.3.4

Pharmaceutical Innovation: The European Situation

................................
...............

21

8.3.5

Other Selected Barriers to Innovation

................................
................................
..........

24

8.3.5.1

Unpredictable Nature of Pricing and Reimbursement (P&R)

................................
.

24

8.3.5.2

Unpredictability During Regulatory Review

................................
.............................

26

8.3.5.3

Cost Effectiveness Analysis

................................
................................
..........................

26

8.3.5.4

Intellectual Property Issues

................................
................................
..........................

27

8.3.5.5

Managerial Risk Aversion

................................
................................
............................

27

8.3.5.6

Perceptions of Other Stakeholders

................................
................................
..............

28

8.3.6

Solutions

................................
................................
................................
............................

29

8.3.6.1

Pre
-
Clinical

................................
................................
................................
......................

29

8.3.6.2

Clinical

................................
................................
................................
.............................

29

8.3.6.3

Post Marketing

................................
................................
................................
...............

30

8.3.6.4

Reimbursement

................................
................................
................................
..............

31

8.3.7

Conclusions

................................
................................
................................
.......................

32

References

................................
................................
................................
................................
.......

33


8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
3

List of Figures


Figure 8.3.1: Schematic of the Drug Development Process

................................
............................

6

Figure 8.3.2

................................
................................
................................
................................
..........

10

Figure 8.3.3

................................
................................
................................
................................
..........

10

Figure 8.3.4

................................
................................
................................
................................
..........

22


List of Tables


Table 8.3.1: Average time from pricing and/or reimbursement application to actual payment

Table 8.3.2: Overcoming Barriers to Innovation for

Infectious Disease


Annex


Appendices



8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
4

Executive Summary



Pharmaceutical research and development is expensive and time consuming, costing
by latest estimates nearly

1 billion US dollars for each new chemical entity and taking
10 to 15 years on average from discovery to market authorization.




In recent years, despite increasing expenditure on pharmaceutical innovation, the
number of new medicines being authorized is
disappointingly low.




The factors that can act as barriers to pharmaceutical innovation are complex
interrelations between the scientific, clinical, regulatory and financial considerations




Although different stakeholders have divergent points of view with

regard to what
the barriers are, and how to overcome them, recently, however, a series of documents
by different stakeholders in drug development have appeared that discuss barriers to
pharmaceutical innovation. The congruence of the factors identified an
d the policy
conclusions among these documents are encouraging.




Barriers to innovation, in broad outline, may include

o

Inadequate understanding of basic science for certain diseases and the
identification of targets amenable to manipulation.

o

Regulatory a
uthority "rituals" with regard to preclinical and clinical testing
procedures that may, or may not, have basis in empirical evidence

o

Differences in perception of risk among different stakeholders

o

Uncertainty about the timing and level of reimbursement deci
sions leading to
uncertainty among stakeholders

o

General business uncertainties in drug development

o

Potential increases in the cost of doing business due to intellectual property
concerns
i





The EU Commission has recently called within its 6
th

Framework Wor
k Program for
Thematic Priority 1 (life sciences, genomics and biotechnology), for research
proposals that include n
ew approaches for accelerated development of new, safe and
more effective medicines.




As part of this call for proposals, the EU should cre
ate and support a broad research
agenda so that every requirement within the drug development process is questioned
for its relevance, costing, and predictive value.




i

T
his document is not concerned with IP but we note the issue regarding barriers to technology transfer due to
the presence of large numbers o
f potential "blocking" patents on basic research tools. See Eisenberg MA and
Eisenberg RS, 1998. Can Patents Deter Innovation? The Anticommons in Biomedical Research,
Science, 280: 698
-
701


8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
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5

8.3.1

Introduction

Biomedical technology companies seek to conduct research and commercialize
products in a
stable, predictable operating environment that encourages and rewards innovation. These
companies are accountable to the shareholders and customers they serve. The pressures
being placed on pharmaceutical companies, from within and without,
can negatively impact
innovation. The resources required for drug development have risen

markedly in the past 30
years, so that these costs may threaten to make the development of new drugs increasingly
unaffordable for both companies and consumers. From
a business viewpoint, this ever
-
increasing cost of drug development
1

is an incentive for companies to invest in new drug
products likely to provide the highest rate of return on R&D investment. This incentive is
often realized by developing drugs against

proven targets using approaches that have
already been
clinically and financially successful, although some companies attempt the
difficult task of having projects with higher success rate but a lower potential return as well
as projects with a higher ris
k but potentially higher reward.


Notwithstanding, p
harmaceutical research has a high failure rate. Of every 5,000 projects
only one completes the drug development process and, of those that do, only one in five
actually returns its R&D investment.
2

Re
gulators have progressively increased the
requirements for product authorization in a quest to promote safety and efficacy.
Reimbursement authorities have often been more interested in controlling drug costs rather
than considering total healthcare benefit
. If a drugs budget is a “stand
-
alone” line item, it is
vulnerable to cutting as being politically acceptable. Providing appropriate incentives for
developing new products targeted for important public health needs, less common diseases,
prevalent third
world diseases, prevention indications, or individualized therapy is
becoming increasingly challenging.


This document aims to present the differing perspectives of the different actors that both
supply and demand medicines. More specifically, we suggest h
ow a comprehensive research
program into the drug development and approval process could promote the presently
flagging innovation of the pharmaceutical industry.


8.3.1.1

What is Pharmaceutical “Innovation”?


There is a rich and varied theoretical and empirical l
iterature on innovation generally and on
pharmaceutical innovation specifically.
3
,

4
,

5
,

6

The definition and even the existence of
“pharmaceutical innovation” varies according to the viewpoint of the definer along the
pharmaceutical value chain.
Figure
8.3.1
, taken from reference 3, is a schematic of the drug
development process as detailed by the USA Food and Drug Administration.. Significantly,
Figure
8.3.1

is lacking the so
-
called "phase IV" post marketing studies whi
ch, in our view,
should take on increasing importance (See Section 6).

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
6

Figure 8.3.
1
: Schematic of the Drug Development Process



Pharmaceutical innovation ranges from breakthrough treatments for life threatening diseases
t
o minor modifications of drugs that have been on the market for some time. From the point
of view of regulatory agencies and their largest “customer”, the pharmaceutical industry, it
is worth noting that the U.S. FDA classifies innovation in two dimensio
ns: by chemical type
and therapeutic potential. This is a useful characterization. The FDA designates drugs
relying on compounds that have never before been approved for the U.S. market as new
molecular entities (NMEs).
7

It also approves new medicines who
se active ingredients are
already available in a previously marketed product. Such altered, but pre
-
existing
molecules, exist as a drug with different features, such as a new dosage form or route of
administration. The FDA classifies these drugs as “incre
mentally modified drugs” (IMDs).
The FDA also uses clinical improvement as a way of assigning marketing dossiers to a
standard or a faster priority review track. New products, including IMDs, can qualify for a
priority review by demonstrating one or more
of: evidence of increased effectiveness;
reduced side effects and interactions; enhanced compliance; or use in a new subpopulation.
7


From a p
ublic health viewpoint, these latter four factors are important as even IMDs can
be classified as “ priority”, as

they are incrementally modified drugs with improved
clinical performance.
ii

The FDA also uses clinical improvement as a way of assigning
marketing dossiers to a standard or a faster priority review track. New products, including
IMDs, can qualify for a p
riority review by demonstrating one or more of: evidence of
increased effectiveness; reduced side effects and interactions; enhanced compliance; or use in
a new subpopulation.
7

However, it should be noted that
because an application is subject to a
standa
rd review, it does not necessarily mean that the medicine lacks innovative aspects.
FDA "priority review" is an administrative management tool, which is based on information
available at the time application is filed.
8

Nevertheless, the real value of any

medicine
emerges most clearly once it has been introduced into medical practice and it supports our
view that the answer to "what is pharmaceutical innovation?" depends on who is asking the
question.





ii

For example, in 1999 the FDA gave priority reviews to two o
ral diabetes medicines, Actos®, and Avandia®,
even though Rezulin®, a drug using the same mechanism of action, was already on the market.

In 1999, the FDA
approved Boehringer Ingelheim’s combination product Aggrenox® to reduce the risk of stroke in patient
s who
have had a previous stroke or a transient ischemic attack (a TIA or mini
-
stroke). Aggrenox® combines aspirin,
which has been on the market for many years, with dipyridamole, an NME.

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
7

8.3.1.2

What Drives Pharmaceutical Innovation?


Key drivers o
f pharmaceutical innovation from both supply and demand perspectives can
include:



a high level of public interest in health care issues;



strong public support for increasing national, public sector research funds;



increasing private investment in medical R
&D, although private sector interest
fluctuates depending on other business opportunities;



size of the market and expected return on investment



changing demographics such as an ever
-
aging population which alters research
priorities to other diseases (e.g.
Alzheimer’s disease, diabetes, chronic diseases); and



public expectations about who performs high quality science.
9

(See Textboxes)




.

Gleevec ®: The role of basic scientists as engines for innovation


Chronic myelogenous leukem
ia (CML) is marked by explosive growth of white blood cells.
People live in average 6 years after diagnosis. In the late 1960s and early 1970s, academic
researchers in the United States discovered that the white blood cells of CML patients had
a genetic t
ranslocation, where a small part of one chromosome had been switched to its
neighboring chromosome
-

resulting in the so
-
called "Philadelphia chromosome". Another
10 years elapsed before scientists discovered that this translocation disrupted a gene and
all
owed it to produce a cell surface receptor involved in cell division (a tyrosine kinase
protein) that was permanently switched "on". Thus, scientists were able to find a specific
molecular target for a potential therapeutic against CML.


Source: Goozner
M., 2004. The $800 million Pill, University of California Press

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
8




8.3.1.3

Trends in Pharmaceutical Innovation


Although the data c
an be subject to different interpretations, certain students of innovation
3,
10
,
11

have suggested that innovation in the pharmaceutical industry occurs in waves of
activity, postulating the existence of several successive "generations" of medical (and othe
r)
technologies over the past two hundred years.



Very briefly (see reference 6 for more details), first generation
innovations (1820
-
1880) were a
consequence of the "Chemical Revolution" introduced by Antoine Lavoisier and the French
School of Chemistr
y at the end of the 18th century. The development of chemical extraction
and experimental methods allowed isolation and purification of "active principles" of
medicinal plants e.g., morphine, quinine, curare, belladonna with known medicinal
properties. Suc
h methods also allowed for the synthesis or isolation from plants or coal tar of
simple organic chemicals with medicinal properties e.g., ether as an anaesthetic, chloroform
as a hypnotic, carbolic acid as an antiseptic, salicylic acid as an antipyretic.


Second generation innovation (1880
-
1930) was driven in large part by scientific and
industrial responses to social conditions in the expanding cities of the Industrial Revolution.
Overcrowding, poverty, malnutrition, lack of running water and public san
itation facilities
caused the spread of infectious disease, such as smallpox, typhoid fever, tuberculosis,
cholera and diphtheria. What developed during this time period were public medical
research laboratories for sera and vaccines e.g., Pasteur Institu
te, Lister Institute, Rockefeller
Institute, Berlin Institute for Contagious Diseases, Kitasato Institute and German, French and
Swiss dyestuffs companies (Bayer and Hoechst, Ciba, Sandoz, Hoffman LaRoche, Poulenc
Freres and Etablissements du Rhone), wit
h increasing expertise in organic chemistry. This
led to establishment of the modern pharmaceutical industry.


The third generation (1930
-
1960) included innovations in organic and natural products
chemistry leading to the isolation and synthesis of vita
mins, corticosteroids, sex hormones
and antibiotics. Laboratory analytical methods for composition and structure determination
requiring very small samples e.g., infrared, ultra
-
violet and nuclear magnetic resonance
Protease Inhibitors: The role of private research in discovering biological mechanisms


Pharmaceutical companies also play an active role in the discovery of key biological
mechanisms that p
otentially lead to therapeutic targets. For example, Merck, a US
pharmaceutical company, played such a role when at the end of the 1980s' Merck's
scientists discovered and published
in the peer
-
reviewed scientific literature

how the
HIV protease was an ess
ential viral enzyme for the HIV replication cycle and then
published the crystal structure of the protease.


See Manuel A.

Navia, Paula M. D.

Fitzgerald, Brian M.

McKeever, Chih
-
Tai

Leu, Jill
C.

Heimbach, Wayne K.

Herber, Irving S.

Sigal, Paul L.

Darke

&

James P.

Springer "Three
-
dimensional structure of aspartyl protease from human immunodeficiency virus HIV
-
1
",
,
Nature,

337
, 615
-

620 (1989)
http://www.pnas.org/cgi/content/abstract/85/1
3/4686
.


8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
9

spectroscopy, X
-
ray crystallography and
paper chromatography were developed as well as
various in vitro and in vivo screening assays for evaluation biological and medicinal
properties of compounds. A major development during the third generation, together with
research intensity, was the adopt
ion of intensive marketing methods aimed at physicians,
hospitals and drugstores.


Innovations of the fourth generation (1960
-

about 1980) resulted from a marked shift in the
scientific basis of the industry from chemistry and pharmacology to the life sc
iences.. The
most important drugs of the 1960s and beyond were used for the treatment of chronic
diseases such as cardiovascular, central nervous system and cancers. Their development
necessitated the understanding of the mechanisms of biological and phys
iological processes
at the molecular and cellular level. Due to the proliferation of drugs, the increasing
competition among companies for the same patient populations, and of the thalidomide
incident in 1961, governments imposed strict regulatory measures

for the conduct of clinical
trials, and the approval of new medicines, which required the provision on the part of
innovating companies of substantial evidence for the effectiveness and efficacy of candidate
drugs.


The latest "generation" (since 1980)
is based on advances in discovery and application of
biotechnology (recombinant DNA and monoclonal antibody methods) in the production of
physiological proteins used in therapy or diagnosis of many diseases. See references
3, 6, 9, 10
for
further details.



Figure
8.3.2

(taken directly as Figure 8 from reference 6) is a very telling description of
innovation in the pharmaceutical industry. The successive "waves" of innovation are clear
but we note the precipitous downward trend over the last ten years. Th
is is a powerful
reminder of the changing nature of the pharmaceutical industry and that, in the face of ever
increasing R&D costs, the output of innovative pharmaceuticals from the "pipeline" is
sluggish. See also Figure

8.3.2

which provides supporting
data showing the inverse
relationship between rising pharmaceutical R&D spending and FDA
approvals

for new
molecular entities.
12

To be sure, Figure 3

connects two very different timelines. The
number of NCEs approved by the FDA is occurring at least a
decade after initial investment
in R&D. This emphasizes the need to understand how the present R&D spending is being
translated into new medicines going forward .


We further note
Figure
8.3.3

in Section 4, showing t
hat even FDA new molecular entity
submissions
for marketing approvals have been declining. We note in this regard that
although the

number of new medical entities securing marketing approval from regulatory
authorities has been on the decline in recent ye
ars, the number of drugs in active
development (i.e., all drugs in the pharmaceutical companies' pipeline, pre
-
clinical and
clinical) apparently has not.
13

The important point in this regard is that while the number of
projects in phases I and II is const
antly increasing, the number of projects in phase III has
stalled. There is a need to more efficiently translate these early stage projects into approved
medicines.

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
10

Figure 8.3.
2


Figure 8.3.
3

0
10
20
30
40
50
60
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001*
0
5
10
15
20
25
30
35
Approvals
R&D Spending
No. of NMEs
Approved
$ Billions R&D Spend
*NME (new molecular entity) total is through August 22, 2001. R
&D spend for 2000 and
2001 are estimates. Source: Washington Analysis, LLC and PhRM
A
R&D spending has increased but new molecular entity approvals ha
R&D spending has increased but new molecular entity approvals ha
ve not
ve not


Why has pharmaceutical "supply side" innovation seemingly been on the wane? The present
paper is not intended to review the pharmaceutical business model but several reasons have
been proposed:



The industry is now tackling c
hronic diseases with complex etiologies that are harder
to treat



Demands for safety and tolerability by the regulatory authorities are higher



The proliferation of drug targets (at the genomic and protein levels) may be diluting
the focus of the industry.



T
ranslating genomics into day
-
to
-
day drug discovery has proved much more
challenging than first assumed

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
11



The many mergers and acquisitions in the pharmaceutical industry has driven "niche
market" players out of the business


8.3.1.4

Pharmaceutical Innovation and so
-
called “me too”
iii

Drugs: A Public Health
Viewpoint


Large drug companies still aim to produce a “blockbuster”, or a product with annual sales
of at least $1 billion).
14

Whether individual sales actually reach that target or not, the
commercial developer o
f a drug needs to recoup the R&D costs, recover the losses from those
products abandoned during development (either due to inefficacy or adverse safety
findings) and make a profit so to reward investors and continue to attract funds to finance
future resea
rch. It is estimated that only 3 out of 10 drugs brought to the market generate
enough revenue to recover the average cost of its development .
15

Although there appears to
be no evidence to support this claim, one often hears that in the pharmaceutical ind
ustry,
sales of $500 million per year are needed to recoup R&D investment.
16

In the face of rising
R&D costs (
Figure
8.3.
3
), and lower expectations for “supply side” innovation
13
, then it is
rational for companies to also

try and develop as many new drugs as possible
against proven
targets using known approaches
.

Thus, different companies will have very different
strategies to balance their portfolio and their long term risk. Pharmaceutical companies are
intensely conne
cted with their R&D history and related successes so most of the largest
companies are constantly trying to balance both known therapeutic routes and novel routes
based on their internal strength and expertise.



Although large brand manufacturers have rea
ched a scale at which they must generate
several billion dollars in additional revenue each year in order to meet investor expectations,
few pharmaceutical firms have brought more than one drug with
new active ingredients

to
market per year over the past

decade.
7

Companies can improve their profits by adding
IMDs as a different class of drug with a similar therapeutic effect to an already marketed
drug (e.g. different types of anti
-
hypertensive) or as “line extensions”, i.e., new products
using the sam
e active ingredient, but differing from the original in some way, such as more
convenient dosing forms. Such enhancements can enable manufacturers to develop their
existing franchise and potentially attract new patients.


IMDs may also provide a higher re
turn on investment as the development of a medicine
using an active ingredient whose safety and efficacy have already been established may be
less time consuming, expensive, and risky than that of one using a compound about which
little is known. The combi
nation of high pricing potential for IMDs with a streamlined
development effort would at first blush make modifying older products more attractive
although we note that as the market potential for another new drug in an overcrowded class
is likely to be
limited, so a higher return on investment is not assured.





iii

In the context of this report, the definition of a “me too”

medi
cine is one that is in the same chemical class
(structurally similar) and has a similar therapeutic profile as existing treatments in the same class. We do not
consider one medicine that has an improved side effect profile, improved efficacy, or improved

delivery
mechanism compared to another in its class as a “me too.” These latter products , although incrementally
improved products, are in accordance with the FDAs " priority IMD" classification.

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
12

Standard
-
rated IMDs

(in the FDA, those incrementally modified medicines
lacking
sufficient clinical advance

to have them be a “priority”) surged from 168 approvals between
1989
-
1994 to 304 betw
een 1995
-
2000, an increase of 136 products having the same chemical
entity as an already marketed product.
7

As a result, 62% of the increase in NDA approvals
came from product line extensions that, in the FDA’s view, did not provide significant
clinical im
provements over existing medications.
7

We refer the reader to our prior
comments regarding use of this FDA administrative classification to make assumptions
about innovation.


On the other hand,
priority IMDs

(in the U.S. regulatory lexicon) are of pu
blic health
interest as they, in principle, are existing chemical entities that have been modified in some
way to provide enhanced clinical effectiveness.
In 1995

2000, the FDA approved 53 priority
IMDs, versus 33 in 1989

1994.
7

This suggests that real cl
inical improvements can, in
principle, derive from technologies focused on refining
older drugs or their delivery
systems.


Incremental innovation of pharmaceuticals from a public health point of view can respond to
the needs of broader conditions of
safe
ty, efficacy, selectivity, and utility
. Fifty percent of the
drugs on the WHO Essential Drugs List are compounds introduced subsequent to the first in
a therapeutic class, and 25% of these essential drugs are in the WHO list for therapeutic uses
approved
after the initially approved indications and after additional clinical research. The
point, which we re
-
emphasize with regard to the underutilization of Phase IV activities (See
Section 8.3.6) is that the future utility of medicines cannot be determined at

time of drug
approval.
17



Plausible arguments can be put forth supporting the view that incremental innovation of
pharmaceuticals offers advantages in terms of
improved efficacy, better patient satisfaction
and compliance, and in some cases greater cost
-
e
ffectiveness. There are several potential
advantages to having multiple agents within a class, including the following:



Provision of backup in case an agent is withdrawn from the market;



Differing dose delivery systems and dosage forms that enable extended

uses with a
variety of patient populations;



Availability of choice when patient response to and tolerance of a particular agent is
subject to great individual variation;



The ability to tailor therapy to the needs and preferences of patients



Cost containme
nt due to increased efficacy and, as a result, decreased use of other
services (e.g. hospital, office visits).
18
,
19



Competition may put downward pressure on prices;


It is said that this ”p
harmacodiversity” in the evolutionary sense allows products with
va
rying features in a drug class to compete for patients. Products that are best “fit” for their
environment dominate the marketplace while others may become "extinct" and still others
will maintain positions in “niche markets.”
18

It is clear that pharm
aceutical innovation from
a public health viewpoint should entail new delivery systems and medicines with improved
side effect profiles. It is not obvious, however, that this so called “pharmacodiversity”,
results in incremental, clinical improvements ov
er existing medicines. It may also result in
the existence of many similar drugs due to many companies are working in a similar area
8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
13

that are promoted with expensive marketing methods developed by the pharmaceutical
industry.


We believe the real value

of multiple members of a class (e.g., the multiplicity of statins and
antihypertensives) can only be determined by looking at the
‘value added’ in terms of
clinical outcomes when comparing members of the class
among each other
, something that
is all to in
frequently performed.
See
Background
Chapter 8.4


Further, arguments praising
incremental innovation still beg the question of the need for entirely new, innovative
med
icines to treat emerging chronic and infectious diseases, including “neglected diseases”
affecting millions of people in other countries.

See
Background
Chapter 6.9

.

8.3.2

B
en
efit, Risk and Pharmaceutical R&D: Aspects of the "Demand"
Side

Industry
-
sponsored pharmaceutical research creates immediate reactions from certain
stakeholders.
With regard to the drug development process, there is almost invariably a
tension set up betw
een the viewpoints of different stakeholders with regard to benefit and
risk.
20

Some argue that industry
-
sponsored research is inherently innovative, while others
point to the plethora of “me
-
too” drugs

aimed at a risk averse strategy of increasing mark
et
share rather than creating beneficial improvements in health. On the other hand, to tar the
industry with the brush of “pure profit motive” is to ignore, for example, HIV/AIDS where
industry
-
sponsored development of new classes of antiretroviral compou
nds during the
1990s has significantly improved both survival times and quality of life.
21



We can illustrate the problem or risk and benefit at another level with examples from
antimicrobial drugs. From the viewpoint of the community that may have a choi
ce among
many safe and effective antimicrobials, a high priority does not need to be set on using a
particular medicine that has adverse side effects. In an intensive care unit, on the other hand,
with mortalities upwards of 25 to 40%, the risk of poor ou
tcomes because of antimicrobial
resistance and the severity of the medical condition may be so high that adverse events from
a new antimicrobial may be tolerated.


Drug regulatory authorities need to consider benefit and risk of medicines. Some regulatio
ns
allow certain authorities to restrict distribution of a product if there is reason to think that it
should be made widely available only
after
confirmatory studies have been implemented.
Recent EU legislation with respect to the EMEA
22
, allows for circum
stances where "

following consultation with the applicant, the authorisation may be granted subject to a requirement
for the applicant to meet certain conditions, in particular concerning the safety of the medicinal
product, notification to the compet
ent authorities of any incident relating to its use, and action to be
taken."

S
uch post
-
marketing restrictions either limit distribution to certain facilities or
physicians with special training or experience, or make distribution conditional on
performan
ce of specified medical procedures.


Would restricted distribution preserve the viable life span of new antimicrobial drugs for
resistant isolates? Controlling the evolution of antimicrobial resistance is important but at
the same time it is reasonable t
o expect private sector investments to provide return for their
indications for some period of time. So while restricting the distribution of new
8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
14

antimicrobials might well serve to extend their viability, it would also constrain the size of
their market a
nd, therefore, curb potential returns on R&D investment for the drug and
potentially curb the amount of R&D industry considers worth investing. In effect, the drug
regulatory authorities’ desire to conserve the viability of new antimicrobials is at odds wi
th
the need to stimulate development of those very products.
However, if the product could
be brought to market years earlier, the economies for the industry would be more
favorable.


During the last fifty years of the pharmaceutical industry, with its su
ccessive "generations" of
chemical, analytical and biotechnological innovation, the regulatory mechanism for ensuring
safety and efficacy has imposed absolute standards that, by and large, have not taken
relative benefits and risks of medicines into accou
nt Indeed, all medicines carry some risk of
side effects.
We believe that the regulatory apparatus needs to become more flexible to
accord with the changing nature of pharmaceutical innovation, there being cases where
regulatory standards may become an u
nnecessary barrier to innovation.



For instance, safety issues should be detected as early as possible, and ways to distinguish
potential from actual safety problems should be available, but they are not. Safety problems
are often uncovered only during cl
inical trials or after marketing. Companies could save
many millions of dollars if they could know much earlier that clinical failures are likely. The
obverse situation is also a problem, as early tests can suggest the possibility of safety
problems that n
ever materialize, potentially eliminating candidates unnecessarily.


The issue of whether, and to what extent, pharmaceutical innovation is being thwarted by
inappropriate or even non
-
existent benefit/risk evaluations with interrelated clinical,
regulator
y and legal constraints is complex and challenging. It is often difficult to separate
fact from rhetoric. The issue, of course, is that there are differences between how risk is
perceived between the public and private sectors and between different member
s of the
healthcare “ecosystem” and in different countries with very different disease patterns.
Regulatory procedures should be flexible enough to take these different perceptions into
account.


8.3.2.1

The Pharmaceutical Industry


For the pharmaceutical industry
, the assessment of risk is an important determinant in how
they allocate resources and conduct their R&D projects. Industry wants as much
predictability and consistency as possible when it makes its R&D investment decisions,
especially when profit margins

are likely to be narrow. Thus, lack of sufficient, reliable, and
decisive consensus about future markets, disease burdens, raw material supply, public
-
sector
needs, priorities, and policies (and a host of other factors including potential for product
lia
bility or intellectual property litigation) may well dampen prospects for private
-
sector
innovation or collaboration with the public sector. During the drug development cycle,
industry does factor drug risk/adverse events into account when making decision
s about
going forward with any particular R&D project. However, from this perspective, the present
regulatory process is inadequate to deal with the collection and analysis of post
-
market
authorization data on adverse events.


8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
15

8.3.2.2

National Governments


For na
tional governments, national pharmaceutical regulation is reflective of national
attitudes towards the risks involved in providing the proper mix of services and financing
mechanisms. For example, countries that control the price of medicines have a tradit
ion of
direct government involvement in economic activity, including, that of controlling prices in a
wide range of sectors.
23

This can lead to the governmental dilemma of whether to promote
health or industrial policy. Nonetheless, as a way of controlling

costs, some European
governments delay the pricing of innovative drugs which neither promotes health nor
industrial policy.


Clearly, governments can promote both but in practice, this is not always
the case, and there is much dispute about how the tensio
n between the two can best be
resolved This dispute is often manifest as the tension between valuing real pharmaceutical
innovation, which will occur as increased costs now but improved health outcomes in the
future, and short
-
term thinking about budgeta
ry pressures. Frequently, evidence of the true
“value” of a pharmaceutical innovation can only be delivered long after the launch of the
product and it is not obvious that national governments will allow price
increases

once
value is determined.
See
Background
Chapter 8.2
.


8.3.2.3

Regulatory Authorities


The present regimen of Phase I through Phase III clinical trials cannot wholly guarantee
safety of medicines.
The perception o
f risk and the calculus involved in pharmaceutical
regulatory authorities is complex as it is often related to the industries’ views that high costs
and long lead times make drug development an uncertain and expensive process with little
room to make mist
akes) . As time to market has increased, industry perceives that there is
less room for failure in securing regulatory approval.
16

Notwithstanding this perception, in
many cases, medicines fail regulatory approval precisely because of inadequate design
and
conduct of clinical trials.
24

From a policy perspective, the regulatory authority sets the risk
to the population of serious or even life
-
threatening side effects against the societal cost of
slowing the advent of new drugs to the market. Thus, if a

regulatory agency believes risk
minimization is a priority, there should in principle be an incentive for increased pre
-
market
testing and post
-
market surveillance.


In general, the evidence required to evaluate new drugs is consistent with the accepta
nce of
greater risk for greater gain. For example, if a new drug offers little potential advantage over
existing drugs for an illness that is not life
-
threatening, but is relatively common, a fairly
large data base would be needed to provide acceptable ev
idence of safety. On the other
hand, if a new drug offers an important benefit for the previously unmet treatment of a
serious illness, even in light of some enhanced adverse event risk, approval should require
significantly less data. We believe the pres
ent regulatory regime is not sufficiently attuned to
these shifting benefit/risk calculations and, in some cases, is itself acting as a barrier to
pharmaceutical innovation. We note, however, that the recent EU legislation on the EMEA
22

(Article 116) make
s such a risk/benefit calculation explicit:


"
The competent authorities shall suspend, revoke, withdraw or vary a marketing authorisation
if the view is taken that the product is harmful under normal conditions of use, or that it lacks
8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
16

therapeutic efficacy
, or that the risk
-
benefit balance is not positive under the normal
conditions of use, or that its qualitative and quantitative composition is not as declared…"


In this regard, suggestions for improving drug safety are in Section 8.3.6.2.


We further no
te that costs by themselves (i.e., cost of the medicine and/or costs incurred by
the sponsor during drug development) are not part of the formal risk calculus of most drug
regulatory agencies but most understand that if they required more complete safety
testing
(and thus more exposed patients) early in
clinical development, many pharmaceutical
companies would find this unaffordable.

(See Comment by EMEA)


8.3.2.4

Patients


P
atients bring yet another range of perceptions regarding risk to the question of
pharmaceutical innovation. Many patients/healthcare consumers, particularly those in the
United States, have a penchant for new medical technology and might strongly support
public investment in R&D, while being less than enthusiastic about paying for high up
-
front
R&D costs for medical products.
25

Individual patients, in everyday life,
do fairly simple
analytic assessments of benefits and risks all the time. This will vary w
ith the patient and
disease. A patient with a life threatening disease may very well accept the risk of a new
medicine with harmful side effects if there are few therapeutic alternatives. In such
circumstances, cost will likely not enter into the assessme
nt. When conditions are non
-
life
threatening, other factors such as cost may come into play, although in developed countries
this is less of a concern as the insurance/reimbursement system is paying most of the time.

Benefit /risk is a sliding scale: if th
ere are no alternatives, a patient might take on a higher
risk of a new drug but if there are plenty of alternatives, a high risk is not acceptable.


8.3.2.5

Payers: Reimbursement Authorities, Insurance Companies, Governments


Pricing and reimbursement systems ac
ross Europe are varied and are likely to change in the
future as governments try to contain costs. Payers are responsive to adverse drug events as
they are looking for pharmaceutical "value" for the money, which may involve cost
-
effectiveness analyses. Fr
om the industries` viewpoint, if they cannot predict what price a
new medicine is likely to achieve or how long the decision will take or even if it will be
reimbursed at all, additional uncertainty is introduced into the pharmaceutical R&D
calculus.

Thu
s, from the industry viewpoint, reimbursement systems, such as the use of
therapeutic reference pricing, disproportionately limit returns on incremental innovation,
particularly if that innovation is a real advance on a generic product See Annex 8.3.3.4..

This
is because the many payers use
cost
-
containment mechanisms that focus on medicines
thought to be ‘budget busters’, no matter what the clinical outcome their use achieves.
26



Payers almost by definition react to pharmaceutical innovation by devel
oping policies that
contain costs.
The demand for cost containment, manifest in large part through
reimbursement policies, is coming into conflict with the commitment to medical
innovation.
26


Patients, payers, and the public all share the expectation tha
t marketed medical products will
have a well
-
understood safety profile and a positive benefit/risk analysis. Both the industry
8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
17

and the regulatory authorities do not really have the ability to confidently predict safety
performance in a timely and efficient

manner. There is too much uncertainty using present
methods. The degree of uncertainty inherent in current techniques can result in conservative
and inflexible standard setting.

8.3.3

Risk, Benefit and Pharmaceutical R&D: Recent Ways of
Thinking About the Pr
oblem

These challenges have not gone unnoticed by stakeholders. Recently, several independent
documents have been produced that deal in various ways with barriers to pharmaceutical
innovation. Some of these provide novel suggestions for ways of overcomin
g these barriers.
None of the documents reference the others. The congruence of these independent
suggestions is encouraging.
iv


8.3.3.1

U.S. FDA: Critical Path Research


In March 2004, the United States FDA produced a document summarizing the view that “…
applie
d sciences needed for medical product development have not kept pace with the
tremendous advances in the basic sciences.”
27

(
See Appendix 8.3.1)

That is, basic scientif
ic
advances are not informing the development of new assessment technology, as opposed to
the discovery of new technology so that there are too few analytic tools (e.g., analytical
devices, assay systems, surrogate markers, cell culture methods and so on
) to assist in
providing drug safety and effectiveness studies more quickly, with more certainty and at
lower cost.


The FDA suggested that new animal or computer
-
based predictive models, biomarkers for
safety and effectiveness, and clinical evaluation t
echniques are needed to improve
predictability and efficiency along the “critical path from laboratory concept to commercial
product.” Significantly, this document emphasized the difficulty of "

predicting ultimate
success with a novel candidate…" at any
point during the R&D development cycle. Thus, the
document cites that fact that a new medicinal compound entering Phase 1 testing, after
having gone through perhaps 10 years of preclinical screening and evaluation, is still
estimated to have only an 8

perc
ent chance of reaching the market. This means that, in
reality, a drug entering Phase 1 trials in 2000 is not more likely to reach the market than one
entering Phase 1 trials in 1985.
28

In this regard, the FDA suggested that it is working to
facilitate

earlier "proof
-
of
-
concept" trials that seek to confirm activity in humans before a
commitment to full
-
scale development is made. They identified a need for new genomic,
informatic, and imaging technologies that could provide tools to reliably detect safet
y
problems early, identify patients likely to respond to therapy, and lead to new clinical
endpoints.


The FDA document also identified a need to improve the efficiency and effectiveness of the
clinical trial process, including trial design, endpoints, a
nd analyses.
The FDA acknowledges



iv

We note the 1997 review of the FDA regulatory proce
ss in the Food and Drug Law Journal, volume 52. This
contains several articles on improving the US drug regulatory process. We will identify where these proposals
track those mentioned in the documents reviewed herein.

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
18

that
"…
most of the tools used for toxicology and human safety testing are decades old… and may fail
to predict the specific safety problem that ultimately halts development…".
Moreover, clinical trials
may not uncover suc
h issues as the safety issues may be uncommon, the trials may be run
with too few patients or with patients that are not representative of the target population (i.e.
trials lacking the elderly, women, ethnic groups). Predicting and subsequently
demonstrat
ing medical benefit is quite challenging as available pre
-
clinical animal models
have limited predictive value in many diseases. In these cases, drug developers must rely
on large
-
scale, expensive human trials to assess effectiveness in people but variab
ility in
human responses is not understood and thus cannot be controlled for. Thus, developing new
clinical markers or surrogate endpoints for clinical effectiveness will become more and more
important.


The paper emphasizes the importance of research into

the regulatory process and highlight
the value to such a research agenda that can be added by the scientists working in drug
regulatory authorities and by the actual regulatory data itself.


8.3.3.2

Coping with an Expanded EU (EMEA Road Map to 2010)


The EU
-
wide

counterpart of the FDA, the European Agency for the Evaluation of Medicinal
Products (“EMEA”), launched a consultation exercise in April 2004 on a strategy to allow the
EMEA to better facilitate drug regulation in an expanded Europe within a setting of
in
creasing innovation and research. Pre
-
clinical and clinical scientific assessment, post
-
marketing issues and improving interactions with patients are important challenges faced by
the EMEA.
29

See Appendix 8.3.2.

This document recognizes that the legislative, institutional
and scientific environment in Europe is undergoing changes brought about by the impact of
new Community legislation and EU enlargement. Further, the
impact of an ageing
population, increased demands for medicines, the rise of antimicrobial resistance also is
forcing the EMEA to take a fresh look at their role.


Although this document did not tackle the difficult issue of new and flexible approaches to
drug regulation, as discussed in part by the FDA document (Section 3.1), the EMEA
recognized the need to develop a more proactive approach to pharmacovigilance and risk
management strategies as well as improving access by healthcare professionals and pati
ents
to information emanating from the EMEA.


8.3.3.3

European Union Perspective


In Europe generally, there is the sense that c
ompetitiveness depends on the ability of
manufacturing and service sectors to meet fast
-
changing market conditions quickly and
efficie
ntly by way of new technology. Although new knowledge is not only created through
R&D, the ability to assimilate and apply new knowledge in order to improve productivity
and create new products and services relies on scientific inventiveness and entrepre
neurship.
More specifically from the point of view of the EU, improving innovation performance is
central to the Lisbon goal for the EU to “become the most competitive and dynamic
knowledge
-
based economy in the world by the end of the decade.”
30



8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
19

Partly

in response to this, the third main update to the 6
th

Framework Work Program for
Thematic Priority 1 (life sciences, genomics and biotechnology), covers calls for proposals
with closing dates in November 2004 that include,

New approaches for accelerated
development of new, safe and more effective medicines”.
31

(See Appendix 8.3.3)

The
approach is to identify and overcome barriers to drug development using new ways to
acc
elerate this
development throughout the entire value chain of pharmaceutical
development. In short, the EU
proposes a new comprehensive approach to drug
development that identifies "bottlenecks/barriers in the current drug development process"
and soluti
ons to overcome them. The project contains two components:


1.

A " …comprehensive strategy with a detailed roadmap to reduce the drug
development time, encompassing the whole path from discovery of a new drug
target to the validation and approval stages of ne
w drug compound, ensuring high
levels of drug safety and efficacy as well as fast availability of innovative medicines
to the patients. " and

2.

A strategy to develop " … exploratory and demonstrative research activities within
one or two of the major chroni
c progressive disorders, where novel concepts for
accelerated drug development can be tested and evaluated. The research must
address key areas, which are linked to the bottlenecks in
drug development and
include regulatory aspects
. " (emphasis added)


We
note that senior staff at the EMEA were unaware of the call for proposals and were not
involved in setting the research agendas.
32



8.3.3.4

Industry and Regulatory Perspectives (Middleton and Rawlins)


A.

Middleton


A recent submission by a GlaxoSmithKline repr
esentative (
See
Annex 8.3
.1
)

is an
attempt to review barriers to innovation that arise in the public’s perception of
research, the regulatory process, the pre
-
clinical/cli
nical research process, and the
pricing and reimbursement process. GSK’s position is that
regulatory authorities are
becoming more risk
-
averse. This lack of flexibility entrenches the existing regulatory
requirements and perceptions. For instance, thi
s can result in the requirement for
expanded studies to quantify potential serious adverse events, a situation
exacerbated by increased public and media scrutiny and a lack of robustness in post
-
marketing monitoring. This risk aversion also is manifest
in
requests for additional
data after submission of a marketing application and an "increasing tendency for
approval of more restricted indications (with requests for increased data for broader
indications)…". This can lead to delays in gaining marketing

authorization and
patient access.


GSK points out, as have others, that the industry shift to focus on chronic diseases
has made research more difficult because of the increasing costs associated with
newer regulatory demands and difficulties in underta
king clinical trials. In this
regard, GSK asserts that, since a

clinical ‘event’ is not realised for many years in
certain chronic diseases, validated surrogate endpoints and biomarkers for chronic
8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
20

diseases are urgently needed.
New biomarkers in partic
ular have the potential to
speed the development process "… if they can also be used for regulatory decision
making." Historically only a few biomarkers have gained acceptability as surrogate
clinical end points (e.g. blood pressure or cholesterol levels

in cardiovascular
medicine). GSK proposes that other stakeholders such as patients be involved in the
regulatory process, consistent with the approach taken by the
National Institute for
Clinical Excellence (NICE) in the UK in which patients are involved

in creating
treatment guidelines.
GSK also argues that improved dialogue with Regulators in the
EU would help to foster better data packages for Regulators on which to make risk
benefit judgments and improve predictability for companies in relation to th
e
approval process.


The lack of predictability in Europe in the environment, in pricing, reimbursement
and in regulatory review, are all seen as obstacles to innovation.
One of the primary
requirements of investors in innovation is to operate in a predic
table, stable
environment. This is currently not the case for the pharmaceutical industry in
Europe. With ever changing pricing and reimbursement systems across Europe as
governments try to contain costs


companies can not predict what price a new
medic
ine is likely to achieve or even if it will be reimbursed at all. Increasing
unpredictability in the regulatory review process is also an issue; frequently,
additional data is requested that either results in delayed approval or a sub
-
optimal
label being a
greed.


B.

Rawlins


Perhaps the most radical proposals have been published in April 2004 by Sir Michael
Rawlins,
16

(Also as
Appendix 8.3.4
) . Professor Rawlins is chairman
of NICE and past
chairman of the Committee on Safety of Medicines in the UK. Rawlins would put all
aspects of the pharmaceutical R&D process on a firm "evidence
-
base" and would
scrutinize drug discovery and development (including the regulatory process) fo
r
potential cost savings
-

such as improving strategies for identifying likely failures as
early as possible and looking at inefficiencies in the conduct of clinical trials. In short,
each step in the drug development pathway should be tested against two

separate
criteria: is there a clear evidence
-
base to support the continuing inclusion of the
measure in the requirements of regulatory authorities?; and does each regulatory
requirement offer value for money?
16



A key point, one that others have noted

as well, is that many
requirements of drug
regulatory authorities are based on the opinion of experts, rather than on a robust
body of evidence to support the continuing inclusion of the measure as a regulatory
requirement.
33

This also applies to the c
hemical and pharmaceutical aspects of drug
development. Rawlins would have each aspect of preclinical safety studies
(pharmacological ‘screening’ for unintended effects ; pharmacokinetic investigations
in species used for toxicology testing; single
-

and r
epeat
-
dose toxicity testing; and
special toxicology testing (e.g., mutagenicity) be tested by a robust analysis of its
predictive power and questions if there is any " … objective basis for the presumed
safety margins that arise from such studies."
16


8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
21


Wit
h regard to clinical testing, Rawlins is convinced that the numbers of patients in
premarketing clinical trials could be reduced without compromising knowledge of
safety and efficacy. This would result in substantial cost savings if the time to conduct
t
rials is diminished.
34

Rawlins suggests that the " … randomized, controlled,
blinded, parallel
-
group clinical trial is not the only possible approach to investigating
the safety and efficacy of a new drug" and calls for new methodological research to
cr
itically evaluate alternatives, including actual experiments comparing novel and
traditional (RCT) designs.


Specific proposals discussed in these four documents for overcoming barriers to
innovation will be reviewed in a later section.

8.3.4

Pharmaceutical Inno
vation: The European Situation

Europe spends 60% less per capita on pharmaceuticals than does the US
-

a gap that has
roughly doubled since 1992, when European governments spent about 30% less per capita
than the US.
35

That trend has translated into majo
r European savings in pharmaceutical
expenditure: if Europe's pharmaceutical spending per capita had increased at the same rate
as the US, Europe would have spent an additional $160 billion in 2002 and $840 billion
cumulatively, over the preceding decade.
3
5

European governments are largely responsible
for these cost differences resulting from various marketplace interventions, including: fixed
reimbursement prices in France; set reference prices in Germany; profit limits in the UK. (See
Section 2.2).


Clea
rly, governmental actions such as the ones above have helped create direct, visible
benefits for Europe in the form of lower pharmaceutical spending per capita. However, these
policies have costs of their own. The innovation performance of the EU remains r
elatively
poor in comparison with that of major international competitors such as the US. In addition,
the EU is concerned about tendencies to shift R&D activities outside the EU, this being true
for pharmaceuticals among other industries. The 2003 Europe
an Innovation Scoreboard
36

shows the EU trailing the US on 10 of the 11 indicators available for both countries,
particularly in patenting, but also in business and public expenditure on research and
development (R&D), tertiary education, and the provis
ion of early
-
stage venture capital.


We briefly summarize some key points but in this regard it should noted with caution that
the largest pharmaceutical companies are truly global entities so that it is not entirely clear
where pharmaceutical innovation

is actually taking place. Although corporate headquarters
of company X may be in New York City, the R&D center(s) may be in Europe and
vice versa
.


Less drug innovation emanating from Europe

-

there were 81 new molecular entities
(NMEs)
launched
in Eu
rope between 1993 and 1997 yet only 44 NMEs were launched
between 1998 and 2002. Conversely, 48 NMEs were launched in the US between 1993 and
1997 and while 85 NMEs were launched between 1998 and 2002
-

a 77% increase over the
base period.
26

We note, howev
er, that, between 1989 and 2002 in the U.S., just 153 out of a
total of 1,035 new drug approvals (or 15%) were for
priority
-
rated

NMEs (i.e., new molecular
entities with significant clinical improvements over existing medicines).
7

Thus, there would
8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
22

appea
r to be less drug innovation emanating from both Europe and the U.S. By contrast,
between 1989

2000, 472 new drugs or 46% of the total approved by the FDA were
standard

IMDs.
7

The NICHM report upon which these data were based (reference 7 and
Appendix
8.3.5
) generated some debate. The report was heavily rebutted by the industry (See
Appendix 8.3.
6
). The NICHM responded almost immediately (
Appendix 8.3.7
) and the
industry provided yet another rebuttal to this NICHM response (
Appendix 8.3.8
). Interested
readers are requested to view the original documents. Briefly, the industry believed that the
NIHCM study was flawed because it excluded all approvals of biologics
from its
calculations.
v

Further, as

we have mentioned previously, the FDA priority review is
performed before anyone really knows if a product is "innovative" or not.


Notwithstanding this debate, the total number of "pharmaceutical" industry drug dossier
submissions for biotechnology produ
cts (Biologics Licensing Applications) and non
-
biotechnology products (New Chemical Entities) has clearly decreased in the U.S. See
Figure

8.3.4

taken directly from Figure 8.3.2 of reference [7].


Figure 8.3.
4



Significantly, similar trends have been observed in the EMEA where it reported that only 31
new drugs were submitted for approval in 2002, compared with 58 in 2001 and 54 in 2000.

35


Fewer high value
-
added jobs
-

the US created 42% m
ore high value
-
added pharmaceutical
jobs than Europe from 1990 to 2001.
37


Loss of corporate research centers

-

both US and European R&D expenditures were
approximately $10 billion in 1992. From 1992 to 2002, US pharmaceutical R&D expenditures



v

This raises the question of the
real differences, if any, between the biotechnology and
pharmaceutical industries in terms of "innovation".

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
23

grew by 11%
(compounded annually) while European expenditures grew by just 8%,
resulting in a substantial shift to the US.
35


Delayed access to the most advanced drug treatments

-

the average delay from initial drug
launch to market in Europe is 33% longer than in th
e US (the UK is shortest, while Greece is
longest). One reason for this slow uptake of new medicines as compared to the U.S. may be
the lengthy reimbursement negotiations that follow government approval in Europe of any
new drug. Often in Europe, a single
national system may be primarily responsible for cost
containment. This leads to companies choosing to launch their products in the United States
which, for better or worse, has no such single national system.
See
Table
8.3
.
1

from
Annex
8.3
.1

.


Table 8.3.1: Average time from pricing and/or reimbursement application to actual
payment



The EU believes that there has been a shift in pharmac
eutical innovation from Europe to the
United States. While a number of the reasons are mentioned above, the primary cause is that
pharmaceutical companies are behaving in an economically rational way and pharmaceutical
innovation has "followed the money."
To get a return on the nearly $1B currently required to
bring a new drug to market,
1

pharmaceutical companies increasingly focus on the large US
market, and on the high quality human resource and technical research facilities in the U.S.
Pharmaceutical

companies now depend on the US as their key source of returns on R&D
investments.


8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
24

In Section 8.3.5 we summarize some important barriers to pharmaceutical innovation, with
particular regard to the situation in Europe. Section 8.3.6 summarizes some of the

possible
solutions to overcoming these barriers that have been proposed by others. Our conclusions
are in Section

8.3.7.

8.3.5

Other Selected Barriers to Innovation

While the EU provides central support for research through its Framework programmes,
pricing and

payment discussions and policies are national responsibilities. So while the G10
group and the European Commission can promote a strong European pharmaceutical
industry (See Appendices 2.2A
-
C of Chapter 2 of the Background Document ), in the final
analysi
s, pricing and reimbursement decisions made at national level will have the strongest
influence on the industry.


8.3.5.1

Unpredictable Nature of Pricing and Reimbursement (P&R)


We briefly summarize the P&R situation for several EU members from the point of view

of
the private sector.
38



Italy:

The Italian pharmaceutical market is the fourth largest in Europe and the sixth largest
in the world. The government exercises strict control over drug prices, uses a wide range of
cost
-
containment measures to curb s
pending, and is now taking greater account of
pharmacoeconomic data than in the past. Public expenditures on prescription drugs declined
in 2003. The government has also recently decentralized responsibility for the health care
system, a development that h
as begun to fragment the Italian pharmaceutical market.


United Kingdom:

The United Kingdom is the world's fifth
-
largest market for prescription
drugs. Pharmaceutical prices are higher in the U.K. market than in most other European
countries. The UK has a

relatively liberal regulatory environment and it is one of the most
accessible of all European markets in terms of product registration, price setting, and
reimbursement. However, tough supply
-
side and demand
-
side restrictions, together with a
flourishing

generics market, severely limit the uptake of innovative new drugs. The United
Kingdom therefore remains one of the most conservative pharmaceutical markets in Europe.


France:
The French pharmaceutical market presents both advantages and disadvantages to

drug manufacturers. France has an outstanding universal health care system, its
pharmaceutical consumption levels are among the highest in the world, and physicians’ and
patients’ strongly support for branded medicines and new therapies. Notwithstanding
this,
the government places strict control over the price of reimbursable drugs, the pricing and
reimbursement process is lengthy and bureaucratic (See Table 8.3.1). From the industry point
of the, recent government efforts to stimulate greater use of gene
ric drugs is not in their best
interest.


Spain:
The Spanish health care system has traditionally offered its beneficiaries generous
reimbursement terms for prescription drugs, with the result that Spain has a high level of
pharmaceutical consumption. Nev
ertheless, prices are among the lowest in Europe, and
manufacturers face tough negotiations to set pricing and reimbursement terms for drugs that
8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
25

are covered by the national health care system. In addition, the Spanish government has
implemented a wide ran
ge of cost
-
containment measures, including a negative list and a
positive list of drugs, reference pricing, patient copayments, price cuts and freezes, dual
pricing, and profit control. The government has also begun a series of reforms that include
promoti
ng the use of generics. The recent decentralization of health care in Spain will be a
powerful influence on the evolution of the Spanish pharmaceutical market; manufacturers
will need to develop regional marketing strategies and responses to regional cost
-
containment measures.


Germany:

Germany has one of the highest levels of health care spending in the world and
has the largest pharmaceutical market in Europe (and the third
-
largest in the world). Drug
manufacturers also enjoy a great degree of freedom in

setting pharmaceutical prices, which
are among the highest in Europe. However, pharmaceutical companies seeking to do
business in Germany must contend with many cost
-
containment measures. These include
prescribing guidelines, patient copayments, reference

pricing, a negative list of drugs
excluded from reimbursement, generics substitution, and parallel import dispensing targets.


Australia:

Australia operates a national Pharmaceutical Benefits Scheme (PBS) to provide
access to pharmaceuticals. Considerable

subsidies are paid for pharmaceuticals covered by
the PBS, which means that the price to the consumer is lower than it might otherwise be.
Products will be considered for listing after receiving marketing approval from the
Therapeutic Goods Administration

(TGA), which considers safety and efficacy issues.
39

Applications for listing on the PBS are considered by the independent Pharmaceutical
Benefits Advisory Committee. When recommending which marketed drugs and medicinal
preparations should be subsidized

through the PBS, the Committee must be assured that the
drug is effective, safe and
cost
-
effective in comparison with other available treatments
. The
majority of prescriptions in Australia are written for medications that are subsidized under
the PBS. The

price of all products listed on the PBS is reviewed annually by the
Pharmaceutical Benefits Pricing Authority (PBPA). The price is agreed
-
to with suppliers.
39


The PBS has been very creative in balancing competing demands for pricing structures and
rece
ntly negotiated an agreement between themselves, the manufacturer, consumers, and
prescribers by limiting prescribing rights and requiring a select group of patients to agree to
a time
-
limited "stop" period if certain outcomes were not achieved.
40

For ne
w antimicrobials,
such an agreement is worth further study.


United States:

The United States manufacturers also enjoy a great degree of freedom in
setting pharmaceutical prices, as there are no national governmental cost controls. In contrast
to most ot
her governments,
the United States government has played a limited role in
containing the costs of pharmaceuticals. There are also no national drug formularies, no
universal cost
-
sharing policies, and no national coverage of prescription drugs

In the USA,

since the 1990s
purchaser power has been consolidated at the level of the insurer, managed
care companies, pharmacy benefit managers (PBMs) and certain federal programs like
Medicaid.
25
These purchasers demand and receive deep price discounts and hav
e also
instituted formulary policies, utilization controls, and disease management programs

as a
means to contain cost.


8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
26

The question of whether or not the industry can innovate (See Figures 2
-
4) is posed at the
same time that purchasers of pharmaceutical
products in the United States are demanding
lower prices from the industry. Thus, even in the U.S., cost pressure is affecting the climate
for the pharmaceutical industry.


Public biomedical research (primarily by the National Institutes for Health) is st
rongly
supported by the federal government. In 2004, the proposed annual Congressional
appropriation for the NIH was nearly $30 billion
41

as compared to the nearly 3 billion Euros
for the four years of the 6
th

Framework Program.
42

However, we do not kn
ow the extent of
government supported funding for biomedical research in each of the EU members.


8.3.5.2

Unpredictability During Regulatory Review


We previously mentioned that
additional data is often requested that results in delayed
approval. The industry po
sition is that this
need to generate increasing amounts of data
before and after the approval of a new medicine may be a barrier to innovation
.
Another
relevant mechanism within this category is approval with restrictions on distribution so as to
ensure s
afe use; however, while such restrictions may well be beneficial in public health
terms, their meaning in market terms may act as a disincentive to industry R&D investment.


In April 2004, the European Union (EU) enacted legislation that will have an impa
ct on
pharmaceutical sector in this regard.
43

Changes coming into force in November 2005 include:



A fast
-
track procedure registration procedure for products of major therapeutic
interest.
.
It is not clear how extensively this will be implemented at prese
nt but
it is hoped it will be


is in line with similar existing provisions in the US.



Conditional marketing authorizations. The authorization will be granted subject to
annual review of certain conditions, these being the company undertaking to carry
out a
dditional monitoring, notification to the competent authorities of any incident
and action to be taken, and in some cases clinical studies. Conditional marketing
authorization could potentially shorten the clinical trials process by years for certain
prod
ucts.



EU
-
wide framework for making medicinal products available in advance of
authorization for compassionate use.



In addition, a new definition of "generic medicinal product" will provide legal
certainty and better application of the marketing authoriz
ation procedure for generic
medicines. The legislation will allow companies to conduct tests in support of a
generic marketing authorization application during the validity of the patent or
supplementary protection certificate applied to the original produ
ct. This is modeled
on the “Bolar” type provisions operational in the US.


8.3.5.3

Cost Effectiveness Analysis


From a general public health and equity viewpoint, and not necessarily limited to European
issues, drugs are “merit goods” that should be distributed on

the basis of need or ability to
benefit rather than ability to pay. As a result, most regulatory authorities do not examine
whether, under conditions of r
outine use, a product is better value for the money than
alternatives (cost effectiveness) taking i
nto account all costs and savings involved (both drug
8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
27

and non
-
drug related).
From the industry viewpoint, it is hard for companies to justify
further dollars and time in cost
-
effectiveness studies, particularly as there are no agreed
-
upon set of measures
by the industry and payers.

Additionally, the need for post
-
approval
outcome studies drives up data requirements so that requiring cost
-
effectiveness analysis by
drug authorities during regulatory review would likely slow down the drug approval
process.


However, from the payer viewpoint, at some point in the development cycle, such analyses
are essential in a time of ever
-
increasing healthcare costs. Governments do use cost
-
effectiveness evaluations through setting up bodies such as NICE and PBAC to as
sess value .


More to the present point, costing concerns should be
adopted by those in the drug
development cycle as some manufacturing, preclinical and regulatory requirements, even if
soundly based, should be eliminated because they offer so little val
ue for money.
16


8.3.5.4

Intellectual Property Issues


Another general issue is that there is an ongoing debate about whether weak IP protection is
a barrier to innovation or is a boon to access. The viewpoint of the stakeholder is critical as
there is a tensio
n between industrial policy directed to improving market share and health
policy directed to obtaining access to assured quality medicines for people, regardless of
their ability to pay. For instance, in the case of emerging infections, lack of patent pr
otection
may be acting as a major disincentive to innovation. Among potential antibiotics left
undeveloped, some compounds might, in theory, offer new product leads.
7

Nonetheless,
because they have gone off patent (or their structures have already otherw
ise been placed in
the public domain) and are therefore unprotected in any prospective market, there would be
little
private sector

justification for developing them further. A related matter is whether
industry would consider it worthwhile to target and/
or obtain IP protection for, a single
resistant mechanism (e.g., methicillin
-
resistant
Staphylococcus aureus

or even vancomycin
-
resistant staphylococci) for which the markets are not seen as large enough to justify
investment. A rational objective of the i
ndustry is to develop agents that have a
wider
spectrum and are therefore more likely to have a larger market and longer useful life.
7


8.3.5.5

Managerial Risk Aversion


An influential view, still prevalent, is that management is too often dominated by risk
-
averse

thinking. This view of corporate management that prizes analytical elegance over insight and
experience, leading to emphasis on maximum short term returns, was first brought to wider
attention over 20 years ago in the important article by Hayes and Aberna
thy in the Harvard
Business Review.
44

Part of the problem is that there is real pressure on senior management to
meet earnings
-
per
-
share goals and quarterly forecasts. Further complicating the problem is
that R&D leaders often lack a sufficient understand
ing of financial analysis and
management.
45

The challenge for R&D leaders is even greater in hard economic times, as
short
-
term fixes are often rewarded and R&D budgets get tightened. These and other
common business pressures force a short
-
term focus, wh
ile innovation naturally requires a
longer
-
term view. We surmise that this “management” problem is most acute in smaller
firms, particularly biotechnology companies, where budgets can dictate behavior and
corporate strategy more than long term innovation.

Indeed, one could argue that it is the
8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
28

venture capitalists who are driving innovation in the start
-
up stages of biotechnology, rather
than the scientists. Larger companies have the financial means to face longer periods of
research cycle to reach their d
iscovery goals.


8.3.5.6

Perceptions of Other Stakeholders


There are many other perceived or actual barriers to innovation, depending upon who one
asks. We note a recent World Bank survey (cited in reference 9) of high
-
level representatives
from the pharmaceutica
l industry designed to ascertain industry involvement in developing
products for infectious diseases. The survey identified certain barriers as well: (a) lack of
adequate information about the basic research that is under way in universities, research
cou
ncils, and biotechnology companies worldwide that could provide material for industry
to screen to generate more product leads; (b) the costs and duration of clinical trials; and (c)
limitations inherent in the developing country market for products that c
ould deal with the
diseases that primarily afflict those countries. The survey also elicited industry suggestions
about ways to lower these barriers. These are incorporated into
Table 8.3.2
, which presents a
categorized sum
mary of ideas about incentives for increasing pharmaceutical research and
development for infectious diseases


Table 8.3.2: Overcoming Barriers to Innovation for Infectious Disease
8


TABLE 8.3.2

Incentives for Increasing Pharmaceutical Research and Development for Infectious Diseases


What Is Needed

Demand Side

Supply Side: Basic Research

Supply Side:Clinical
Phases

More
information

Market identification
; •
epidemiologic/bu
rden of
disease data; • ongoing,
accessible, integrated,
comprehensive surveillance
data on disease trends and
resistance patterns

Priority setting
; • well
articulated, consensus
-
based public health
agendas; • clear portrayals
of specific disease prioritie
s;
• product characterization

Disease
-
specific
bioinformation system
; •
research data from
universities, research councils,
biotechnology companies on
product leads for possible
development by industry

Development of
surrogate endpoints
; •
generic categori
es of
endpoints for use with
a range of infectious
diseases; • alternatives
to correlates of
protection for vaccines
for which clinical trials
difficult or impossible

More
predictability

Market assessment
; •
early forecasting of demand
based on epidemiolo
gic
criteria from surveys,
demographic analysis; •
segmentation by size,
ability to pay, disease
profile; • cost
-
effectiveness
analysis

International/regulatory
harmonization/reinforcement
of intellectual property rights

Restricted
distribution/produ
ct
labeling
; • systematic
exploration of tension
between need to
conserve usable life of
antimicrobials while
conserving market
appeal for R&D
investment


8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
29

8.3.6

Solutions

We summarize various solutions to overcome both supply and dem
and side
-

barriers to
pharmaceutical innovation.


8.3.6.1

Pre
-
Clinical



Preclinical regulatory requirements should be examined.

Thus, to what extent are the
current regulatory requirements for repeat
-
dose studies based on biological
plausibility, rather than form
al evidence?
16

For instance, does target organ toxicity,
as identified in relevant experimental animals ( rat or dog), accurately reflect likely
toxicity in humans? Unfortunatley, t
he available evidence is limited, but a recent
review suggests that
the conventional approach using experimental pharmacology
alongside toxicity studies of one month's duration reasonably predicts adverse events
in the first human studies.
46

M
ore evidence is required in this regard.
What, for
example, is the real predictiv
e power of repeat
-
dose studies lasting more than three
months? Last, what is the evidence base for the ‘safety margins’ assumed by
toxicologists?
16




The predictive value of these regulatory “rituals” should be assayed. For instance, it
is possible to pe
rform case
-
control studies on marketed drugs that have already
caused damage to compare whether the preclinical toxicity profiles from the dossier
actually had any predictive value.




Key enabling technologies involving the use of animals and the use of hum
an tissue
in biomedical research are subject to complex regulation. Any increase in complexity
of regulation or indeed blocking of access to these technologies by public opinion
pressures has the potential to seriously disrupt basic and applied biomedical
research.



The pharmacoeconomic effect of ever
-
increasing quality standards should be
analyzed. What are the marginal benefits, if any, of increased “purity” standards?


8.3.6.2

Clinical




Clinical research should be promoted and supported by the EU and EU Member
St
ates. Investment in infrastructure including training and creating posts for suitably
qualified staff should be a priority.



A
lternatives to randomized controlled trials should be investigated. This requires an
experimental approach with formal comparisons

of the results of studies comparing
novel and traditional (RCT) designs.
16

They include various designs, including
decision based and risk
-
based designs, observational studies, including historical
controlled trials that confirm or refute the circumsta
nces under which they might be
useful.
47

48

In this regard, h
istorical controls might be used to good effect in phase III
trials since one can create a large number of prospectively collected historical controls
that follow the natural history of clinic
ally important diseases.



It is possible to merge clinical phases. Indeed, once multiple dosing in phase I health
volunteers starts, there is no reason not to go directly into perhaps 20
-
30 patients and
merge this with a phase II trial.

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
30



To improve drug sa
fety, phase III trial requirements could be altered to clearly
demonstrate efficacy and phase IV monitoring be expanded to include active case
detection (numerator) as well as reporting of all drugs dispensed (denominator).



Bayesian analytical approaches s
hould be used as, in principle, they can allow clinical
trials to be terminated sooner.
vi

Certainly it is possible to retrospectively analyze
clinical trials using Bayesian and “frequentist” approaches.



Its flexibility makes the Bayesian approach ideal for

analyzing data from clinical
trials.
49

In carrying out a Bayesian analysis for inferring treatment effect, information
from the clinical trial and other sources can be combined and used explicitly in
drawing conclusions. The ability to calculate predictiv
e probabilities for future
observations is a distinct advantage of the Bayesian approach to designing clinical
trials and other decisions.



Increased use of biomarkers and surrogate clinical end points to improve
“translational” research (e.g., new scannin
g methods, micro
-
array assay technologies
and high throughput screening).




Review current technology opportunities and use of biomarkers/surrogate end
-
points
in marketing authorization applications with a view to encouraging the use of bio
-
markers of dr
ug effect (e.g. in dose ranging studies) or surrogate end
-
points likely to
be predictive of clinical benefit.



Improving communication between the industry, physicians and regulators during
drug development
would help to reduce requests for additional dat
a and regulatory
questions following submission. This could increase predictability of outcomes for
marketing authorisation applications.

Industry should interact with payers at early
stages in the development process in order to provide industry with suf
ficient
information to know that payers would be looking for in order to reimburse a
medicine. See Background Chapter 8.2.



Continue to improve regulatory procedures in Europe, including piloting new
processes to speed up the system (e.g., rolling submissio
ns, accelerated assessment
for innovative products)



Increase the dialogue between patients and regulators. Patients have a different
assessment of the risks and benefits of medicines, especially for products that are
going to be released conditionally.


8.3.6.3

P
ost Marketing




The relatively scant attention paid to phase IV post
-
marketing studies needs to be re
-
evaluated. European regulatory agencies should push for shorter and smaller clinical
trials, supplemented by computer
-
based registries of all patients and
their clinical
outcomes. Such registries will have data in both incidence and exposure to the



vi

A definition of Bayesian methods in the present context might be: the explicit quantitative use of external
evidence (prior judgments), in the d
esign, monitoring, analysis, interpretation, and reporting of a health
technology assessment. Bayes's theorem is a formula that shows how existing beliefs, formally expressed as
probability distributions, are modified by new information. For instance, in
diagnostic testing, the evaluation of a
diagnostic test requires the prevalence of the disease to be specified, and a Bayesian analyst will specify a
probability distribution expressing the relative plausibility for this unknown quantity, before taking in
to account
any evidence from a study. This “prior” distribution can then be combined with actual evidence from the study.


8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
31

medicine. L
ong term, post
-
marketing risks and benefits of medicines must be
evaluated and this information can come from observational/epidemiological studies
th
at use electronic patient
-
level data (e.g. administrative databases). See Background
Chapter 8.4

(“Comparative Effectiveness of Medicines") for further details.



Most pa
tient groups have little funding of their own, an unfortunate circumstance as
they need public support and should be consulted on regulatory and pricing
decisions. Indeed, t
he current method of dealing with medicines does not include the
perspective of the

individual patient, but deals with disease categories. Patients and
patients’ organizations need to be involved in shaping the environment in which
innovations and healthcare processes are designed to ensure that those processes take
into account the pat
ient
-
centred approach.



Patients should be involved in creating treatment guidelines as well
-
informed
patients will improve the process.



Patients’ organizations have a role in advising on information, disseminating
information and encouraging involvement.
They should also be involve in ethics
committees. Rather than just being involved as a passive recipient in clinical trials,
patients and patients’ organizations have valuable opinions and experience which
should be incorporated into the planning of clinic
al trials and the regulations that
govern them.



Attention is directed to the recent draft guidelines set out by the International
Conference on Harmonization of Technical Requirements for Registration of
Pharmaceuticals for Human Use (ICH) on the "E2E"
pharmacovigilance planning.
The
guideline describes a method for summarizing the identified risks of a drug, the
potential for important unidentified risks, and the potentially at
-
risk populations and
situations that have not been studied pre
-
approval.
vii


8.3.6.4

Reimbursement




Prospective reimbursement may be able to contain rising costs. That is, payment for
different diagnoses will be set in advance and will not be based on an individual
physician or hospital's costs. This will give healthcare providers a strong

incentive to
hold down costs, since providers that hold costs below the payment rate can keep the
difference, and those that do not must absorb the loss. To be fair, however, the
situation is not so clear
-
cut since prospective reimbursement might mean th
at new
innovations which are likely to more costly but provide added benefit would not be
chosen. Further, since
early

reim
bursement decisions set a price for an innovation at
the beginning of a product’s life cycle, payers may not gain the benefit of lea
rning
about the product going forward or from changing demand for the product.
Alternatively, perhaps reimbursement decisions should introduce conditional, time
-
limited coverage and a reviewable reimbursement rate.
27
M
ore flexibility to alter
prices onc
e “value” is demonstrated after launch (See Chapter 8.2.) could help
moderate pricing requests at launch. Companies would know that prices would
drop only under defined circumstances.




vii

Available at,
http://www.ich.org/UrlGrpServer.jser?
@_ID=276&@_TEMPLATE=254
, last accessed 27
August 2004.

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
32



More predictability terms in terms of improving the timing and payment

level for
reimbursement is required.



Conditional product release mechanisms set forth by the EMEA should be keyed to
conditional, time limited and reviewable reimbursement coverage.



National levels of reimbursement should be related to the ability to p
ay (e.g., based
on GDP per capita. See Background Chapter 8.2 (Determining Value for Innovation).

8.3.7

Conclusions

At present, there appears to be a
slowdown, at least in the short term, in the rate of new
drugs approved despite increasing expenditures for drug

development. The hurdles to
increased successful pharmaceutical innovation are likely to change going forward as new
technologies and pressures are brought to bear on all members of the pharmaceutical value
chain. Nonetheless, rewards for a clinically ef
fective and cost
-
effective drug need to remain
significant for the innovator. The challenge to the industry is to better target its research and
development money, which may well become more scarce. The challenge for regulators is to
maintain safety while

also stimulating or, at a minimum, maintaining the existing innovation
advance. The challenge for governments is to stimulate innovation while dealing with
risks
and benefits associated with medicines, with pricing and reimbursement proposals,
appropriate

incentive mechanisms, and related issues. These policy decisions can have long
-
term consequences for the availability of breakthrough and incremental pharmaceutical
innovations.


We commend the EU for their commitment to approaches for accelerated develop
ment of
new, safe and more effective medicines in the latest call for proposals for the 6
th

Framework
Program.

The focus is to identify “…bottlenecks/barriers in the current drug development
process … and solutions elaborated to overcome them.” We believ
e this focus is still too
narrow.
We would like to see, as part of this call for proposals, the EU create a research
agenda so that every aspect of the drug development process is questioned for its
relevance, costing, and predictive value.


(See
A
ppendix 8.3.9
)

8.3: Benefit, Risk and Innovation in Pharmaceutical Research and
Development: Opportunities and Issues


8.3
-
33

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