How the FDA Boosts the Costs of New Drugs
Policy + Politics

How the FDA Boosts the Costs of New Drugs

Benis Arapovic |

Many aspects of the GOP’s newly proposed A Better Way healthcare plan would improve the health system. But “A Better Way” seems to mean “Much of the Same” when dealing with Food and Drug Administration regulation.

The FDA greatly increases the costs to pharmaceutical companies by forcing compliance with regulations that cost billions of dollars and take over a decade on average. A report by PhRMA, an industry trade group, indicates that of all drugs that enter clinical trials (a substantially smaller number than pre-clinical trials), less than 12 percent of them will be approved. This raises the costs of prescription drugs, a major expenditure for senior citizens on Medicare Part D.

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Peter Huber, a senior fellow at the Manhattan Institute, states in his book The Cure in the Code, that “the science and economics of molecular medicine now stand as a monument to medicine’s ignorant past . . . The system assumed broad areas of biochemical uniformity, conflated differences, and steered medicine relentlessly toward generic drugs for generic patients.” In other words, federal regulation of the medical profession is out of date.

To the GOP’s credit, the proposal does address the need to “cut red tape” in the FDA to “make sure that our regulatory system keeps pace with the state of science.” This is a step in the right direction, but it does not focus clearly enough on the lengthy clinical trial process and the fact that not all trials and regulations are necessary for every new drug.

Medicare Part D sidesteps the deeper issues with the federal government’s involvement in patient care. Rather than drastically deregulating the pharmaceutical industry by reforming or abolishing the FDA, Part D implements free market concepts to “reduce costs” for those on Medicare who can no longer afford drugs. First, the government drastically raises the cost of buying life-saving drugs through FDA regulation, then provides a subsidy at the expense of the taxpayer and acts as though it has “solved” the issue of high costs. This sounds an awful lot like the villain in Saturday morning cartoons putting someone in harm’s way so that he can claim he saved them.

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The Manhattan Institute’s Project FDA concluded in a 2014 study that a modest increase in efficiency at the FDA (defined as the approval of an additional 25 drugs per year) “would be worth about $4 trillion annually in value to patients, from enhanced U.S. life expectancy.” A substantial review of the FDA’s required clinical trial process could drastically benefit Americans.

Companies that copy drugs with expired patents are no longer required to go through the same regulatory process as manufacturers of new drugs. Yet Senator Lamar Alexander (R-TN), in a January press release, said “According to a survey of generic drug makers, the median approval times have slowed from 30 to 48 months [despite] receiving an extra $1 billion in fees from the generic drug user fee program.” Even with generics, there is still room for improvement.

 The GOP’s health plan offers “A Better Way” for Americans. The “Best Way,” however, would be to speed up the approval process for both new and generic drugs.

Conner Dwinell is an E21 contributor.