The FDA and the Biosciences Non-Boom

by Reihan Salam

Mike Masnick points us to an insightful Carl Schramm column published last month:

In the past 15 years, despite a doubling of federal funds for biomedical R&D, the number of new drugs approved by the FDA and coming to market has decreased by nearly half — from around 40 per year in the late 1990s to a little over 20 per year since 2005. Pre-market testing to meet FDA requirements has become such a huge factor in drug development budgets that it’s hard for companies to even consider working on new products with limited market potential.

Among other things, Schramm points to the onerous cost of drug trials and the increasing risks of tort liability as obstacles to new entrants. To break through the bottlenecks, Schramm recommends that the FDA focus on safety rather than efficacy, a question best left to decentralized markets:

The agency’s regimes for product testing and control need to be streamlined — perhaps by adopting a new, quicker-to-market model such as “adaptive” regulation — and some aspects could be stripped away entirely. One approach would be to have the FDA go on approving drugs and devices for safety, but let the market determine efficacy, at least to a greater extent than at present. Also, once a treatment has passed the FDA’s safety exam, why not reduce the added hurdle of tort liability by exempting the makers from punitive damages?

Masnick goes further still:

Obviously, those making medical products have every incentive to have those products actually work. Rather than saddling them with massive clinical testing regimes, why not focus on transparency, that would provide more data and opportunities for everyone to properly evaluate the effectiveness and risks of certain products? As it stands now, the data from most clinical trials is totally hidden away. Imagine a much more open process that would allow people to access the data, share their own data and determine what really is and is not safe. 

I like Masnick’s approach, but relying on transparency raises the question of how we’d handle tort liability for new drugs. My sense is that a bias towards transparency combined with Schramm’s call for limiting FDA efforts to determining the safety and not the efficacy of new drugs is a sound option, which might, if we’re lucky, accelerate the pace the medical innovation. 

If we get much better at finding low-cost drug therapies that can substitute for labor-intensive medical procedures, we’d also go a long way towards containing medical cost growth.