EDITOR'S NOTE
LSL
LIFESCIENCELEADER.COM JUNE 2014
6
economic philosophy. How else can you explain
his serving as the principal author of the
Orphan Drug Act (ODA), which provided incen-
tives (i.e., federal grants, development assis-
tance, waiver of the PDUFA filing fee, a 50
percent tax credit of clinical investigational
expense, and a seven-year period of market
exclusivity after FDA approval) to entice compa-
nies to develop more rare-disease drugs? Today,
our industry averages more than 13 specialty
pharmaceuticals annually, proving the point
— people respond to incentives. Obviously, the
FDA believes this also to be true, having cre-
ated a number of additional acts to incentivize
innovation, such as Fast Track, Breakthrough
Therapy, Accelerated Approval, Priority Review,
and GAIN (Generating Antibiotic Incentives
Now). Though all have various enticements and
provisions, I have yet to find one which speci-
fies, "And make sure it's cheap too."
In March, Waxman and two other Democratic
members of the House Energy and Commerce
Committee wrote a letter demanding Gilead
Sciences justify the price of its hepatitis C drug.
Well, Mr. Waxman, it is what it is. You got
exactly what you incentivized for — a break-
through therapy drug. Cheap was not part of
the incentive. Ever consider longer patents?
What about tying longer patents to how quickly
a company is able to execute its R&D; plan or tie
it to a step-down, drug-pricing exchange model,
or even request price estimate forecasts as part
of participating in an incentive program? But if
you want companies like Lilly (see feature with
CEO John Lechleiter, p. 24) to continue devel-
oping drugs such as Cyramza, which received
FDA approval for stomach cancer in April, don't
demand they justify the price after the fact.
This year an estimated 22,220 Americans will
be diagnosed with stomach cancer and 10,990
will die from the disease. Cyramza has shown to
improve median overall survival by 1.4 months.
What is that worth?
l
Drug Development –
You Get What You
Incentivize For
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R O B W R I G H T Chief Editor
llowing the application of a "one-
size-fits-all" intellectual property
policy that affords the same pro-
tection for Frisbees as lifesaving
and sustaining medicines would
be, quite frankly, moronic and short-sighted.
It would also be a disincentive for companies
to develop R&D-intensive; drugs because the
longer it takes to develop, the shorter patent life
you have. The converse is also true — less costly
drugs brought to market more quickly get lon-
ger patents. Until fairly recently, this is exactly
what was done, and why we had the "me-too"
drug era of the 1990s as well as the shortage of
antibiotics necessary to treat common infec-
tions today. If you want new cures in areas that
don't seem profitable, you need to provide the
proper incentives for companies to take the risk,
along with making sure provisions are in place
to properly align industry stakeholders (e.g.,
how Medicare reimburses hospitals for antibi-
otics). Now, if you want inexpensive drugs, we
need to further rethink drug patent protection
to achieve this as part of the outcome.
According to American economist Steven
Landsburg, most of economics can be summa-
rized in four words: "People respond to incen-
tives." Don't forget, pharmaceutical companies
are run by people and similarly respond to
incentives. For example, prior to 1983, indus-
try averaged fewer than one specialty pharma-
ceutical per year for rare diseases. Apparently,
Democratic Congressman Henry Waxman
believed this level of productivity to be inad-
equate and sought to increase the development
of rare disease drugs. In so doing, Waxman
demonstrated an affinity for Landsburg's
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