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Innovation and Its Discontents

Yesterday’s report on pharmaceutical cost and innovation got a lot of play in the media, including the ABC special last night (which I didn’t see much of.) I’m of two minds about it: there’s some truth in it, but there are important things that it misses.

Companies will do everything they can think of to hold on to a lucrative market. It needs, as Shakespeare said, no ghost come from the grave to tell us this. Drug companies exist to make money, and this is a way to make money. Legal maneuvers to extend the patent life and make things difficult for generic companies are one strategy; internal me-too drugs are another.

As my May 2 post on Claritin and Clarinex shows, I believe that the industry does come up with drugs that have few (if any) advantages over their predecessors. Nexium vs. Prilosec is another example of this, as far as I can tell. Both these are largely designed to replace drugs that the companies already had which are going off-patent.

But the “me-too” label gets thrown around a bit too liberally when it comes to competition between companies. I can tell you, from personal experience, that for a serious R&D effort to be mounted, a project simply has to have some advantage versus the competition. I’ve never seen a project start off by saying “We’re going to make the exact same thing as those guys did, and make up the difference with a huge ad campaign.” Huge ad campaigns work better with something to hang them on.

The complexities of pharmacology give you plenty of chances to have differences between drugs that (in theory) might well work the same. Companies try to develop and promote those differences. If the combined size of the total market and the space for differentiation is large enough, you can have several companies piling into the same field, fighting it out.

That could be just plain old better efficacy, as Lipitor seems to have in the crowded field of cholesterol-lowering statins. It could be once-a-day dosing versus after-meals, fewer side effects, or fewer interactions with other drugs. It could be plain old lower price, too: the uncertainties of clinical development make it risky to start a project based on that alone, but it can come up by the end of the project. Ciba-Geigy (now Novartis) tried that with one of their statins a few years back, to pick one from the same area.

That’s the free market, and may the best compounds win. Sometimes the differences that are promoted may not be enough to justify a new drug’s existence, though. This happens (in my experience) along the way in the development process, when the plan for a bigger market advantage doesn’t work out in the clinic. Ideally, such drugs wouldn’t fly in the marketplace, but companies will sometimes try to make them take off anyway.

Physicians can feel stampeded when their patents come in asking for a new drug that they don’t think is worth the cost. If they don’t write for it, they think, someone else will. What we’re seeing now, though, is a reluctance for managed-care plans to pay for some of these, a decision which is certainly their right to make. HMOs get to have their free-market fistfights, as well.

As for the general question of innovation, I can tell you that no company tries to make a living from just hopping into crowded fields where there’s already competition. You have to innovate to survive. On the flip side, trying to break absolutely new ground every time out is a risky strategy, too, given the failure rate and the expenses involved. We can argue all day about just how much it takes to develop a new drug, but if you’re the first-in-class in a new area, it’s going to cost you more. But the potential payoff is bigger, too – you can have some real fun calculating the risk/reward, especially since some of the key numbers are impossible to truly quantify.

I’d also like to see a study like yesterday’s address what happens to some of the groundbreaking drugs that they cite favorably. For example, they mention Avandia and Actos (rosiglitazone and pioglitazone) for diabetes in the category. Leave aside the fact that these two drugs work via almost identical mechanisms (with some slight differences, which the companies are, as per the above, trying to exploit.) And leave aside that they were developed at the same exact time, in sull knowledge that they’d be going head-to-head in the marketplace (which one was the me-too, if either one was?)

No, what I’d like to point out is that these innovative therapies weren’t the first in that class. That would be Rezulin (troglitazone.) That was absolutely the first drug on the market to work by that mechanism, and the first to do what these compounds do for diabetes. Avandia and Actos were expected to have to go out and dethrone it; that’s what the companies planned for. But Rezulin went down in flames due to toxicity, which only showed up when it got into a broad patient population. The lawsuits are still flying. If it had made it, then the other two drugs would surely be cited as more of those nasty, money-grubbing me-toos.

Where’s that one in the sound bites about “nothing new in the drug industry”? The money spent to develop and market Rezulin is gone, and it’s not coming back. Lots more is going to vanish, is vanishing right now, going to plaintiffs and lawyers. How do we make up for that?