Ideally, every new drug would represent an unprecedented breakthrough and lead to the creation of a
completely novel treatment. This, however, is not the reality of the pharmaceutical industry, or of any other
development-based industry. Creating drugs based on incremental innovations provides pharmaceutical
companies with a secure stream of revenue, which can be directed to higher-risk, potential blockbuster-yielding
research. Policies aimed at reducing the industry’s ability to obtain revenues from incremental innovations
could be self-defeating, as those industries will then have less revenue to reinvest in R&D for new drugs. Put
simply, limiting incremental drug innovation is analogous to limiting competition. The ultimate result could
have devastating consequences for the future of the pharmaceutical industry and for the millions of patients
who depend on it.

Ideally, every new drug would represent an unprecedented breakthrough and lead to the creation of a completely novel treatment.  This, however, is not the reality of the pharmaceutical industry, or of any other development-based industry.  Most new drugs represent the combined weight of seemingly small improvements achieved over time.  Creating drugs based on incremental innovations provides pharmaceutical companies with a secure stream of revenue, which can then be directed to higher-risk, more innovative research.  Many critics contend that “Me-too” drugs — drugs within the same chemical class as one or more already on the market — add little or no therapeutic value to existing formularies.   Conversely, advocates claim that new drugs based on incremental improvements generally represent advances in safety, efficacy, selectivity, and ultimately increase the utility of drugs within a specific therapeutic class.  Innovations may also include new formulations and dosing options.  Changes in one or more of these parameters generally increase patient compliance and improve health outcomes.  Furthermore, patients can respond differentially to drugs within a single class, thus having multiple drug options within a therapeutic class enables optimization of medical treatment to best fit a patient’s needs.  From an economic standpoint, while it is unrealistic to presume that every incremental innovation leads to cost savings, the sum of all drug innovations can reduce overall treatment costs, shorten or eliminate hospitalization, increase worker productivity and reduce absenteeism, and eventually lower drug costs through increased competition among manufacturers.

In conclusion, policies aimed at reducing an industry’s ability to obtain revenue from incremental innovations could be self-defeating, as less revenue will be available to reinvest in research and development.  In pharmaceutical terms, limiting incremental drug innovation is analogous to limiting competition.  The result could have devastating consequences for the future of the pharmaceutical industry and ultimately for patients.

Source:  Competitve Enterprise Institute

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