Hearings probe drug reform economics - C&EN Global Enterprise

Jul 10, 1978 - In the debate swirling around the Administration's proposed rewrite of the U.S. drug laws a major focus has been the effects of federal...
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C&EN July 10, 1978

says, "is consistent with the fact that public benefits from the support of R&D come only from the widespread deploy­ ment of the products of R&D in the civil sector." As the report points out, "Expe­ rience clearly indicates that there is no assurance of realizing such benefit solely from federal support of R&D." Thus, it concludes that "it is not apparent" that the opposition in some government circles to negotiating patent rights with private firms is "fully warranted." Copies of the report, "Applications of R&D in the Civil Sector: The Opportunity Provided by the Federal Grant and Co­ operative Agreement Act of 1977," are available from the U.S. Government Printing Office. The GPO stock number of the report is 052-003-00545-0; the price is $2.30.

Hearings probe drug reform economics In the debate swirling around the Ad­ ministration's proposed rewrite of the U.S. drug laws a major focus has been the effects of federal drug regulation on in­ novation in the pharmaceutical industry. Late last month a House subcommittee considering the legislation heard from nonscientists—economists—about how (or would) government controls affect the drug business. Dr. Henry G. Grabowski, professor of economics at Duke University, told the House Interstate & Foreign Commerce Committee's Subcommittee on Health & the Environment that "as regulatory controls have become increasingly more stringent over this [drug] industry since 1962, a number of adverse trends in pharmaceutical innovation have become apparent." Grabowski argues that be­ cause of federal regulation the cost of in­ troducing a new chemical entity (as op­ posed to so-called "me too" drugs or dif­ ferent dosage forms of existing drugs) has soared to as much as $50 million and length of time needed to win Food & Drug Administration approval of a new drug has stretched to as long as 10 years. At the same time, Grabowski claims that the proportion of new drug introductions has risen sharply in favor of the very largest drug firms in recent years, indicating that smaller drug companies are being squeezed out of drug development by in­ creased costs. Industry R&D, too, Grabowski ob­ serves, has shown little if any growth in real terms since the beginning of the 1970's. Moreover, he points out that in­ creasingly U.S. drug research is being carried out abroad. A National Science Foundation study, for instance, shows that about one third of all U.S. new drugs are first investigated abroad before they are introduced here. At the same time, many new drugs introduced in the U.S. since 1966 (indeed drugs that have been cited as important therapeutic advances) were available abroad before they were in the U.S. He notes that 14 of 27 important

Federal Alert— new legislation This C&EN report lists new legisla­ tion introduced between May 24 and June 27. Senate and House bills are listed under areas of interest by bill number, primary sponsor, and the committee to which the bill has been referred. HOUSE Competition. H.R. 13116—McKinney (R.Conn.). Requires Federal Trade Commission to monitor industries that produce supplies from or that hold reserves of energy sources; take action to prevent noncompetitive mar­ ket situation from evolving or continuing; referred to Interstate & Foreign Com­ merce. Energy. H.R. 12922—Pursell (R.-Mich.). Establishes a National Energy Trust Fund to support RD&D on alternative energy tech­ nologies; referred to Science & Technolo­ gyEnvironment. H.R. 13084—Livingston (R.La.). Amends federal water pollution control law to provide a lower limit on penalties for the discharge of hazardous substances; re­ ferred to Public Works & Transportation. Explosives. H.R. 12947—Anderson (D.­ Calif.). Requires addition of chemical mark­ ers to explosive materials for purpose of identification, detection; referred to Judi­ ciary. Health. H.R. 12980—Rogers (D.-Fla.). Re­ forms U.S. drug laws, establishes National Center for Clinical Pharmacology; referred to Interstate & Foreign Commerce. H.R. 13028—Wampler (R.-Va.). Directs EPA to request National Academy of Sciences study concerning standardization of certain tests for determining potential carcinogens; referred to Agriculture, Interstate & Foreign Commerce. Liability. H.R. 13260—Steiger (R.-Wis.). Provides a tax deduction for certain amounts paid to product liability loss reserve ac­ counts; referred to Ways & Means. Materials. H.R. 13025—Hollenbeck (R.-NJ.). Establishes national materials policy plan, federal mechanism to carry out such plan; referred to Government Operations, Interior & Insular Affairs, Interstate & Foreign Com­ merce, Rules. Nuclear. H.R. 13259—Ryan (D.-Calif.). Provides for a public proceeding by NRC to determine whether radioactive wastes can be safely contained, whether a plan for such containment exists; referred to Interior & Insular Affairs. Resources. H.R. 12988—Murphy (D.-N.Y.). Sets U.S. law governing development of hard mineral resources in deep seabed, com­ promise worked out among four committees; referred to interior & insular Affairs, Inter­ national Relations, Merchant Marine & Fisheries, Ways & Means. Safety. H.R. 13296—Skubitz (R.-Kan.). Ex­ empts employers of 10 or fewer people from coverage under OSHA, requires issuance of warnings to employers of fewer than 25 persons for first instance violations, bars assessment of penalties where fewer than 10 violations are cited; referred to Education & Labor.

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U.S. drug products were previously in­ troduced in the U.K. And he adds, "This was true despite the fact that the majority of these drugs were discovered in U.S. research laboratories." The Administration's proposed legis­ lation, however, has been billed as a remedy for many of these problems. But, observes Grabowski, there is "very little in the bill that would provide significant new positive incentives for drug innova­ tion and there are several aspects of the bill that could have a significant negative effect on innovation.,, For example, he believes that the bill's proposed mono­ graph system which prescribes published identity standards for all new drug com­ pounds "entails a longer, more formal and complex process of approval than the present law [and] will surely require more time and FDA resources than the present approval process." Grabowski says that the main incentive in the bill (H.R. 11611 and its companion S. 2755) is its provision for speedy ap­ proval of "breakthrough" drugs, drugs that in the hands of specialists could provide new therapy for serious illnesses before all the cumbersome regulatory steps are complete. He cautions, however, that "scientific advances in the drug areas, as in other fields, are often incremental in character, and frequently cumulate only gradually over time to major gains in so­ cial welfare." Nevertheless, the Administration is steadfast in its support of drug law re­ form. William D. Nordhaus, a member of the White House Council of Economic Advisors, argues that "the bill should speed research by reducing FDA control over drug investigations in their early stages. By distinguishing between early drug innovation investigations and later drug development investigations, and by keying appropriate regulatory controls to each phase, the bill gives free rein to the creativity of the drug innovator." The bill would ease restrictions on so-called Phase I clinical trials of new drugs where many compounds get shelved because they don't fulfill their promise. This has the potential for saving pharmaceutical firms both time and money, bill supporters claim. Nordhaus, however, seemed to be willing to make a concession on the monograph system contained in the bill. As now proposed, the drug monograph would give a drug developer five years of exclusive use of proprietary data supplied to FDA in support of a new drug approval. But the data would at the same time be made public. Critics of the proposed leg­ islation contend that this would allow foreign drug makers to pirate U.S.-de­ veloped data and beat U.S. firms out of key world markets. Observes Nordhaus, "The main negative effect of full disclo­ sure [of drug data] might be to tilt com­ panies to slightly earlier foreign intro­ duction . . . . If more incentives to dis­ covery are desired, it would be more efficient to lengthen the period of exclu­ sive use [of data] than to impede the flow of information." D

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