Biotech vs. Big Pharma: Will patients be caught in the middle?

By ACSH Staff — Feb 21, 2012
How can we help level the playing field in the game of regulatory approvals between upstart biotech firms and Big Pharma? By supporting a new bill that would expand the FDA s accelerated approval process to a broader range of diseases. At least that s what Avik Roy, a Senior Fellow in health care policy at the Manhattan Institute for Policy Research, is suggesting in a recent Forbes op-ed.

How can we help level the playing field in the game of regulatory approvals between upstart biotech firms and Big Pharma? By supporting a new bill that would expand the FDA s accelerated approval process to a broader range of diseases. At least that s what Avik Roy, a Senior Fellow in health care policy at the Manhattan Institute for Policy Research, is suggesting in a recent Forbes op-ed.

The current problem in pharmaceutical innovation, says Roy, is that small biotech firms are forced to partner with larger pharmaceutical companies for financing if they want to get their drugs on the market, since clinical trails are so expensive. (As Matthew Herpert discussed last week in Forbes, the average cost of a new drug is $4 billion.) To circumvent that, however, Sen. Kay Hagan (D-N.C.) has proposed the TREAT Act (Transforming the Regulatory Environment to Accelerate Access to Treatments). The act calls on the FDA to tentatively approve drugs for diseases other than cancer and AIDS if they show promise after early-stage (Phase II) trials that rely on surrogate endpoints, which are markers that measure the efficacy of a certain treatment that may or may not correlate to a clinical endpoint.

For instance, the cancer drug Avastin was approved for breast cancer via the accelerated approval process after Phase II data demonstrated that the drug improved progression-free survival. Yet evidence later showed that the drug had no effect on survival (the actual clinical endpoint), and thus it was removed from the market.

ACSH s Dr. Josh Bloom, however, has some problems with the TREAT Act. People are aware that drugs occasionally show unexpected toxicity and are recalled after being put on the market, he says. This is relatively rare (Vioxx is the most obvious example). Yet he points out, What most people don t know is that half of new drugs fail in Phase III and, of these, about 25 percent fail due to safety issues. It s inevitable that we will see additional safety problems if Phase III trials are circumvented.

Not surprisingly, some say, large pharmaceutical companies are trying to fight the proposed legislation, though Roy and others argue that their actions are hypocritical, using phony concerns about patient safety to mask their true commercial agenda. Big pharma says don t dilute safety measures for new drugs. That sounds better than we want to keep our cut of the action, says Erik Gordon, a business professor at the University of Michigan. To Roy, Big Pharma s latest push against the TREAT Act comes as no surprise: Biotechs are forced to give up the economic upside of success for their innovations, he observes, while big pharma skims the cream off of biotech pipelines for their own purposes.

Yet to Dr. Bloom, that logic doesn t make much sense. Drug makers incur their highest costs during Phase III trials, so they would benefit from this change as well just not as much as the smaller companies that can t afford to run advanced trials, he says.