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Tuesday, July 20, 2004

We Need Me-Too Drugs Too

In a recent article in the NY Review of Books, Marcia Angell, former editor of The New England Journal of Medicine, promises to tell us "The Truth about the Drug Companies." Her version of the truth turns out to be pretty much the same rant put out by Ralph Nader's health policy organizations. Indeed, her 19 footnotes are mainly citations to Nader organizations, other advocacy organizations, newspapers, magazines, and also a blog, and rarely to academic research.

Angell makes one particularly wrong-headed proposal:
We need to get the industry to focus on discovering truly innovative drugs instead of turning out me-too drugs...The me-too business is made possible by the fact that the FDA usually approves a drug only if it is better than a placebo...

The me-too market would collapse virtually overnight if the FDA made approval of new drugs contingent on their being better in some important way than older drugs already on the market. Probably very few new drugs could meet that test. By default, then, drug companies would have to concentrate on finding truly innovative drugs.
There are at least two problems with this plan. First, there's no reason to think that banning me-too drugs would spur more research into innovative drugs. There isn't some fixed pot of industry research money. The drug industry, and its investors, are presumably already doing all the research into breakthrough drugs that they think will be profitable. If they can't put their money into me-too drugs, they're just as likely to invest in Las Vegas casinos, Hollywood movies, or maybe munitions, as in truly innovative pharmaceutical research.

Second, banning me-too drugs would raise drug prices. Me-too drugs, by definition, are close substitutes for drugs already on the market. Hence, they increase competition and lower drug prices. It may not be the optimal way to set drug prices, at least if the me-too drugs are really identical to the old ones, but it could well be a second-best solution.

Another way that Angell's proposal would raise drug prices is to increase the cost of clinical trials, which account for most of the cost of developing a new drug. Consider a drug trial where 50% of those given a pill recover, while only 25% of those given a placebo do. Now consider a me-too drug that worked for 55%. Angell wants us to test this drug against the old 50% pill, rather than a placebo. But to do this we need a dramatically larger study. In fact, about 25 time larger: 2500 patients instead of 100! These kind of costs could easily rule out any possibility of doing the research. And that would mean that the extra 5% won't ever get to benefit from the drug. Further, if the "me-too" drug doesn't benefit exactly the same types of people, the number of potential beneficiaries is higher than 5%.

I've always been puzzled: why do public interest organizations spend so much time criticizing the drug industry for "wasteful" research and marketing, and so little time criticizing the billions spent on the development and marketing of marketing of movies, casinos, candy, and all the other products that are a lot less valuable than new pharmaceuticals?


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