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PharmaDeals Business Commentary

US Election Will Impact New Drug Development Worldwide Forever (2008-08-01)

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Health has always been a political issue, particularly as regards access by the public to health services and medicine. The pharmaceutical industry is one of the most productive innovators, and in the field of prescription drugs, the emergence of biotech over the past 30 years has been a big help in boosting output. Historically, the pharmaceutical sector has been the most profitable and best performing economic sector, a reality that has always attracted political criticism – but, frankly, without this performance, new drugs would not be discovered at the same rate.

Today, the cost of producing a new drug is enormous, simply because of the rigorous testing that is required to ensure that the drug is both effective and safe for use by the public. The regulatory framework involved in this testing introduces an enormous development risk, as attested by the fact that only one out of ten drugs entering clinical trials makes to market. To take on this risk there has to be due reward.

In my view, without the US market, the growth and success of biotech would never have occurred over the past 30 years. The US market has helped to sustain a growth in new medicines because of the rewards made to those who were successful. This growth has been provided by an environment that protected the patents of the risk takers, and allowed them to price drugs at a level that ensured the appropriate reward was made. It is also my view that pharmaceutical and biotech companies outside the US have benefited enormously from the US market, and, in doing so, have provided a benefit to those economies whose governments have imposed strict pricing regimes on pharmaceutical companies.

There is a perception within US politics that the tough pricing regimes of Europe, Japan and Canada are right, and that those regimes provide the best way for the public to access medicines. This access benefit is, however, only true in the short term. If tougher pricing regimes do occur within the US, the rate of new drug discovery will decline sharply, because the risks for innovators will be simply too high. That situation will not benefit patients in the longer term, not only in the US, but also worldwide.

It is highly likely that there will be a change in pricing regimes in the US after the 2008 presidential election, as both Senators McCain and Obama have promised in their manifestos that they will allow cheaper drugs to be imported from overseas, and will encourage the growth of the generics market, by providing less protection to innovators. This will profoundly reduce the development of life-saving drugs in the future, and will be of no public benefit in the longer term.