The Real EpiPen Lesson

The bad press and outrage swirling around the pharmaceutical company Mylan has forced it to take an unusual new step. In response to criticism of the company’s $600 price tag for its EpiPen — an emergency response system for severe allergic reactions — Mylan is offering a generic version of its own product. The generic EpiPen will cost $300 dollars — half the current price of a two-pack of the product — and would compete directly with its name-brand counterpart.

Yet there’s a better solution than just hoping public pressure will keep drug prices affordable. For example, EpiPen prices might be significantly lower today if the Food and Drug Administration hadn’t delayed approval of the drugmaker Teva’s generic version this past March. The high price of the EpiPen is the inevitable result of the FDA’s cumbersome, arbitrary approval process, which prevents many new drugs and treatments from ever reaching the general public. In turn, drugs already on the market enjoy near-immunity from competition — and the lower prices that come with it.

The FDA’s drug approval process is byzantine, to put it mildly. The Independent Institute estimates it takes pharmaceutical companies roughly between eight and 19 years of bureaucratic back-and-forth to bring just one new medicine to market. It’s also getting longer: Research conducted at Tufts University found the average clinical trial process lengthened by 70 percent between the late 1990s and the mid-2000s. Part of this is because the FDA drastically changed its approval standards over time. Other times, it’s just a matter of regulatory limbo — see the nearly five-year gap between the FDA’s recommendation for approval and final approval of a recent revolutionary lung disease treatment.

No matter how it happens, this time sink increases the price of new drugs. The final approval stage, Phase III, can account for 90 percent or more of a drug’s development costs, according to a 2012 study by the Manhattan Institute’s Avik Roy. Across all companies, Tufts University found that new medicines cost an average $2.6 billion in 2014 — a $1.6 billion, a 160 percent increase in a mere 11 years.

Even small decreases in the review process could substantially lower drug development costs. It could also lower drug prices for consumers. In 2014, Researchers Joseph A. DiMasi, Christopher-Paul Milne, and Alex Tabarrok found that the FDA’s oncology division approves drugs 60 percent faster than other divisions. If the rest of the agency closed the gap by just half, drug developers would save nearly $900 million a year. Consumers, meanwhile, would see the savings in their medical bills.

The lengthy and expensive review process also stifles innovation that could save countless lives. According to the Center for Study on Clinical Research Participation, only 19 percent of drugs successfully navigate the three major stages of FDA approval and testing. Some drugs fail because they were unsafe. Others fail because their creators couldn’t afford the exorbitantly expensive process, further diminishing competition with established companies like Mylan.

This profoundly matter for the average American. Besides increasing prices artificially, the agency also prevents the creation of drugs that could revolutionize treatment for a wide variety of conditions. This is especially true in the areas of obesity, diabetes, and cardiovascular disease, for which drug development is more heavily regulated. Drug development is a life-or-death matter, yet the FDA is standing in the way of longer and better lives for hundreds of millions of Americans.

If the FDA is concerned about these trends, it can combat that by modifying its burdensome review process. Mr. Roy recommends the agency adopt a “conditional” approval process, allowing drugs that pass through Phase I and II clinical safety trials to be marketed on a limited basis. The FDA, meanwhile, would continue collecting evidence and reserve the right to recall the product. This one reform could cut a medicine’s development costs by more than 90 percent, while cutting three or more years off the approval process. Americans would benefit from both lower costs and quicker access to lifesaving medicines.

And if the FDA proves itself to be a bureaucracy unwilling to be reformed, then Congress should pull out its own scalpel. Henry I. Miller, the founding director FDA’s Office of Biotechnology, has recommended that Congress outsource the clinical trials to federally-approved private companies. They would then compete to make the review process more efficient and affordable, with the FDA maintaining the ultimate approval authority.

Congress has recognized the danger posed by the FDA’s ever-growing bureaucracy, and has ongoing attempts to address it via bills such the “Reciprocity Ensures Streamlined Use of Lifesaving Treatments Act,” or RESULT Act. Introduced in December by Senators Ted Cruz (R-Texas) and Mike Lee (R-Utah), this bill would force the FDA to approve medicines that have first been approved by regulators in other developed nations. Data from a 2014 study by the Center for Innovation in Regulatory Science show this could have given Americans quicker access to roughly a quarter of all drugs approved in the European Union and Japan between 2009 and 2013.

If the FDA is to live up to its mandate of enhancing public health  it must stop needlessly barring competition to products like the EpiPen. A vibrant, competitive marketplace will give drug producers more incentive to keep prices low and will spur innovation that could save lives. Surely that’s what the doctor ordered.


Mr. Nascimento is senior policy advisor at Freedom Partners Chamber of Commerce.

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