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November 5, 2015

Lower Drug Prices by Streamlining Approval Process, Delaying IP Clock

  Institute for Policy Innovation

DALLAS- No one likes paying high prices, and not surprisingly drug pricing has become a hot-button issue on the presidential campaign trail. But a new publication shows how competition, streamlining the drug-approval process, and leveraging the power of intellectual property protections are the keys to unlock lower prices for consumers. 

“If you are taking a prescription drug, there’s an 86 percent chance it’s a very affordable generic version of a brand name drug. But for everyone else, prices have become a political target,” writes Institute for Policy Innovation (IPI) resident scholar Dr. Merrill Matthews in “Explaining the High Cost of Prescription Drugs.”

It takes longer and costs more for a new drug to become available, said Matthews. In 2014, drug makers spent over $51 billion on research and development.  But no thanks to a cumbersome FDA approval process that lacks incentives to expediently get drugs to market, the average cost of a newly approved drug is about $1.756 billion. These days the target patient population for new drugs is often much smaller, making the cost of drug development for each new patient rise exponentially.

However, reducing intellectual property protection will likely raise prices, not lower them, and price controls would simply halt the R&D process altogether. “Competition, not regulation, is the best way to put downward pressure on prices. The government’s best action isn’t price controls but streamlining the drug-approval process to ensure that as many drugs can hit the market as quickly and as safely as possible.”

“If lawmakers want to lower drug prices and encourage even more new drug development, they should allow innovator companies to receive more benefits from their current IP protections,” said Matthews. “One way would be to start the IP clock ticking later, perhaps during clinical trials rather than once a company discovers a prospective molecule. This change would allow manufacturers to spread their R&D costs over a longer period.”

“There are reasons why some drugs are very expensive,” said Matthews. “But some of the proposed political ‘fixes’ would either make those drugs even more expensive or ensure they are never developed for the patients who need them.” 

 

The Institute for Policy Innovation (IPI) is an independent, nonprofit public policy organization based in Dallas. Resident scholar Merrill Matthews, Ph.D. is available for interview by contacting Erin Humiston at (972) 874-5139, or erin@ipi.org. 


 

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