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Selected research from leading health care experts whose findings have a direct bearing on public policies effecting medical progress. Research is chosen based on its quality and relevance by the Medical Progress Today editorial staff.

Selected Research

Are Development Times for Pharmaceuticals Increasing or Decreasing?
Neil Powe, Salomeh Keyhani, Marie Diener-West, Health Affairs, 3-1-06

Researchers in this study argue that, contrary to assertions made by drug companies and other researchers, drug development times (and therefore development costs) are in fact decreasing, with the implication that drug prices are in some sense “too high” relative to costs.

This study examines trends in drug development times. Longer clinical trial times have been described as one factor leading to higher drug prices. Previous reports on development times have been based on proprietary data. We examined trends in development times for 168 drugs with data collected from publicly available sources. The median clinical trial and regulatory review periods for drugs approved between 1992 and 2002 were 5.1 and 1.2 years, respectively. Clinical trial periods have not increased during this time frame, and regulatory review periods have decreased. Therefore, it is unlikely that longer clinical trial times are contributing to rising prescription drug prices.

Readers can examine both this article and the previous one and come to their own conclusions. But one thing to consider is that no commodity is priced simply according to the cost required to make it. If this were the case, tiny shoebox studio apartments in Manhattan wouldn’t sell for many hundreds of thousands of dollars.

Market prices reflect the value of products to consumers; thus cancer and AIDS drugs command a premium, while generic aspirin does not. The response to this reality is not to try and find an “objective” cost for making these items and then demand that producers lower prices. Price controls are a recipe for declining innovation and therefore a reduced supply of new and improved medicines over the longer term.

Market mechanisms offer a better solution. Let consumers pay for their routine consumption of pharmaceuticals through HSAs and reduce reliance on third-party payers. When consumers buy drugs with out-of-pocket spending, they have an incentive to find the best combination of price and value. Streamlining the time and cost required for producers to bring new drugs to market would also increase the number of therapeutic choices available to consumers and insurers—encouraging more price competition. Drugs that offer significant therapeutic improvements will still command pricing premiums.



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