Pharmaceutical evolution

Innovation is the lifeblood of the pharmaceutical industry. Over the last century, that industry has been responsible for thousands of new drugs, based on hundreds of thousands of smaller incremental innovations. The breakthrough “blockbuster” drugs taken by millions of patients today were not produced from thin air. Most represent the combined weight of seemingly small improvements achieved over time. The advantages of incremental improvements on existing drugs are paramount to overall increases in the quality of health care. As the pharmaceutical industry developed, classes of drugs—those with similar chemical composition and which treat similar conditions—have grown to provide physicians with the tools they need to treat diverse patient groups.

Still, critics have been highly condescending about what they call “Me-too” drugs—drugs within the same chemical class as one or more others already on the market—which they claim add little or no therapeutic value and are nothing more than an opportunity for pharmaceutical companies to fleece unsuspecting consumers. While some claim that there are too many similar drugs, and that pharmaceutical industry research and development could be more profitably directed toward developing entirely new classes of medicines, drugs based on incremental improvements generally represent advances in safety and efficacy. They also provide new formulations and dosing options that significantly increase patient compliance—both of which lead to improved health outcomes. From an economic standpoint, adding new drugs to a class of medicines also offers the possibility of lower drug prices as competition between manufacturers increases. Additionally, pharmaceutical companies depend on incremental innovations to provide the revenue that will support development of the riskier, capital-and research-intensive blockbuster drugs.

When critics refer to Me-too drugs, they do not mean exact generic copies of already existing drugs, or illegal counterfeits. Instead, Me-toos have a similar chemical composition to one or more others on the market, and have similar biological effects. But, in order to be approved, Me-too drugs must undergo the same extensive clinical testing as other new drugs to determine their safety and efficacy because they are chemically different. In addition, these differences, even if small, typically must represent a medical advancement—such as fewer side effects or improved efficacy for patient sub-populations—in order to attract a portion of the market away from the first approved drug in the class. Nevertheless, many drug industry critics have called for federal policies to inhibit the development and marketing of such incrementally improved medicines. But policies that curb incremental innovation will ultimately lead to a reduction in the overall quality of existing drug classes and could arrest the creation of truly novel drugs.

Research in any industry is a building process. Few scientists develop groundbreaking drugs from no prior research. Most work within, and respond to, existing knowledge—reading the same medical literature, and reacting to new technological breakthroughs at the same time. It is not hard to imagine, therefore, that many different companies would be working on similar drugs. In fact, it is often the case that the only reason why one drug is called novel and another a Me-too analogue is the speed at which each moves through the regulatory process.

Like other technological and value-added industries, the pharmaceutical industry depends on small steps for the creation of blockbuster drugs, which often result from a long series of small innovations. It also depends on these steps for the creation of drugs that provide slight, incremental improvements on existing drugs—thereby adding to a drug class, increasing competition among drugs, and incentivizing further innovation. As the National Research Council has observed, “the cumulative effect of numerous minor incremental innovations can sometimes be more transforming and have more economic impact than a few radical innovations or ‘technological breakthroughs’.” The net effect of increasing the number of drugs through innovation leads to advances in safety, efficacy, selectivity, and utility of drugs within a specific class.

Importantly, providing physicians with a variety of prescription options within a given therapeutic class is paramount to the provision of optimal health care. This is especially true for some drug classes, such as those relating to the central nervous system, for which overall response rates can be as low as 50 percent. For unknown reasons, certain patients respond differently to different drugs within a single class. If physicians have many options at their disposal, they can calibrate their prescribing patterns to better address the needs of specific patients. The existence of multiple similar molecular agents also provides backup in situations where the novel drug in a class is found to have unacceptable side effects and is thus removed from the market. As patients come to depend on a particular class of drugs, it is essential to make sure that they do not lose access to needed medication as a result of regulatory action.

One of the most vehement criticisms made against Me-too drugs is that they siphon money away from research that could be devoted to the creation of novel breakthrough drugs. This assumption is incorrect for a host of reasons, the most important of which is the fact that the pharmaceutical industry depends on selling the products of incremental innovations to provide the revenue for research and development of breakthrough drugs. Additionally, while it is unrealistic to presume that every incremental innovation leads to cost savings, the sum of all drug innovations can result in cost savings by reducing overall treatment costs, shortening or obviating hospital stays, increasing worker productivity and reducing absenteeism, and lowering drug costs through increased competition among manufacturers.

Ideally, every new drug would represent an unprecedented breakthrough and lead to the creation of a completely novel treatment. This, however, is not the reality of the pharmaceutical industry, or of any other development-based industry. Creating drugs based on incremental innovations provides pharmaceutical companies with a secure stream of revenue, which can be directed to higher-risk, potential blockbuster-yielding research. Policies aimed at reducing the industry’s ability to obtain revenues from incremental innovations could be self-defeating, as those industries will then have less revenue to reinvest in R&D for new drugs. Put simply, limiting incremental drug innovation is analogous to limiting competition. The ultimate result could have devastating consequences for the future of the pharmaceutical industry and for the millions of patients who depend on it.

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Aged care funding via vouchers now being considered in Australia

A good move

FUNDING could be stripped from Australian aged care homes and vouchers of up to $50,000 handed directly to residents in a radical aged care overhaul being examined by the Federal Government. Under the proposal, vouchers would go directly to Australian seniors and their families, allowing them to decide what sort of care they wanted. The proposal has been floated by Warren Hogan, author of a landmark report on aged care funding for the previous Howard government.

It has the backing of mainstream facilities - including one of Queensland's largest providers, TriCare, which wants a more consumer-focused approach to an industry facing "the perfect storm of an ageing demographic and a declining number of aged care beds".

A spokesman for Minister for Ageing Justine Elliot yesterday confirmed the minister was looking at the issue of "consumer-directed care". "This is a radical area of policy development and we would need to proceed cautiously," he said. "In addition, we would have to ensure that there were strong safeguards to protect the frail aged."

Professor Hogan - along with the Productivity Commission and the National Health and Hospitals Reform Commission - expressed deep concern about the nation's ageing demographic. All are pushing for aged care facilities to be more responsive. Professor Hogan said central planning at the core of existing policy strategies introduced inefficiencies and rigidities, sparking a retreat by providers and "regulated scarcity". He said allowing government aged care funding to be directed to users of services and their families could be arranged just as readily as sending the money to providers. "By issuing vouchers to residents and potential residents for the value of the care to be met by government, these users could determine in discussions with the provider of their choice the type of services suited to their needs as specified by an Aged Care Assessment Team."

Care subsidies paid annually to providers range from $3000 to $50,000 a year, with more than 60 permutations and calculations in between. But, generally, a high-care provider receives between $30,000 and $50,000 a year to care for a resident.

Jim Toohey - the spokesman for the national Aged Care Alliance and who also heads up TriCare - said the idea was one of a range of proposed new funding models which appeared to have merit. "Establishing a relationship with the consumer in which the consumer has power is the way towards innovation in the aged care sector," Mr Toohey said. He said good-quality providers would welcome removal from a situation where they relied on a government subsidy to one allowing the market to determine what services they should provide. Mr Toohey said the proposal, in practical terms, could allow ageing Australians to opt out of an aged care facility altogether.

A Brisbane resident in a $700,000 home who required aged care could choose to opt for a reverse mortgage on the home, collect the government voucher, and use the funds to arrange for private aged care inside the home. Alternately, seniors wanting a high quality of life could opt to top up their voucher with their own money for more luxurious care.

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