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Big Pharmaâ€TMs Profit Pursuit Means Fewer New Drugs, Report Says

by Shreema Mehta

Dec. 22, 2006 – Although drug makers typically justify the high cost of medicines by citing research expenses, a new government report says their research investments are mostly funding highly profitable modifications of existing drug designs, not new treatments.

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Spending on research and development has increased over the past ten years, but a combination of factors has led the pharmaceutical industry to submit fewer drugs to the FDA for review, according to an investigation by the Government Accountability Office, which handles such inquiries for Congress.

The report blames the slowdown on a shortage of research scientists, the slow adaptation of expensive new technologies, and an industry-wide focus on profit. Out of the "new" medicines that companies have submitted for review, 68 percent are so-called "me-too drugs" – modified versions of existing drugs, which generate generous profits while carrying little risk of rejection.

"This strategy has led pharmaceutical companies to pursue development of blockbuster drugs, which are usually for large patient populations and have the potential to reach $1 billion in annual sales," wrote the report’s authors.

Industry officials questioned by the GAO claimed these drugs offer wider options and safer alternatives to existing drugs for consumers.

But many health experts say the me-too drugs are essentially copycats that have no impact on the safety or efficacy of the drug.

"Newer isn’t always better, when it comes to drugs," Randall Stafford, a medical professor at Stanford University, told Stanford Medicine Magazine in an interview last year. "The FDA approves drugs on the basis of their superiority to placebo, not their superiority to existing drugs."

Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America, said in a press statement that the report merely confirms that the "journey from laboratory to medicine cabinet has become more challenging, risky and expensive than ever before."

The pharmaceutical industry’s spending on research and development grew by 147 percent between 1993 and 2005 to nearly $40 billion, according to the GAO. At the same time, the number of new drug applications submitted for an FDA safety review increased only by 38 percent.

The report also found that as pharmaceutical companies merge and consolidate to raise their profits, they often drop innovative but less-lucrative drug applications.

In its annual rankings of gainful industries and companies, Fortune magazine ranked the pharmaceutical industry as the fifth most profitable in 2006, with 15.7 percent of revenues gained as profits.

A report released by the National Institute of Healthcare Management, a US government-funded nonprofit that researches healthcare issues, concluded that legislation passed in the past two decades has given drug companies enormous patent protections that have offered them tremendous market advantages.

That report’s authors wrote that the intellectual-property protections have created an "oligopolistic market" that has increased the cost of drugs to consumers and limited innovation by encouraging companies to create and market me-too drugs instead.

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The NewStandard ceased publishing on April 27, 2007.

Shreema Mehta is a staff journalist.

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