Americans want to reduce health care costs and improve patient care. Congress says it wants to do the same, which is why both houses recently voted to renew drug approval “user fees.” But it would be better to strip the Food and Drug Administration of its monopoly control over pharmaceutical development.
The FDA was created in 1906, before prescription drugs became a leading medical treatment. The 1962 Kefauver-Harris Amendments vastly expanded agency control over drug approval, giving the FDA, which also regulates most food products, cosmetics, vitamin and dietary supplements, the power to determine efficacy as well as safety of new pharmaceuticals.
Drug discovery is an uncertain business. Unfortunately, new medicines do not appear miraculously, like manna from heaven. Firms typically have to assess between 5,000 and 10,000 substances for every one that survives the extensive testing process and makes it to market. Of those that win approval, 80 percent lose money. Only a few pharmaceuticals pay for the entire development process.
The average cost of developing a new drug runs more than $1 billion, with estimates traditionally ranging between $1.2 and $1.5 billion. The more stringent the FDA controls, the greater the expense. Bernard Munos at InnoThink and Forbes magazine’s Matthew Herper recently pegged the development cost much higher.
Critics complain that these numbers include administrative and marketing costs, but what business, let alone government agency, does not have administrative expenses? And marketing is an investment—drug companies advertise to sell more pills. It would be a strange industry if firms created products at great expense and then locked them away, playing a form of consumer hide and seek.
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