US Leads in Medical Innovation
TL/DR –
The U.S.’s previously robust drug development market is under threat from recent changes including the Inflation Reduction Act (IRA) which adjusts the expectation of profit from successful inventions, thus affecting investment. The U.S.’s model of intellectual property protection and competitive price negotiation has made it a leader in the development of new drugs, however, recent financial and policy changes are undermining this position. Meanwhile, China is enhancing its intellectual property laws and has increased its share of global clinical trials by 57% in the past five years, positioning it as a rising leader in drug development.
Revamping the U.S. drug development sector
In 2020, the U.S. marked the 40th anniversary of the Hatch Waxman Act, which established a legal framework contributing to the evolution of transformative medicines worldwide. However, recent years have seen a decline in attributes encouraging investment in the costly and risky business of drug development. As China enhances its intellectual property protocols, it’s becoming a global leader in this field. It’s time for the U.S. to reassess and adapt.
Inflation Reduction Act’s impact on drug development
The Inflation Reduction Act (IRA) doesn’t impact a drug’s intellectual property protection but changes profit expectations from successful creations. By introducing price controls for certain drugs in Medicare, the IRA is diluting the system that encourages investment in drug development and restrains cost growth.
The cost of clinical studies
Investing in clinical studies comes with potential financial gains, but it also requires hefty amounts of money to transfer a promising idea from the lab to a patient safely. This doesn’t account for the lost finances if drug discovery fails.
The U.S. market-based system
The U.S. has thrived through a market-based system with intellectual property protection. Despite some imperfections, it’s resulted in a multitude of medicines for infectious and life-threatening diseases, making the U.S. a global leader in drug development. The idea of a government deciding what diseases get treatment seems considerably more fraught.
The unique nature of drugs
Drugs differ significantly from other goods or services, which is why they’re treated differently in law. Since developing a new drug requires substantial time and money, most drug patents start expiring while they’re being tested. However, even with additional protections, most drugs have a generic competitor after 14 years, leading to over 90% of all U.S. prescriptions being dispensed as generics.
Financial implications of the IRA
Concerns about healthcare expenditure in the U.S. are valid, with the U.S. spending more and getting less compared to other countries. However, price controls in the IRA might be counterproductive, particularly given the potential health loss from dwindling investment in drug development.
China’s growing influence in drug development
While the U.S. grapples with these issues, China’s global clinical trials’ share has surged by 57% in the last five years.
Suggestions for IRA price controls
If IRA price controls are deemed necessary, they should be reformed to coexist constructively with the intellectual property system. One possible solution could be to impose price controls after 13 years for any selected drug when they would naturally expect a generic competitor. The U.S. must strive to sustain its leadership in drug development, not dismantle it.
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