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The Case for Incremental Innovation: The Importance of Protecting Follow-on Pharmaceutical Discoveries

Written by Dr. Kristina Lybecker
Associate Professor of Economics, Colorado College
Posted: June 23, 2014 @ 9:00 am

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The pharmaceutical industry is widely criticized for wasteful spending on duplicative research to develop “me too” drugs, and focusing their efforts on “evergreening” patents. Those who argue that incremental innovation and follow on improvements to existing therapies aren’t worthy of patent protection need to look more deeply at the reality of what subsequent innovation provides. The case for protecting incremental innovation is laid out in a new publication by the Fraser Institute (released 19 June 2014), in which a thorough exploration of the therapeutic and economic value of follow-on pharmaceutical innovation is provided.

Pharmaceutical innovation is an inherently dynamic process; one innovation builds on another and improvements draw from a long history of earlier technological advances. Sir Isaac Newton once stated, “If I have seen far, it is by standing on the shoulders of giants.” In her classic paper on innovation, Scotchmer cites this quote and emphasizes that virtually all technical progress builds on a foundation provided by earlier innovators.[1]   Innovation is an undeniably cumulative event, and progress happens both in leaps and bounds (radical innovation) and in small steps (incremental innovation). In the context of the pharmaceutical industry, radical innovations encompass breakthrough discoveries of the ‘first-in-class’ medicine with a new mechanism of action. In contrast, incremental innovations may expand an existing therapeutic class through the development of a new drug based on differences in adverse effects, delivery systems, dosing schedules, or heat stability. In 2012, 45 new drugs gained regulatory approval from the US FDA, the highest number since 1997. Currently there are 907 biologics, medicines and vaccines in development, targeting more than 100 diseases.[2] Much of this innovation can be considered incremental, resulting in so-called ‘me-too’ or follow-on drugs. These are therapies that largely replicate the action of existing drugs. All indicators suggest that a significant share of medical progress is happening through incremental innovation.

All innovation is valuable to the economy and to patients, whether in the form of breakthrough discoveries or incremental innovations. Importantly, the majority of existing therapies currently in use are incremental innovations. As evidence of their therapeutic value, a recent study finds that 63% of the drugs on the World Health Organization’s Essential Drug Lists are follow-on drugs[3], and close to one-quarter of the therapeutic indications described are treated by drugs initially indicated to treat a different disease or condition[4].

The value of such innovation is best measured through the improved health outcomes for patients. In this context, a few examples from the developing world are even more illustrative. Given that those who most vehemently oppose protection for incremental innovations frequently cite the need for treatments for neglected diseases and maladies of the developing world, it is important to note that many of the treatments that do exist for the world’s most vulnerable populations are themselves incremental innovations. Numerous incremental innovations have resulted in improvements that have specific application to neglected diseases and the maladies of the developing world.   As noted by WIPO, “many follow-on and patented innovations might contribute in a positive way to the improvement of public health and also to economic development, and that some forms of adaptive innovation may be especially relevant to meeting neglected health needs.”[5]

 The list below is but a small sample of valuable incremental innovations improving health and extending lives today, specifically in the developing world.

  • AIDS: Efavirenz/emtricitabine/tenofovir DF, the first-ever single-pill AIDS treatment regimen combining three drugs into one pill, simplifying the dosing regimen and increasing patient compliance. [6]
  • AIDS-related Kaposi’s Sarcoma: Both daunorubicin and doxorubicin which are used to treat AIDS-related Kaposi’s sarcoma are delivered in liposome delivery systems which reduces toxicity and concentrates the drug in areas of infection.[7]
  • Chagas Disease: Clinical trials are underway to explore the effects of the antifungal medicine ravuconazole against the pathogen that causes Chagas disease, a neglected tropical disease affecting nearly 10 million people.[8]
  • Malaria: Improvement innovation led to the development of a new formulation of two anti-malarial drugs, artesunate and amodiaquine, reducing dosing regimens from eight tablets a day to two.[9]

Beyond the therapeutic value these drugs provide, the choice that they offer physicians and their patients is also of great value. As described earlier, incremental innovation provides physicians with the flexibility to treat the individual needs of diverse patients with precision. Therapeutic alternatives within the same drug class may differ in their metabolism, molecule, regimen, dosing schedules, speed of action, delivery system, adverse effects, therapeutic profile and/or interactions. In addition, incremental innovation increases the number of available dosing options, uncovers new physiological interactions of known medicines, encourages children’s compliance through reformulations, increases the shelf-life or heat-stability of a given medicine to ensure effectiveness in diverse environments, expands the number of treatment options available, improves patient administration, allows for the elimination or treatment-limiting drug reactions or side effects, and offers significant options to patients with different physiologic and pathophysiologic status. While increasing the number of treatment options available to patients is a primary goal of incremental innovation, it bestows other benefits as well.

In addition to the health benefits described above, incremental innovation in the pharmaceutical industry delivers cost savings. One of the principal advantages of the development of follow-on drugs is the price competition that results from the availability of multiple drugs in a single therapeutic class. In a study of pharmaceutical innovation, DiMasi examined 20 new entrants to existing classes (1995-1999), finding that 80% were launched at a discount relative to the price leader and 65% were launched at a discount relative to the average price for the class.[10] Moreover, the average percentage decrease in price was 26% relative to the price leader and 14% relative to the class average. DiMasi’s analysis demonstrates that incremental innovation delivers cost savings, as well as therapeutic choice, to patients.

While critics argue that incremental innovation represents a waste of resources and generates minor improvements, not worthy of patent protection, the evidence indicates that these criticisms do not withstand close scrutiny. It is essential to recognize the value of these treatments and those that will build upon them in the future. They must be protected and incentivized. The future of public health is at stake.

 

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[1] Scotchmer, S. “Standing on the Shoulders of Giants: Cumulative Research and the Patent Law,” Journal of Economic Perspectives, vol.5, no.1, Winter 1991, pp.29-41.

[2] Pharmaceutical Research and Manufacturers of America (PhRMA). “Medicines in Development: Biologics,” 2013.

[3] Cohen, J., and K. Kaitin. “Follow-On Drugs and Indications: The Importance of Incremental Innovation to Medical Practice,” American Journal of Therapeutics, vol.15, 2008, pp.89-91.

[4] Wastilla, L.J., M.E. Ulcickas, and L. Lasagna. “The World Health Organization’s Essential Drug List. The Significance of Me-Too and Follow-On Research,” Journal of Clinical Research and Drug Development, 1989, vol.3, pp.105-115.

[5] World Intellectual Property Secretariat (WIPO). “Follow-on Innovation and Intellectual Property,” WIPO submission to the World Health Organization’s Commission on Intellectual Property Rights, Innovation, and Public Health, May 20, 2005.

[6] Cohen, J., and K. Kaitin. “Follow-On Drugs and Indications: The Importance of Incremental Innovation to Medical Practice,” American Journal of Therapeutics, vol.15, 2008, pp.89-91.

[7] Wertheimer, A., R. Levy, and T. O’Connor. “Too Many Drugs? The Clinical and Economic Value of Incremental Innovations,” in Investing in Health: The Social and Economic Benefits of Health Care Innovation, 2001, volume 14, pp.77-188.

[8] International Federation of Pharmaceutical Manufacturers & Associations (IFPMA). “Incremental Innovation: Adapting to Patient Needs,” January 2013.

[9] Ibid.

[10]DiMasi, Joseph A., “Price trends for prescription pharmaceuticals 1995-1999,” a report prepared for the Conference on Pharmaceutical Pricing Practices, Utilization and Costs of the U.S. Department of Health and Human Services, 2000.

 


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About the Author

Dr. Kristina M. Lybecker is an Associate Professor of Economics at Colorado College in Colorado Springs. She earned a B.A. from Macalester College, with a double major in Economics and Latin American Studies, and received her Ph.D. in Economics in 2000 from the University of California, Berkeley. Kristina’s research analyzes the challenges surrounding intellectual property rights protection in innovative industries: incentivizing pharmaceutical research and development especially on neglected diseases, addressing the difficulties of strengthening intellectual property rights protection in developing countries, battling the problems related to pharmaceutical counterfeiting and the unique nature of protection for biotech therapies. Recent publications have also addressed alternatives to the existing patent system, the balance between pharmaceutical patent protection and access to essential medicines, and the markets for jointly produced goods such as blood and blood products. Kristina has testified in more than a dozen states on the economics of pharmaceutical counterfeiting. She has also worked with US Food and Drug Administration, Reconnaissance International, PhRMA, the National Peace Foundation, the OECD, the Fraser Institute, the Macdonald Laurier Institute, and the World Bank, on issues of innovation, international trade, and corruption.

 

 


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  1. Such incremental innovations may be ideal candidates for protection according to “second tier ” patent systems such as Australia’s innovation patent regime which provides lower level innovations with 8 years of patent protection and sets the invention threshold below that of the requirement to show an inventive step necessary in the case of a standard patent.