Can't fix health-care without fixing the FDA.

The pharmaceutical industry is a major part of the US and global economy. For 2008, US pharmaceutical sales are estimated to be $291 billion, and the world market is estimated to exceed $900 billion. The worldwide industry is dominated by US companies, and even big European pharmaceutical companies have large operations here. The industry has long been profitable and relatively recession-proof. Pharmaceutical stocks are an anchor investment in most equities-oriented mutual funds, college endowment portfolios, and retirement funds (including union and public employee funds). We are at the most exciting stage in medical history, with a wide range of wonderful new discoveries based on the emergence of real science knowledge about micro-biology, DNA, diseases, and drugs.

What’s wrong with this scene? It costs way too much to get a new drug approved by the FDA. Since over a billion dollars must be risked in the development and testing of every new drug, most participants in the industry only look for drugs that are potential “blockbusters,” with annual US revenue potential approaching a billion dollars or more. None of the hundreds of newer, small pharmaceutical companies can raise the risk capital required to get new drugs through the approval process, so a small player with a promising drug must contract to be a minor partner with one of the huge, cash-rich companies. (The big-pharma companies are likely very happy with this situation!) The world depends on high US prices for new drugs to provide the necessary profit incentives for companies to take on the risk and huge expense of getting them approved. Therefore new drugs in the US are ridiculously high priced. But if the health-care reform drives down the prices materially, the new drug pipeline will dry up.

Health-care reform should include a radical reduction in the FDA-determined cost to get new drugs approved. A populist bill that mandates lower drug prices without reducing the FDA-controlled cost to create new drugs will quite simply cause the pharmaceutical industry to wither on the vine. Do you plan to vote for a health-care reform bill that starves health-care innovation and strangles one of the most economically important US industries?