Accelerated Approval Of Cancer Drugs: No Economic Reward For Drug Makers That Conduct Confirmatory Trials

By: Richard Frank, Shahzad Mahnum, and Ezekiel Emanuel

Abstract

The Food and Drug Administration uses expedited approval of drugs to speed the development and assessment of drugs that address unmet needs related to serious or life-threatening conditions. Drugs approved via this route rely on surrogate endpoints or other clinical indicators that are not direct measures of benefits to patients, such as survival or quality of life. Companies are required to conduct a clinical trial confirming that a drug provides long-term benefits that are clinically meaningful, but prompt completion of these trials frequently does not occur. Theory suggests that because confirmatory trials reduce uncertainty, they should provide an economic reward in the form of higher prices for a positive finding. We used a sample of physician-administered cancer drugs and data on average sales price to test this hypothesis. We found no significant relationship between confirmatory trial completion with a positive outcome and elevated prices. This represents a failure of the market to reward reduced uncertainty about a cancer drug’s true benefits. This inefficiency would be mitigated if major payers such as Medicare built price schedules that directly rewarded completion of confirmatory trials. More completed trials would ensure that patients are receiving truly effective chemotherapies and not suffering the adverse effects of drugs that are ultimately not effective.