Drug manufacturing’s innovation problem

By Nicholson Price

There’s a lot of talk and research about the drug industry, including its levels of innovation, its pricing patterns, transparency of clinical trials, industry changes over time, and how the industry is and should be regulated.  But one thing that usually flies way under the radar is the question of actually making drugs – cranking out capsules, tablets, aerosols, gels, and liquids day after day. We tend to think that manufacturing can be taken for granted, that it’s high quality, cheap, easy, high-tech, and unproblematic.

In a new paper up on SSRN and forthcoming in BC Law Review next year, I argue that these widely-held assumptions are wrong.  Drug companies tend to spend about twice as much on manufacturing as they do on R&D, and a lot of that is unnecessary.  Essentially, the industry wastes tens of billions of dollars per year on inefficient manufacturing techniques which have stayed largely unchanged for decades.  Increasing drug shortages, higher drug prices, and higher levels of drug recalls are the unfortunate result. 

I argue that the root cause of the problem is a combination of insufficient incentives from ineffective intellectual property protection (manufacturing patents are hard to enforce and trade secrecy only drives some types of innovation and prevents field-wide advances) and high regulatory barriers to change (both before and after a drug gets approved).

It’s not a problem with easy solutions, but best path for change is most likely some combination of lowering those barriers and increasing those incentives.  I propose some more detailed solutions in the paper, including a potential system of FDA-administered exclusivity for manufacturing methods or a push to move the industry away from secrecy so that patents work better.  But it’s a knotty problem, and demands both academic and policy attention to avoid tragedies of drug contamination (like the NECC meningitis outbreak or the Chinese heparin crisis).  With some sustained effort and attention, hopefully drug manufacturing can really become something that’s humming along and working well, rather than a set of problems we just don’t know enough to worry about.

W. Nicholson Price

Nicholson Price is an Assistant Professor of Law at the University of Michigan Law School. Previously, he taught law at the University of New Hampshire. He holds a PhD in Biological Sciences and a JD, both from Columbia, and an AB from Harvard. He clerked for Judge Carlos T. Bea on the Ninth Circuit, and was then appointed as an Academic Fellow at the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics at Harvard. Nicholson teaches patents and health law and studies life science innovation, including big data and artificial intelligence in medicine. He recommends reading Bujold, Jemisin, and Older. His work has appeared in Nature, Science, Nature Biotechnology, the Michigan Law Review, and elsewhere. Nicholson is cofounder of Regulation and Innovation in the Biosciences, co-chair of the Junior IP Scholars Association, and a Core Partner at the University of Copenhagen’s Center for Advanced Studies in Biomedical Innovation Law.

0 thoughts to “Drug manufacturing’s innovation problem”

  1. Hi Nicholson,

    Thanks for your post on this interesting and important issue. I have not yet had a chance to read the paper, but I wonder why you think that FDA-administered exclusivities would be more enforceable that method patents? Do you propose that the FDA play a policing role? If so, it may be in the awkward position of having to actively prevent widespread adoption of a safer manufacturing method during the exclusivity period.

  2. Hi Anna,

    Thanks for the great questions. In the solution of FDA-administered exclusivity (which, to be clear, is one of several I propose), I do suggest that FDA should police the exclusivity; that policing would be quite straightforward, since preapproval is required for big manufacturing changes, and FDA could just deny that approval while the exclusivity holds.
    I wrestled a bit with the awkward position issue you raise, but came to the conclusion that even those this seems a bit weird on the surface, FDA frequently does things like this. FDA has multiple roles; it’s ensuring safety, yes, but also acting to encourage innovation and administering innovation policy, and those goals can be in tension. The biggest example is regulatory exclusivity for drugs. FDA keeps generic drugs off the market during a brand’s exclusivity period, even though the higher prices mean less access to potentially lifesaving drugs for some, because the policy judgment is that the additional innovation incentive is worth it.
    I see a similar dynamic as a possibility here; if regulatory exclusivity for manufacturing methods would increase incentives for firms to develop better/safer/higher quality manufacturing methods, we might think that a period of limiting the spread of those methods to be worth it.

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