What Trump gets wrong about drug companies

President-elect Donald Trump was hardly timid in declaring Wednesday that drug companies are “getting away with murder.”

Yet the issue of drug pricing is not as black and white as he brazenly suggests: that expensive drugs are bad and cheap drugs are good.

The reality is far more nuanced.

As a former physician and pharmaceutical executive — and as a current investor and board member for several startup biotech companies — I’ve dealt with the pain of drug pricing from all sides. I’ve had patients who were desperate for a new drug that would let them live longer, more comfortable lives. I’ve worked with scientists who’ve devoted their entire careers to creating a new medicine. And I’ve helped entrepreneurs navigate an overly burdensome regulatory process to get their new drugs to the marketplace.

So I know firsthand that how Trump tackles this issue could have a tremendous impact on patient care in this country and on the culture of innovation that has made America the global leader in bringing life-changing drugs to the marketplace.

Rather than arbitrarily or punitively forcing drug companies to lower prices — or doing away with competition as we know it — Trump and his advisers would be wise to look at what’s wrong with the underlying system: Why is it so expensive to create a new drug?

Part of the answer lies in government requirements for new drug approvals, which have increased dramatically in cost and complexity over the last two decades without speeding up approval timelines or increasing drug success rates. Something needs to give.

While the recently passed 21st Century Cures Act promises incremental improvements to the drug approval process — instructing reviewers to give more weight to real-world evidence than they have in the past — the measures lack specificity and will be far from transformational for patients or drug developers.

Trump has been clear that he wants to lower the cost of drugs and reform the FDA, presumably beyond what’s laid out in 21st Century Cures. But rather than continue to add new layers on top of a drug development system created for a long-gone era, I urge the soon-to-be president to consider how we can rebuild the system for the future — a time when drug development is no longer beholden to Byzantine requirements and a company doesn’t have to spend billions of dollars to get a drug to the market.

Clinical trials should still be an essential step of the FDA review process; patients need to know a drug is both safe and effective. But today we have the capability of leveraging big data within health care systems to discern answers better, faster, and cheaper.

Instead of requiring three phases of expensive clinical trials, what if the FDA allowed companies to release a drug to the market in a controlled setting after a first phase of trials, when it is shown to be safe and there are data providing leading indicators of its intended therapeutic effect? By making the drug available in a controlled-market setting, its utility and value can then be fully discerned through real clinical outcomes.

Under this system, a new drug could be launched at a constrained price and volume, with its use and price modulating as evidence builds around its usefulness. Experts in medical risk-benefit analyses could decide how quickly and widely a new drug could be deployed, balancing the level of evidence versus the severity of the patient need. Patients who are taking the new drug would be closely monitored, and growing pools of resulting data would be able to more quickly answer key questions about whether the drug is working as expected. In fact, I believe that real-world big data monitored in real time can uncover safety issues more rapidly than the current, contrived system.

Good products are used more and rewarded more. Bad products go away.

Panels of experts would develop and modify treatment guidelines for various diseases and determine what drugs should be used more, less, or not at all for them. These panels and guidelines already exist, but today they usually don’t come into play until a drug company has already doled out over $2 billion to develop each new drug — largely for clinical trials.

Let’s leverage health care databases for real-time mega-epidemiology and study medical outcomes from large and real patient populations to draw conclusions. Providers like Kaiser Permanente and Geisinger Health System are early adopters of using such data to assess utility, and all of the big insurers are on their way to doing it. The table is set.

In such a scenario, drugs could be made available to patients at lower costs with still-healthy profit margins because they are cheaper to bring to market. Price-based competition would continue to thrive, and patients would have earlier access to new drugs.

These ideas may sound dream-like, but the required tools are nearly all in place. Tech innovations exist that can monitor patient outcomes and evaluate a drug’s effectiveness on a larger scale than is currently being done in the traditional framework, offering dividends of speed and cost. Critics of reform will ring the alarm bell of safety. But let’s not forget that delaying the development of lifesaving drugs is the biggest patient safety issue we face today.

Of course, changing something as complicated as the US drug approval process is cumbersome, especially because so many stakeholders have vested interests in the current way of doing things. As with our tax system, entire industries have been built to deal with complex drug regulations and requirements. I am part of that industry. But it needs to change.

By making smart and decisive changes, the Trump administration has the potential to spark more rapid development of effective and affordable drugs without sacrificing our country’s leadership in pharmaceutical innovation.

Tim Shannon, MD, has been an entrepreneur, executive, researcher, professor, and practicing physician in pulmonary and critical care medicine. He is currently general partner and investor at Canaan Partners, a venture capital firm with a significant health care practice.