U.S. Cancer Drug Development Outpaces E.U., Due To Favorable Regulatory And Reimbursement Policies

It is presumed that anticipated regulatory and reimbursement policies are important considerations in the research and development (R&D) decisions of manufacturers of drugs and biologics, and the investors who finance their development. A proactive regulatory approval process, including provisions such as priority review and accelerated approval, but also financial regulations concerning tax incentives, induce investment. And, payers play an important role as they account for over 80% of the spending on prescription drugs. Decisions by payers to insure a drug constitute a critical determinant of market access. In turn, this can reach back to impact expected return on investment (ROI) for developers and investors with respect to drugs in the pipeline.

Conventional wisdom suggests that the relative absence of government-regulated pricing and restrictions on reimbursement creates an environment that is generally conducive to greater R&D expenditure. Without price controls and anticipated reimbursement restrictions, firms are able to invest in drug development with fewer concerns about future market access issues once their product is approved.

It’s difficult, however, to trace a causal link between market conditions related to pricing and reimbursement, regulatory environment, R&D, and pharmaceutical innovations. What can be postulated are associations between these variables. What is known, for example, is that the U.S. is the world’s largest source of R&D for new drugs. According to a European Commission report, the U.S. spent $70 billion on pharmaceutical R&D in 2016, which is approximately 46% of the global total. Research has also revealed a strong correlation between drug companies’ profitability and R&D spending: The more revenues on current products the more companies invest in future innovations.

In certain disease categories such as cancer higher drug prices and fewer barriers in one market (U.S.) compared to another (E.U.) appear to establish incentives for drug manufacturers to launch more drugs earlier in the former than the latter. In 2017, the Food and Drug Administration approved 16 new molecular entities and biologics in the oncology space, as well as dozens of supplemental indications and new formulations, outpacing its European counterpart.

A relatively unbridled market and a plethora of regulatory incentives appear to be driving more cancer drug approvals in the U.S. compared to the E.U. And, for the common subset of drugs approved in both the U.S. and Europe, the vast majority were approved earlier in the U.S. Currently, there is an extraordinary amount of cancer drug R&D in the U.S. Coverage of cancer drugs in the U.S. is also less restrictive. This is due in part to numerous reimbursement policies that favor cancer drug uptake in the U.S.: Regulations, such as anti-neoplastics being one of Medicare Part D’s protected drug classes; state and federal mandates with respect to coverage of cancer drugs; and an extensive array of drug manufacturer patient assistance programs for the uninsured or to pay co-insurance bills for those with coverage. On the other hand, more price controls and reimbursement restrictions appear to have impeded cancer drug uptake in Europe. Furthermore, a somewhat less proactive regulatory environment vis-à-vis cancer drug development in Europe may have limited R&D outlays.