The eras tour of healthcare innovation (Mel’s version)

In honor of the iconic Eras Tour coming to an end, I am swapping the usual Metallica-themed headings and references for the legendary Taylor Swift in this year’s final edition of our newsletter. 

“We are about to go on a little adventure together, and that adventure is going to span” from the preclinical phase of drug discovery all the way to genericization. Other accounts of this process often stop at regulatory approval, but that is not the “end game” if we want to achieve our “wildest dreams” of low-cost, effective medicines. 

It starts with researchers, innovators, and investors who “took a chance”, “took a shot”, “took a swing” knowing that the outcome could be “sad, beautiful, tragic”. We won’t “forget that you existed”. 

Even if “the manuscript” summarizes a positive phase III trial and a product receives regulatory approval, we aren’t “out of the woods” yet. If we march-in like Kanye and say the innovators and investors don’t deserve their award, we will be left saying “would’ve, could’ve, should’ve”.

 Healthcare treatments are “wonderful things” that we could “be using for the rest of our lives” if we incentivize innovation and promote competition after the appropriate protected period.

“Welcome to the Eras [of Innovation] Tour”. 

ERA 1: “Tell Me Why”

This era includes the preclinical phase of the drug development process that includes things like drug discovery, formulation development, pharmacology, and toxicology. This is where the knowledge base is formed, and promising compounds are identified for further study. In this foundational era, the knowledge base is formed, new drugs are discovered, and determinations of which ones should be tested in people are made. 

The average person doesn’t spend much time thinking about this era because they don’t have to. The risk is taken by others. The knowledge base is largely funded by NIH, academia, and other public and private funders. Companies focused on drug discovery are largely funded by investors (venture capital, private investors, etc.).

ERA 2: “This is me Trying”

This era is the clinical phase of the drug development process where the drug is tested in people and the safety and the efficacy of the drug is evaluated. From the preclinical phase, those compounds selected to be tested in humans then move to this drug testing era. This is when Phase I, Phase II, and Phase III clinical trials are conducted with human participants. If the clinical evidence supports that a drug is safe and effective, the innovator can submit an application to regulators in attempts to market the drug. 

The average person also doesn’t spend much time thinking about this era because they don’t have to, except of course those courageous individuals (and their care partners and loved ones) who are participating in the trials with hope for a better future. The financial risk in this era is also taken by others. The clinical phase is largely funded by innovators and investors (venture capital, IPOs, etc.). Large pharmaceutical manufacturers may also acquire smaller companies or reinvest their profits to fund these expensive trials of investigational products.

Most other accounts of the drug development process stop at regulatory approval. However, we are not done yet. Although it is a celebratory moment indeed when a new innovation gets approved and the treatment landscape forever changes, the drug still needs to make it to patients and the innovators and investors still need to be paid. That takes us to the next era.

ERA 3: “Everything has changed”

From the clinical phase, those drugs that receive regulatory approval can now enter the market and experience an era of market exclusivity and patent protection. During this era, the innovator of the drug has exclusivity to market the drug before generic/biosimilar competition can enter. 

We could also refer to this period as the payback era. During this period which often lasts around 12-16 years, drug prices are often “high” because this is when we pay back the innovators and investors for the innovation. 

When the average person thinks about prescription drugs, they probably think of this era, and that is because this era is when their role comes in. This is the era during which their dollars (e.g., taxes, premiums) go to work to pay back the investors and innovators. 

As a society, we all play a role in the innovation of healthcare treatments. This isn’t something that only drug developers and biotech investors are involved in. As members of society, our role comes in during this era where we use a portion of our pooled resources (money for taxes and premiums) to pay for new healthcare treatments.

The good news for society is that this era has a time limit (thank you exclusivity periods, patent terms, and Hatch-Waxman), which promotes society’s access to low-cost, effective medicines and encourages innovators to keep on innovating if they want to keep making money (which then allows society to get even more low-cost, effective medicines). 

After this time limit, we enter the final era.

ERA 4: “End Game”

The final era for a healthcare innovation begins when the innovator has lost market exclusivity, and the patent protection period has ended. During this final era, generic and biosimilar competition needs to enter and substantially drive down prices. 

The period of time the investors and innovators expected to receive the majority of their returns has passed, and now competing copies of the innovation can enter and drive down pricing. And now that the payback era for the “new” innovation is over and competition has resulted in substantial price drops, our pooled resources (e.g., taxes and premiums) can now go to work for other innovations that are in their payback era. 

The good news for society is that this era does not have a time limit. As each new innovation enters its fourth and final era, we can add to the number of low-cost, effective, and safe medicines that society has access to.

Healthcare treatments are “wonderful things” that we could “be using for the rest of our lives” if the incentives are there to support each era. The prices we pay to innovators in the third era must incentivize the investment in the first and second. And generic and biosimilar competition must eventually bring down prices to ensure we only paying “high” prices for a period of time.   

There are many things that need to be fixed within the US healthcare system, but this edition of our newsletter is not about those. That content will resume next year. 

We will end this year celebrating parts of the system that are designed well—the NIH funding a strong knowledge base; the investors and innovators carrying most of the risk of researching, developing and commercializing a drug; the prices (to the manufacturer) for the commercial successes incentivizing ongoing research and development; the intellectual property protections justifying the risk; and the patent terms and policies that have made it so 90% of prescriptions filled today are generics.