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1::.C.:ing the 1:100 1:o) ihr Ig 1.10 We still do not know if the 1962. Amaniments have generator more yood than harm: Jundiw says they love, loudlow .100 Pelizman contend they have not, but all three analyses suffer from scrious limitations or crrors. Windell argues that the thical Collin costs of the Amendments are very large, yet he does not consider the therapeutic gains or any of the economic cltcris.

While benefit/cost analyses of the 1962 Amendments are useful. Wardell has suggested that much of the therapeutic cost of popular tion can be mitigated through administrative practices and interprelation. The implication is that much of the benelit of the Amendments, and regulations in general, can be maintained and much of the cost reduced by relatively small changes in the existing regulations rather than by wholesale repcal or major reconstruction. Accordingly, benefit/cost analysis with a large scope (drug regulation as a whole or of major portions of it), or a small scope (pertaining to revisions, perhaps minor, of existing regulatory policy), may well provide useful guides as to both the direction and form of change that will serve society best. None of the studies to date, as we have seen, has provided a satisfactory frame of reference for such analyses. However, they collectively offer most of the necessary components. This study now turns toward an integration of these components to provide guidelines for benefit/ cost analyses of existing and proposed drug regulatory policies.

The appropriate benefits and costs to include in such an analysis are presented in Table 11. The table shows those benefits and costs applicable to the drug lag, and those additional benefits and costs necessary for an assessment of the regulations as a whole.

The quantification of these benefits and costs is more readily accomplished by following Wardell's approach rather than Peltzman's, thus using actual experience of the drugs in question rather than hypothetical or generalized historical results. Such an approach relies heavily on subjective medical judgment, but it must suffice in the absence of other ways of measuring health care outcomes.

Carefully selected foreign experience, perhaps that of Canada, or Great Britain, or several countries who lead the United States in the rate and timing of innovation, provides the basis for quantifying most of the benefits and costs in Table 11. Benefit I and Cost I, which probably are the largest of the components comprising total

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benefits and costs, can be estimated by following the general steps:

(1) Identify the specific new drugs "lagged" in their introduction into the United States.

(2) Estimate the incidence ratios both of adverse consequences (whose aversion is a benefit) and of outcomes more favorable than offerred by the best alternative therapy available in the United States at the time (these foregone superior outcomes are costs of the lag to U.S. patients).

(3) Apply these ratios of adverse and superior outcomes to the respective American populations-at-risk to determine the absolute frequencies of both in the United States that would have occurred but for the lag.

(4) Estimate increased or reduced disability and work, subtracting periods that result from these adverse or superior outcomes.

(5) Calculate the dollar values associated with the averted or incurred medical treatments and productivity gains and losses. The product of (3) and (5), with appropriate discounting, represents the value of the benefit or cost in question.

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Benefit Il can be calculated by looking at forcign drugs that are promoveri sorotan the innokas wrong spiproring only in countries outside of the United Stales. 'I heir usage rules and prices, adjusted 101 il ferences between the United States and foreign nations, estimates the savings that paticnts in the United States would have coboravince froon drugs nirves rutrring the Amriirin market.

Benefit III is the gain to customers from the incicused knowledge about all drups resulting froin increased testing. We can calculate this bcnclit by cmploying, intcr-icmporal U.S. comparisons, international comparisons, oor soome combination of borde that show shifis or differences in the ratio of unfavorable to favorable outcomes associated with drug use attributable to the additional information generated by the heightened requirements. Complex factors are involved, including the effects of learning by experience, international transfers of knowledge, improved testing methodology, and Icgal liability. However, multivariate analysis may enable us to sort out the relative insluences of cach such sactor.

Costs II and III, the increase in real costs both for lagged and other drugs, can draw on the many studies cited in this report that deal with changing R&D outlays. Special attention here needs to be given to the use of appropriate definitions of R&D activity and accurate indexes of changing R&D input prices. Cost IV, administrative costs of the regulations, can be quite easily derived from FDA budgetary and activity reports.

The above guidelines admittedly are very general and unqualified. All the nuances of benefit/cost analysis must eventually be utilized; but as a general overview, they offer initial directions that can produce useful retrospective studies of the effects of the lag and of the regulations creating the lag. Once this approach is worked out, it can tell us much about the marginal benefits and costs resulting from changes in the requirements that apply to the quantity or timing of drug development in general, or certain drugs or groups of drugs in particular. While the prospective benefit/cost analysis of major regulatory changes may be the most problematical task of all, this framework at least provides some useful methodology for both identifying and quantifying those anticipated effects.

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New drug development during and after a period of regulatory change: Clinical research activity of major United States pharmaceutical firms, 1958 to 1979

The 1962 unig amendmenis fundamentally changed the way in which U.S. pharmaceurical firms
could rest new drugs in man and receive New Dnig Application (NDA) approval. Although it is
well known that the amendments and associated events caused a profound decline in the annual
number of new drugs receiving NDA approval, the amendmenis' effects on clinical research into
new chemical entities INCES) have not been investigated because data were unavailable. To
study this we requested drug development information daring back to 1958 from most major
United States owned pharmaceutical firms and obrained complere responses from nine. The
results showed that the introduction rate of NCEs into human resting dropped sharply in the
early 1960s and declined substantially thereafter. The number of NCEs entering human testing
fell from a mean of 89 a year in 1958-1962. 10 35 a year in 1963-1972 la reduction of 61%).
and 10 17 a reas in the last s years of the survey, 1975-1979-an overall reduction of 81%.
The number of NDA approvals received by these firms feil sharply by 19% in the early 1960s
sind more slowly for 10 years thereafter, from the mid-1960s to the mid-1970s. In the case of
self-originated NCEs. the size of this later fall was 71%. Causes of these changes in NCE flow
include the amendments and the events that prompted them: changes in sciennfic philosophy.
standards, and state of the art; and economic factors.

Maureen S. May, Ph.D., Willam M. Wardell, M.D., Ph.D. and Louis Lasagna, M.D.
Rochester. N.Y.
Center for the Soudy of Drug Development, Department of Pharmacolog. University of
Rochester Medical Center

Based on research supported by the National Science Revendarioa wecken grad 19 17602 Aay opinion. Ardiapa. and conclusions of recommendations se those of the authon red do not necessarily retract the views of the National Science Foundation.

Received for publication Nov. 29. 1982

Accepted for publicados Now. 3. 1992

Reprint request Dr. Willian Wardell, Department of Pharma cology. Vaiversiry of Rochester Medical Center, Rochester, NY

tested in man in the 5-year period 1958 to 1962. • By combining the data obtained from this survey with other data previously collected from the same. fimms in 1963 to 1979, we were able to analyze all the NCEs tested by the set of responding U.S. firms for the years 1958 to 1979.

In 1962 and 1963 fundamental changes occurred in the way in which the Food and Drug Administration (FDA) regulated the development of new drugs in the United States. The enactment of the 1962 drug amendments to the federal Food, Drug, and Cosmetic Act of 1938 gready increased FDA control over clinical research into Investigational New Drugs (INDs). The new amendments required that the FDA be notified about preclinical studies and given detailed descriptions of the planned clinical investigacions before clinical trials could commence. For the first time, subjects' informed consent was required, along with full progress reports about the distribution and use of drugs in clinical investigations, and the FDA was given more power to halt mials.6. Al the same time the system for approving a New Drug Application (NDA) was transformed from one that emphasized safery data into one that also required rigorous proof of efficacy and active approval by the FDA before a drug could be marketed.

It is well known that the entry rate of new drugs into the market decreased sharply at that time. but the effect of the amendments on the ency of New Chemical Entities (NCES) into clinical testing has not been analyzed because no data were available. la previous studies of United States drug development, we have analyzed both the annual rate of entry of NCES inco clinical testing from 1963 onward and the subsequent face of these drugs.20.21.33 la chis paper we have extended the previous studies back in time to 1958 in order to study the effect of the amendments on the clinical testing of NCES.

The reason no data were available for the pre-1962 period is the absence of an external reporting requirement at that time. This means any data that still exist from this period are available only in the archives of the pharmaceutical firms. Because such old data are of litde or no curta use to the firms, they are rapidly becoming inaccessible and in many cases have already been discarded. Our objective was to obtain and analyze as much of the dan as possible that still exist at this time from the events of 1962

We surveyed most major United States firms to assemble information about the NCEs first


Companies surceyed and NCEs included in analysis. As in out earlier studies, 20.31.33 an NCE is defined as a compound of molecular structure not previously tested in man. Vac. cines, antigens, antisera, immunoglobulins, surgical products, diagnostics, and new salts or esters of existing agents are excluded from the analysis.

Fifteen major fimms (which accounced for approximately two thirds of all NCE research by U.S.-owned firms in the period 1963 to 1979) were asked to provide data (1) on all self-originated NCES first tested in man any. where in the world in the 5-year period 1958 to 1962 and (2) on all acquired NCEs that they were the first to lest in man in the United States in this period. (Self-originated NCEs are those discovered, owned, and developed by the par. ent company, whereas acquired NCES are obtained by licensing or ocher means.) These is firms were the largest U.S.-owned firms that we considered likely to have the required information, judging from the post-1962 daca we obcained from them.

Nine firms were able to give us a full response. The remaining six firms were unable to supply reliable data (for reasons such as loss of records in a fire and destruction of very old records on NCEs for which research had been terminated many years ago). The nine responding firms accounted for 49% (S14) of the 1041 NCEs tested in man berween 1963 and 1979 by the 39 firms included in our most recent study of NCE drug development undertaken by U.S.. owned firms. Although the aide firms are large ones, their drug development trends were similar to those of all U.S. pharmaceutical finas for 1963 to 1979.

Information requested. The questions asked in the survey were a subset of those asked in the full questionnaire used in our earlier studies.40.21.1 We obtained data on the numbers, the

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