Experts Urge Caution in Expansion of Drug Development Incentive Program

May 5, 2016

May 05. 2016.

Expanding the federal program set up to reward development of new treatments for tropical diseases could reduce the incentive for drug companies to use it, according to a professor at Duke University's Fuqua School of Business who first proposed the program.

Professor David Ridley says that expanding the program could hurt it, by forcing down the monetary value of the program to drug developers.

Ridley and his Duke colleagues Jeff Moe and Henry Grabowski proposed the priority review voucher system in a 2006 paper and it became law the following year. It encourages development of drugs for diseases that firms might otherwise neglect because the drugs are not likely to be profitable.

Under the program, the developer of an important new treatment for a tropical disease can get priority review from the FDA - six months instead of the standard 10 - plus a voucher for priority review of another drug of their choice. Firms can sell the extra voucher for a huge sum, because getting a profitable drug to market four months earlier can massively boost revenue.

The last voucher sold fetched $350 million in August 2015.

Congress and the FDA have expanded the program several times, adding Zika in April. But Ridley's latest research quantifies the value of the vouchers and found there is risk in offering vouchers too broadly.

"The voucher is subject to the forces of supply and demand," Ridley said. "Expanding the program increases the supply of vouchers which drives down the price, and a lower price means a diminished incentive."

Ridley's findings, "The Commercial Market for Priority Review Vouchers," are newly published in the May issue of the journal Health Affairs.