Can a drug be too cheap and effective?
If there’s one thing you’d think American medical establishment would have a grip on, it would be keeping blood inside you. But you’d be mistaken!
An inexpensive, simple drug is helping save American soldiers in Afghanistan and Iraq. Tranexamic acid slows blood flow, giving emergency medical personnel more time to stabilize patients and treat injuries.
But the drug is hardly used in hospitals outside of the United Kingdom, according to a New York Times story. Despite the potential ease of access—and the fact that it's available without a prescription in both Britain and Japan—a drug that could help save thousands of lives every year is largely ignored throughout the American health care system.
Experts point to a confusing problem: The drug is too cheap to be widely implemented. Most new pharmaceutical developments in the United States come when big drug companies put their marketing and R&D funds toward getting a drug approved by the Food and Drug Administration and selling it widely. But in the case of Tranexamic acid, the profit margins proved so small that most drug companies didn’t feel manufacturing and selling the drug was worth the time.
Pfizer, for instance, manufactures the drug and markets it to hemophiliacs, but couldn’t speak about using the drug to treat trauma patients because it had not been approved by the FDA for that purpose.
A study performed in 40 countries, however, estimated that 128,000 lives could be saved around the world if the drug were widely adopted; using the drug would also help preserve the limited supplies of donor blood maintained by health care providers. Hospitals around the country are now discussing including the drug in their trauma protocols in the next few months, but the slow pace of adoption raises questions about how effective our health care system is at finding and deploying cost-effective treatments.
There are a couple of answers. The government, seeing the decline in pharmaceutical research, is trying to bolster funding at the National Institute of Health and creating a new research facility to help spur more investment from private companies.
Another problem is the business model that these companies rely on—finding and selling blockbuster drugs. Reforms that make the FDA’s approval process more efficient would be one way to help encourage more research. That Tranexamic acid has come to greater attention because it was adopted by the U.S. military is another example of how government can create rewards for innovation through its purchasing practices.
Another option is bringing social impact-focused partners into the mix; the Gates Foundation has joined with the WHO, governments and other NGOs to provide a $758 million incentive for pharma companies to battle chronic diseases that have plague the developing world but attract little attention (or investment) in the developed world. All of those methods would change the incentives that the managers at pharmaceutical companies face today and give Big Pharma a better chance of supporting generic drugs like Tranexamic acid.
The bigger issue here is perhaps the short-term focus on profits rather than building a strong business faced by the CEOs of public companies, a focus that makes finding a way to add a low-margin but critical drug to their inventory a waste of time. Changing the way managers think about the value of a company—and their responsibilities to its stakeholders—is just as important as making sure that our drug approval system and public investment works as well as it can.