Pharmaceutical companies’ race to find effective vaccines for COVID-19 has sparked a global spotlight on the trade-off regulators face in approving new drugs.
Under a system used by drug regulators in the US, Europe and elsewhere, drug companies are only required to show clinical trials that new drugs have short-term safety and efficacy in order to gain approval. .
So, what if something goes wrong for a while?
Specifically, does the market itself penalize pharmaceutical companies when regulators issue warnings about a product’s safety, or withdraw it altogether? Our latest research has set out to answer that question.
warning after the fact
Companies are not required to demonstrate the long-term safety and efficacy of a drug. The limited duration of clinical trials is allowed to avoid the cost of developing drugs from being so high that new drugs are not developed.
There are also ethical problems with lengthy trials – would you want to spend three years randomly assigned to take a drug that you quickly find out is ineffective, or worse?
But our system brings with it the risk that new drugs could cause long-term problems known at the time of approval – opioid pain relievers being a prime example.
Instead, after a drug is approved, doctors or patients can report “adverse drug events,” which can be investigated by regulators. Regulators may issue a new warning to go off the drug’s label or, in extreme cases, have the drug withdrawn from the market, as was the case with the pain reliever Vioxx in 2004.
regulation vs market signals
The new safety warnings can vary in severity, for example from the risk of permanent skin discoloration from certain dermal patches in our sample, to an increased risk of potentially fatal heart or liver damage, or suicidal ideation.
In the US, the Food and Drug Administration (FDA) therefore distinguishes between new routine warnings and more severe “boxed” warnings that are high enough to be promptly prepared and placed at the top of drug information labels.
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Do regulators strike a balance between encouraging the creation of new drugs and protecting public health from unforeseen problems with newly approved drugs?
The burden will not fall on regulators alone if markets “punish” companies whose drugs cause long-term problems. This will give additional market incentives to companies to avoid such consequences.
So do markets help keep us safe when we take approved drugs?
We tested for the first time how the US and UK hospital and retail sectors affected the total sales volume of individual drugs across four broad categories when each country’s respective regulators issue new safety warnings.
Some of these drugs were sold by only one or two companies, while others were sold by several, but we focused on whether the warnings significantly affected the overall sales of individual drugs.
We included drugs separated into four diabetes drug categories, analgesics pain relievers (including opioids), nervous system analeptics to calm down (including antipsychotics), and nervous system psychoactive stimulants (including antidepressants).
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In addition to asking whether the warnings affected the total sales volume of individual drugs, we next tested whether they affected the share price of publicly listed companies selling the drug in the days surrounding the announcement of the safety warning.
Share prices matter because they should hold whether shareholders of the affected company believe the warning will reduce its future profits.
little impact on sales
We followed up with new warnings, sales and share prices for the US and UK over 12 years, from 2006 to 2017. Across the various statistical methods, we found surprisingly little evidence that new safety warnings affect the sales volume of relevant drugs within our four. Categories.
The exceptions were in the US (with warnings from the UK regulator never having a measurable effect on sales in that country). Specifically, if we excluded diabetes drugs, the FDA warnings significantly reduced subsequent U.S. sales of the other three drug categories, but if each broad category of drug is considered separately, sales There has not been a significant decrease in
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Similarly, having “at least one new boxed warning” during our sampling period significantly decreased US hospital sales volume for all four categories of drugs combined, but not for each category separately, And not for US retail sale.
At the extreme, we found that at least ten new FDA warnings, or at least three new FDA boxed warnings, significantly reduced overall sales volume across all categories in both U.S. retail and hospitals.
share prices unaffected
We found even less evidence that the warnings affected the drug company’s stock prices. The effects of the warnings were small, sensitive to the timing of our choice of surrounding warnings, and statistically insignificant. The single significant exception used a 25-day time period following warnings issued by the UK regulator.
We conclude that if the Society considers the problems identified by post-approval warnings to be rare or mild, there is probably no reason to think that should affect sales volume or the company’s share price.
The current system can then do a good job of balancing the cost of new drug development with protecting public health against the risk of unexpected negative side effects.
But if society considers the problems identified in the new warnings to be too common or serious, then the balance of our evidence is that markets do not penalize companies that sell such drugs.
If the market doesn’t meet this task, it’s only up to regulators to run pre-approval drug trials for more patients for longer periods.