The Fraser Institute

The Fraser Institute

June 19, 2014 06:15 ET

Fraser Institute: Incremental Innovations in Pharmaceutical Industry Spawn Life-Saving Improvements

VANCOUVER, BRITISH COLUMBIA--(Marketwired - June 19, 2014) - Despite claims from critics, incremental innovations by drug companies provide great value for doctors and patients, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

The study, The Benefits of Incremental Innovation, spotlights the value of incremental innovations, which include relatively modest improvements to existing pharmaceutical drugs compared to dramatic breakthrough innovations.

"Some critics argue that incremental innovations in pharmaceuticals waste resources on minor improvements of existing products, but incremental innovation helps spawn new medicines and cutting-edge therapies that enhance and extend life," said Kristina M. Lybecker, study co-author, Fraser Institute senior fellow, and associate professor of economics at Colorado College.

For example, the first-ever single-pill AIDS treatment combined three drugs that were previously sold and ingested separately. The incremental innovation simplified the dosage and increased patient compliance. Incremental innovation also improved anti-malarial drugs, reducing daily doses from eight tablets to two. And when first-generation oral contraceptives increased the risk of thromboembolic disorders, subsequent research spawned pills with lower doses of estrogen, dramatically reducing the dangers.

"Developing pharmaceuticals is an inherently dynamic process. One innovation builds on another, and improvements draw from a long history of earlier technological advances for the benefit of patients and society at large," said Steven Globerman, study co-author, Fraser Institute senior fellow, and Kaiser Professor of International Business at Western Washington University.

Moreover, incremental innovations provide more choices to physicians who can treat the individual and diverse needs of patients with greater precision, while avoiding drugs that cause adverse side effects for a particular patient.

Incremental innovation also promotes price competition among drug manufacturers, driving down prescription costs, and provides the lion's share of revenue for future innovation and the more dramatic breakthroughs that save countless lives. Finally, despite critic claims to the contrary, incremental innovations also apply to neglected diseases and maladies of the developing world.

So what does this mean for policy-makers?

"Over the past two decades, government regulators have been increasingly reluctant to sanction the sale of drugs that are not new, but rather are modifications of drugs already established in the marketplace. Yet the health benefits of incremental innovation, for ordinary people and the economy overall, may be just as great, if not greater than the benefits of breakthrough innovation," Globerman said.

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of think-tanks in 87 countries. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

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