Intro
The journey of a drug from conception to market is notoriously fraught with challenges. In the high-stakes world of biotech and pharmaceutical development, it can be particularly damaging to all involved when drugs fail late in development, after substantial investments of time, money, and resources have been made. One often overlooked factor contributing to these failures is the presence of misaligned incentives within the drug development process.
The Cost of Late-Stage Failures
Late-stage drug failures, which can occur during Phase II or III clinical trials or during the regulatory approval process, can be catastrophic. At this stage, a company may have invested hundreds of millions of dollars over several years of research and development. The repercussions of such failures include financial waste, reputational damage, and the opportunity cost of deprioritizing other pipeline drugs that may have had the potential to be effective for patients.
Understanding Incentives in Drug Development
Drug development is driven by a complex web of incentives, influencing decisions at every stage. These incentives can be internal or external and include financial, regulatory, or even individual motivations, (e.g., career advancement goals of the scientists and executives involved). Ideally, all these incentives should align towards the common goal of developing safe and effective treatments. When these incentives diverge, they can inadvertently promote decision-making that increases the risk of late-stage failures.
Rather than only incentivize efforts to push a drug candidate forward through the development process, it can be just as critical to incentivize ‘killing’ a drug as early in development as possible to prevent unnecessary waste and myopia with the pipeline. The intention should be "fast fail" to make sure that hurdles are high enough to ensure that only outstanding projects reach successively resource-intensive stages of development.
Common Misaligned Incentives
Rushed Timelines for Milestones:- Early Incentive: R&D scientists are rewarded with promotions and bonuses for 'championing' a drug development program and driving it forward too rapidly.
- Late Incentive: Meeting aggressive timelines can secure milestone payments from investors or partners and enhance stock prices.
- Issue: These incentives can lead to premature progression through R&D or early clinical trial phases without adequate data, increasing the risk of failure in later stages.
- Early Incentive: R&D scientists are advised and rewarded for refraining from any experiments outside of what is required to further progress a drug’s development path.
- Late Incentive: Overly positive interim clinical results can attract more funding and boost company valuations.
- Issues: Scientists may overlook in vitro or in vivo findings that could have offered a glimpse into a mechanism of action contradictory to current hypotheses, with broad downstream implications on clinical study designs, and even patient subpopulations or primary indication selections. Optimism in early clinical studies may gloss over potential safety or efficacy issues, which could become insurmountable obstacles in Phase III trials or regulatory review.
- Incentive: Fast-tracking a drug can reduce development costs and time to market, which can be a tempting prospect for companies and investors.
- Issue: Accelerated programs, while beneficial, may result in insufficiently tested drugs moving forward, increasing the likelihood of late-stage failure due to unforeseen adverse effects or lack of efficacy.
- Incentive: Academic and industry professionals often face pressure to publish groundbreaking research and develop novel treatments.
- Issue: This pressure can lead to advancing promising but poorly understood therapies too quickly, without a robust understanding of their mechanisms or long-term effects.
Real-World Examples
Several high-profile cases highlight the impact of misaligned incentives. For instance, certain Alzheimer’s drugs, e.g., AVP-786, solanezumab, elenbecestat, and gantenerumab were advanced rapidly due to the pressing need for effective treatments and the promise of substantial financial rewards. However, a number of these drugs failed in late-stage trials because initial optimistic results were not substantiated by thorough and methodical research. In the cancer vaccine space, the field is littered with examples of Phase 3 trial failures after flawed interpretations of Phase 2 data. MASH (née NASH), or metabolic dysfunction-associated steatohepatitis, is an indication in which the etiology is still poorly understood, yet at least 30 drugs in development for the condition were progressed to and ultimately failed in Phase 2 or 3 clinical studies.
Aligning Incentives for Better Outcomes
To mitigate the risk of late-stage drug failures, drug developers should ensure incentives are aligned towards more sustainable and scientifically sound practices such as:
Enhanced Due Diligence: Investors and upper management should demand more rigorous proof-of-concept before allowing drugs to progress through the development pipeline. Over-reliance on data from sample sizes that are too small to be significant or confirmation bias (overlooking data that do not support the established hypothesis) can influence management to jump to conclusions. Likewise, the sunk-cost fallacy (reluctance to abandon a heavily-invested project) can also influence decision-making.
Balanced Funding Models: Shift from milestone-based funding to models that reward long-term success and robust data collection, even if it means slower initial progress.
Transparent Reporting: Encourage a culture of transparency where potential issues and negative results are openly shared and addressed early in the development process. The goal of R&D should be to prove that each drug candidate is not effective. Failing fast is better than failing after many expensive years of development, during which time patients in clinical trials may have been able to receive better options.
Pragmatic Timelines: Create realistic timelines and goals that prioritize proof of concept, well-defined mechanism of action, patient safety, and drug efficacy over rapid advancement.
Conclusion
Late-stage drug failures due to misaligned incentives not only waste resources but also delay potentially life-saving treatments for patients in need, due to significant opportunity cost. By recognizing and addressing misaligned incentives, biotech and pharmaceutical companies can improve the likelihood of successful drug development, ultimately leading to better health outcomes and more efficient use of resources. Aligning incentives towards thorough, patient-centric research and development is essential, if we are to improve our chances of advancing treatments for the many unmet medical needs that remain.
Our Drug Development Expertise
Alacrita's core team leverages 150+ industry-experienced, clinical development strategy and operations consultants, with backgrounds spanning a broad range of therapeutic areas and product modalities. Our extensive consulting resources allow us to offer you versatile, fit-for-purpose expertise that can be tailored to the exact needs of your clinical development program, enabling us to support you in each crucial area from planning and strategy to execution and tactical support.