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.
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.
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.
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.
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.
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.
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