Incremental innovation must not be penalised, says a new study from the Institut économique Molinari (IEM)

Media Release

Paris, Thursday April 5, 2012 – While medical progress related to “pioneering” drugs is largely unchallenged, this is far from true of treatments that represent incremental innovations (often wrongly referred to as “copies” or “me-too” drugs). Under pressure from accounting control of health spending, the innovative character of these drugs is questioned and their commercialisation deterred by the public authorities, in particular by the Transparency Commission responsible for evaluating them in France.

“Policies such as these simply run counter to the logic of technological progress, regardless of the sector or era being considered,” the IEM study notes. “They overlook the advantages of incremental innovation.”

The logic of technological innovation

While technological innovation is marked by radical discoveries and innovations, it also results from numerous incremental innovations, which are ubiquitous.

• Combustion engine: Since its discovery, revolutionising our means of transport, it has undergone numerous refinements in terms of power, vibration, size, weight, pollution, etc., providing for improved speed, quality and safety in our movements while using smaller amounts of scarce resources.

• High-tech: “Notebooks” and “smartphones” are the result of incremental innovations made to PCs and mobile telephones respectively.

• Cameras: Without incremental innovations, our digital cameras would still weight 3.6 kg (rather than 100 g for the lightest ones), would provide resolution of 0.01 megapixel (instead of more than a thousand times greater resolution) and would cost us close to $20,000 rather than hundreds or just tens of euros as at present.

• Medical field: Whether for the endoscope or the contraceptive pill, incremental innovations have led to improved performance for the former and drastically reduced side effects, such as weight gain, for the latter.

The advantages of incremental pharmaceutical innovation

On the one hand, incremental innovation offers therapeutic advantages. Unlike generic drugs, the products of incremental innovation have different molecules, profiles, posologies, dosages, speed of action or metabolism. This is why nearly two-thirds (63%) of drugs considered essential by the World Health Organisation (WHO) in 2005 resulted from incremental innovation.

In addition, incremental innovation offers economic benefits that should not be overlooked:

• By reducing side effects or improving ease of use, it enables the sick to experience more normal lives and to become productive again more quickly.

• Between 1970 and the late 1990s, the launch of drugs resulting from incremental innovation helped reduce the period of commercial exclusivity of “pioneering” drugs from 10.2 years to 1.2 years.

• Incremental innovation creates steadier income flows that serve to finance radical innovation.

Accordingly, any policy that artificially limits the commercialisation of pharmaceutical innovation would have the effect of increasing the risks faced by pharmaceutical firms.

Paradoxically, policies aimed deliberately at penalising this form of innovation and requiring pharmaceutical companies to bring only “pioneering” drugs to market end up having the opposite effect of what was stated. Rather than favouring their development, the IEM study concludes, these policies hold it back, at patients’ expense.

Titled The advantages of incremental pharmaceutical innovation, the study is available free of charge on our website.

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The Institut économique Molinari (IEM) is an independent, non-profit research and educational organization. Its mission is to promote an economic approach to the study of public policy issues by offering innovative solutions that foster prosperity for all.

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Information and interview requests:

Cécile Philippe, PhD

Director, Institut économique Molinari

cecile@institutmolinari.org

+33 6 78 86 98 58