Stanford Law’s Lisa Ouellette Helps Shape New Report on Drug Development Reform
The diseases causing the most suffering and death in the United States do not always attract investment in new treatments. That’s the disconnect exposed in a new report from the National Academies of Sciences, Engineering, and Medicine, co-authored by Stanford Law School Professor Lisa Larrimore Ouellette, a leading voice on intellectual property and medical innovation policy. Stanford Health Policy Professor Joshua Salomon, a senior fellow at the Freeman Spogli Institute for International Studies, also served on the 16-member committee that drafted the report.
Aligning Investments in Therapeutic Development with Therapeutic Need: Closing the Gap calls out a persistent flaw in the U.S. health innovation system: Drug development is often driven more by market potential than by medical necessity. The result? Lifesaving treatments remain elusive for conditions like heart disease and mental illness—even as resources pour into more commercially promising areas such as oncology. According to the report, this misalignment not only distorts innovation but deepens health disparities and costs lives.
Ouellette, the Deane F. Johnson Professor of Law at Stanford and a Senior Fellow at the Stanford Institute for Economic Policy Research, drew on her legal and policy expertise to examine how patent law, federal research funding, and regulatory frameworks shape the incentives behind drug development and pricing, topics she also addressed in a recent Stanford Lawyer magazine essay, “Pharmaceutical Pricing and Access Beyond Patent Reform.”
“Despite billions in public and private funding, therapeutic development in the United States remains poorly aligned with the country’s most pressing health needs,” says Ouellette, whose scholarship on publicly funded research and medical innovation policy is frequently cited in the report. “As the report shows, the data we rely on to assess disease burden and track therapeutic development are often fragmented, insufficient, and inaccessible. That makes it hard to set evidence-based priorities. That is just one of the challenges we worked to address in a highly interdisciplinary way.”
The committee found two major drivers for underinvestment in disease areas relative to their population burden: scientific challenges and market forces. Scientific challenges include a lack of understanding of how the disease works, limiting options for innovation, and diseases that have subjective or difficult to measure outcomes, such as chronic pain. Market forces may also discourage investments because the potential earnings or return on investment are too low. This includes diseases that impact small populations, such as rare diseases, or diseases where the treatment course is short, which limits profit margins.
Changing the status quo will require a roadmap for confronting significant challenges and identifying promising practices, according to the report, which outlines steps to encourage treatment innovations to address unmet healthcare needs, lower societal costs, and improve health outcomes. Among the report’s recommendations:
- Build a Public Data Infrastructure
The U.S. should create a comprehensive, publicly accessible system to track disease burden, unmet medical need, and therapeutic investment across sectors. This data would enable more strategic decision-making and resource allocation and could illuminate over- or underinvestment by disease area. - Incorporate Disease Burden into Funding Priorities
Both public and private funders should integrate unmet need into decisions about research grants and investment, without sacrificing scientific merit. Congress, in particular, should consider burden metrics when allocating funds among different National Institutes of Health (NIH) institutes and centers, and the NIH should consider these metrics when developing research funding opportunities. - Strengthen Public–Private Partnerships (PPPs)
PPPs can reduce risk and improve efficiency in areas of high unmet need, according to the report, which calls for increased use of nonprofit foundations to broker collaborations and the creation of a voluntary repository of “shelved” private-sector assets that could be revived for public benefit. - Support a Regulatory Environment that Encourages Innovation Where Needed
The FDA’s accelerated approval pathways can help bring therapies to market quickly, but the report stresses the importance of requiring rigorous, timely confirmatory studies. The FDA must also be better resourced to retain expertise and enforce post-marketing obligations. - Link Reimbursement to Therapeutic Value and Unmet Need
Medicare, Medicaid, and private insurers should reform pricing and reimbursement frameworks to reward drugs that offer substantial clinical benefit and address unmet needs, the researchers say. New payment models may also be needed for one-time curative therapies, such as gene therapies, to ensure equitable access.
As the U.S. confronts widening health disparities and prepares for new scientific frontiers such as cell and gene therapies, the case for realignment is only growing stronger, according to the researchers.