4

Factors Contributing to Misalignment Between Investment Priorities and Unmet Need

The idea of accelerating medical breakthroughs and enabling individualized screening, prevention, treatments, and care for all depends on appropriately integrated funding for science, clinical trials, and data aggregation and analysis, as well as regulatory considerations. Barriers in any one of these areas impede innovation. Although there are many challenges and barriers in drug development broadly, this chapter seeks to narrowly focus on the reasons underlying the observed mismatch between research and development investments and areas of unmet need. Exemplars are used throughout to highlight disease areas where innovations are not meeting patients’ needs because of these barriers.

SCIENTIFIC CHALLENGES

Lack of Understanding of Underlying Pathophysiology

One of the factors driving a misalignment of investment with disease burden and unmet need is a lack of understanding of the underlying pathophysiology of certain diseases. Public funding for basic and translational research is critical for understanding the basic mechanisms of disease and thus for developing potential molecular targets for drug discovery and development (see Chapter 3). As explained by Tal Zaks, Partner at OrbiMed, former chief medical officer at Moderna, and an oncologist by training, during an open session for this report, “Our starting point [as an investor] is not unmet need nor disease burden; rather, our starting point

is something new that gives us the opportunity to do something about it.”¹ Private innovation and commercialization of therapeutics that improve outcomes of patients is inextricably linked to public investment in biomedical research (discussed further in Chapter 5).

However, there are some disease areas reviewed in Chapter 3 that continue to receive fewer research dollars from the National Institutes of Health (NIH) despite large unmet needs. Chronic obstructive pulmonary disease (COPD), for example, affects approximately 11.7 million adults in the United States and costs around $50 billion annually (American Lung Association, 2024a), but it receives relatively low public investment for research (Chapter 3), and little progress has been made on new innovative targets for COPD patients (Barnes et al., 2015). COPD is a heterogeneous condition, including chronic bronchitis and emphysema, characterized by a variety of respiratory symptoms and smoking history (American Lung Association, 2024b). Because of the heterogeneity of the disease, it is difficult to develop a one-size-fits-all approach to therapeutic development for COPD (Leung et al., 2019). More investment into developing a precision-medicine approach or developing better animal models could help improve innovation and the development of therapeutic targets for COPD (Barnes et al., 2015; Leung et al., 2019).

There are certain disease areas, such as neurodegenerative disorders, where research investments are high and where those investments may be warranted, given the levels of disease burden and unmet needs. However, despite these high levels of investments, innovation has not yet been able to meet the needs of many patients. Box 4-1 describes one of these examples, Alzheimer’s disease (AD), in more detail. The committee emphasizes that even in areas where there is a strong public commitment to investment, the complexity of some diseases results in significant residual unmet need, leading to fewer molecular drug targets that researchers can use to pursue therapeutic discovery and development. Furthermore, when potential molecular targets are identified, such as for AD, the lack of a detailed understanding of the pathophysiology and disease progression deters investment in moving such molecular targets forward owing to the uncertainty in whether the target will ultimately lead to an innovative, disease-modifying therapeutic. Thus, identifying validated molecular targets for drug development is a key consideration. This may also include needing novel diagnostic tests to characterize disease and disease states and to better identify patients who should receive novel treatments, as described in Box 4-1.

Although there are still many areas where a lack of understanding of the disease mechanism results in a large unmet need, there are new technologies

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¹ T. Zaks and M. Mackay. 2024. Strategies to better align investments in innovations for therapeutic development with disease burden and unmet needs. Meeting 2, June 18, 2024.

that could be potentially transformative and lead to more productive drug discovery efforts in these areas. For example, artificial intelligence (AI) has the potential to transform drug discovery by identifying novel targets and to improve safety by predicting toxicological patterns as well as exploiting other actionable insights (Paul et al., 2021). AI can help in understanding the basic mechanisms of disease and could be transformative for the current system. However, the committee acknowledges that there are several limitations and challenges to using AI in drug development, including data-quality issues that compromise accuracy, concerns with black-box models producing incorrect or misleading results, and trust issues among patients and trial participants, particularly related to accessing patient datasets, which would be critical for training and validation of AI algorithms (Paul et al., 2021).

Advances in platform technologies is another area that could play a critical role in therapeutic innovation. Platforms represent highly versatile approaches for developing innovative therapeutics, which are to varying degrees independent of molecular targets. Examples of platform technologies include viral vectors for gene therapy, CRISPR for gene editing, small interfering RNAs, antisense oligonucleotide technologies, structure-based drug design, mRNA therapeutics, and intracellular targeted protein degradative platforms. PROTACs monoclonal antibodies are one example of an intracellular targeted protein degradative platform, which includes libraries for screening and discovery of novel agents that selectively bind to targets. These platform technologies can also expedite drug development by not having to be validated every time they are used, and the Food and Drug Administration (FDA) has published guidance to help clarify how to request platform technology designation (Niazi, 2024).

As these technologies are developed, they can become the basis for start-up companies or be licensed to existing or larger biopharmaceutical companies for the use in discovery and development of new agents. The development of platform technologies has enabled scientific advances such as gene cloning, recombinant production of proteins, gene sequencing, and the discovery and early development of monoclonal antibodies. As advances in platform technologies continue, so will our understanding of diseases and the development of treatments to address them.

Finding 4-1: Investment in basic and preclinical biomedical research is essential to driving innovation in disease areas with significant disease burden that have unmet needs.

Challenges Measuring Outcomes

Difficulty measuring health outcomes can drive mismatches between investment and unmet need in some disease areas. When outcomes are subjective, hard to characterize, or highly variable, companies may face higher development costs, risk, and uncertainty, which can lead them to direct resources toward other disease areas where outcomes are better established and more easily measured. Many conditions lack objective biomarkers that could help characterize the disease more precisely and provide early signals of treatment efficacy, thereby derisking investment and accelerating drug development.

Chronic pain is a prototypical example of this type of challenge (see Box 4-2 for more detail). Inherently subjective, pain generally lacks objective outcome measures or biomarkers, so physicians and researchers must rely on patient-reported scales, which are subject to variability, in order to evaluate patients’ complex pain symptoms (Dansie and Turk, 2013; Robinson-Papp et al., 2015). Although these subjective measures are important, they often create noisy datasets, which make it more challenging to receive FDA approval. Similarly, psychiatric disorders such as depression rely heavily on symptom reporting via questionnaires and have limited biomarkers or objective indicators that can be measured reliably (Abi‐Dargham et al., 2023; Levis et al., 2019). In fibromyalgia, widespread musculoskeletal pain, fatigue, stiffness, and cognitive difficulties manifest without clear underlying tissue damage or reliable diagnostic biomarkers (Favretti et al., 2023). Other conditions characterized by functional impairments rather than by clear physiological problems, such as irritable bowel syndrome, and those diagnosed clinically by exclusion, such as chronic fatigue syndrome, further illustrate this challenge. The lack of established biomarkers or surrogate endpoints that reliably correspond to clinical benefit makes drug development more complicated and

uncertain, driving up costs and disincentivizing innovation in these areas of high unmet need.

MARKET FORCES

Bringing a new drug to market is an expensive and lengthy process. Only about 12 percent of drugs that enter phase I clinical trials ultimately demonstrate effectiveness and safety and thus are granted FDA approval (Congressional Budget Office, 2021). In 2021, the Congressional Budget Office reviewed three prior studies on pharmaceutical research and development (R&D) costs, which estimated the average cost to bring a new drug to market ranges from $0.8 billion to $2.3 billion (in 2019 dollars), including capital costs and the costs of failed investments (Congressional Budget Office, 2021). Two more recent studies reached similar estimates of approximately $900 million (in 2018 dollars) and $1.1 billion, also

including the costs of capital and failures (Sertkaya et al., 2024; Wouters and Kesselheim, 2024).

As discussed in Chapter 1, since clinical trials are so expensive and lengthy and are often associated with a great deal of risk, they generally require substantial investments from for-profit entities, such as venture capital firms or drug companies, to complete. As these entities seek profits for their shareholders, concerns about returns on investment are of paramount importance for drug developers. Risk-adjusted net present value (NPV) forecasts are done for each project and drive investment decisions concerning which assets should continue through development, approval, and on to the market (or remain on market) and which assets should be shelved. NPV forecasts are used to analyze potential return on investment (Gallo, 2014), accounting for a number of factors, including the likely volume of usage, the net pricing of the envisioned product, and the duration of patent coverage or market exclusivity. Each of these considerations is complicated by such factors as the size of the target patient population, disease severity, associated diagnosis and treatment rates, presence or absence and relative attractiveness of existing competing products, willingness of payers to cover, degree of formulary coverage, and utilization management.

Some of these NPV drivers prevent drug developers from investing in therapeutics and diagnostics (see Box 4-3) because the potential return on investment from such a new therapy may be lower than their defined hurdle rate and thus does not justify further investment in research and development. For example, many drugs, particularly vaccines, have been shelved because of poor market prospects (Krishnamurthy et al., 2022). Acemoglu and Linn documented that innovation, measured as the number of new products entering the market, increased by 4–6 percent per 1 percent increase in the expected market size of a product (Acemoglu and Linn, 2004). This section reviews some of these market forces that drive misalignments in investments in innovation with disease burden and unmet need.

Patient Population Size

Traditionally, the ability of manufacturers to recover R&D investments is particularly limited for disease states with small patient populations. Rare diseases, as discussed earlier in the report, by definition affect small populations.² Current estimates indicate that about 30 million people have been diagnosed with a rare disease, also known as an orphan disease, and

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² The Orphan Drug Act definition of rare disease also includes a disease that “affects more than 200,000 in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sales in the United States of such drug.” 21 U.S. Code § 360bb(a)(2).

that there are between 7,000 and potentially more than 10,000 distinct rare disease diagnoses (FDA, 2024b; Haendel et al., 2020).

Because rare diseases affect such small populations, the market for uptake of these therapies is small, and for many years the return on investment often was correspondingly too low for successful performance in the market. Most rare diseases are categorized as ultrarare and hyperrare diseases and may affect fewer than 100 people globally, making the market for these drugs extremely small (Vavassori et al., 2024).

The scientific complexity of conducting drug development research for rare diseases is also a significant barrier, again, related to the low disease prevalence, heterogenous populations, and challenges in recruiting patients, among other issues (Fonseca et al., 2019). Additionally, the current knowledge base for many of these diseases is severely lacking. For example, many rare genetic diseases have poorly understood or complex pathophysiological mechanisms, highly heterogeneous presentations of disease, inadequate diagnostic approaches, and limited information about disease progression, creating an initial barrier to drug development. Conducting initial clinical trials for these drugs is especially challenging because of the small pool of eligible patients who may also be geographically dispersed, a financial burden that deters investment in this area (Kempf et al., 2018). Clinical trials with small sample sizes may face significant statistical issues and may not capture adequate data related to safety or effectiveness (NASEM, 2024b).

To address these challenges, several regulatory and policy actions have been implemented, such as the passage of the Orphan Drug Act in 1983 (see Chapter 5 for a longer description of the Orphan Drug Act). The act was designed to promote R&D in this area through tax credits for biopharmaceutical companies, waivers of FDA user fees, and increases in marketing exclusivity for rare indications, among other actions (Yates and Hinkel, 2022). Still today, fewer than 5 percent of rare diseases have approved drugs on the market (NASEM, 2024b). The gap is larger for those rare diseases affecting bone and connective tissue, ophthalmic, renal, urinary, and reproductive systems (Fonseca et al., 2019).

Diseases with large patient populations may also present challenges to potential investments in innovative products. For one, generics may already be available on the market, limiting investors’ expectations for their return on investment. Moreover, payers are less likely to be willing to pay high prices for drugs that would be used by a large segment of the population, to avoid large increases in insurance premiums. This too could discourage investment in products with potentially large patient populations.

Patient Access

In the United States, manufacturers set the list, or sticker, price for their products. Government agencies mandate certain rebates and discounts for the programs they manage (e.g., Medicaid and 340B), and private insurers negotiate for rebates with manufacturers for the programs they manage (e.g., commercial insurance and Medicare Part D). Manufacturers seek a profit-maximizing price, which is influenced by the relative competition within the drug class and pricing decisions of their competitors (Pauly, 2017). Manufacturers may mark prices up or down from benchmark prices, depending on how agents and their product profiles are projected to address the needs of patients for the particular indication, as well as their competitiveness in the marketplace. Payers then typically determine whether and how to cover, reimburse, and manage the use of the products. When there is no coverage for a product, there is typically less prescribing and patient filling of prescriptions since patients would be responsible for paying the undiscounted list price of the drug. Thus the commercial returns in the Unites States to drug manufacturers are directly tied to the list and net pricing and access for physicians and patients. Moreover, the U.S. market is the world’s largest and generally accounts for over half of global product revenues and 64–78 percent of profits, making U.S. assumptions about pricing and access key drivers of investment decisions regarding drug development (ASPE, 2024; Goldman and Lakdawalla, 2018).

Formularies

One market force that limits innovation despite high disease burden and unmet need is the availability of less effective therapeutic options, particularly those without patent protection, in certain disease states. Some high-burden diseases, such as cardiovascular disease (discussed more below), have some treatment options available, but these therapeutics may not fully address the disease for many reasons. For example, the effectiveness of available therapies may be limited in their ability to control symptomatology and disease progression and, ultimately address the underlying etiology of the disease, resulting in residual unmet need for patients. Theoretically, if a new drug that was more effective than current treatments were approved by the FDA, it would seem from basic market principles that the new drug would generate enough profits to make the investment worthwhile. However, the formulary design process does not always allow for this to be the case.

Health insurers often subcontract the coverage and administration of drugs dispensed from pharmacies (outpatient pharmacy benefits) to pharmacy benefit managers (PBMs), which reimburse pharmacies for claims,

create pharmacy networks, and also design formularies (Hernandez and Hung, 2024). Formularies are “lists of drug products covered by [health plans] that distinguish between preferred or discouraged products by dividing outpatient therapies into three to five ‘tiers,’ each with a different level of patient cost sharing” (Werble, 2017, p. 41). Formulary designs also often involve utilization management tools that restrict coverage by requiring prior authorization (approval by the plan before prescribing or filling the drug), or evidence that a lower-cost or preferred drug has not worked for the patient before obtaining the higher-cost, nonpreferred drug, often called “step therapy.”

In the formulary-making process, PBMs negotiate with manufacturers to obtain lower prices (typically through rebates that are paid by manufacturers after the product is sold) in exchange for coverage, favorable cost sharing, and lower use of utilization management relative to any competitors (Dickson et al., 2023) (more on this in Chapter 5). These negotiations typically favor the PBMs when there are multiple drugs in a class, but not in cases where there are limited treatment options or where formulary coverage is required. For example, in Medicare Part D, all plans are required to cover essentially all drugs in six protected classes: anticonvulsants, antidepressants, antineoplastics (cancer drugs), antipsychotics, antiretrovirals, and immunosuppressants (Cubanski, 2024).

In other therapeutic classes, they must cover at least two FDA-approved drugs per class. PBMs thus have less negotiating leverage for drugs in protected classes or classes with little competition. For example, for antineoplastic drugs—a category of drugs that typically has high per-user prices owing to smaller populations treated—there is evidence that Medicare’s coverage requirements lead to limited or no rebating (meaning the list price set by the manufacturer is close to the amount paid by the plans and patients (Hwang et al., 2022). The required formulary coverage and ability to command high prices and pay lower rebates is generally considered an incentive for development, which may explain why the committee found disproportionate investment relative to disease burden for antineoplastic drugs and significant investments in therapeutics for mental health disorders (Chapter 3).

Because PBMs have greater negotiating leverage in competitive drug classes, this can serve as a barrier to innovation in disease states where available therapeutic options are able to only partially address disease burden, thus leading to residual unmet need. One example where this happens is in therapeutics for cardiovascular disease. Because there are a wide range of products available that are effective for many but not all patients, there are few incentives to develop new therapeutics for cardiovascular disease that could address residual unmet need in this area. While not the only factor, this may explain why the committee found cardiovascular disease to

be an area that is underinvested relative to disease burden, as described in Chapter 3. However, because cardiovascular disease affects so many people, this lack of innovation results in residual unmet needs for patients.

Variation in Coverage and Reimbursement Across Payers

There exists important variation in coverage and reimbursement across payers, which may introduce differential incentives for R&D investment. Private insurance accounts for the largest share of spending on drugs in the United States, at 42 percent, but Medicare is the largest single source of spending, accounting for 30 percent of U.S. expenditures on drugs (Cubanski et al., 2019). Following the enactment of Medicare Part D, R&D activity increased for drug products with a high share of the Medicare-eligible population (Blume-Kohout and Sood, 2013). The prices of drugs that are largely paid for by Medicaid are consistently lower than in Medicare and commercial insurance because of the Medicaid Drug Rebate Program, which requires manufacturers of branded products to provide a base discount of 23 percent off of the average manufacturer price or the best price provided in the market, in addition to an inflation rebate that penalizes increases in drug prices above inflation (Dolan, 2019). This reimbursement structure may lead to decreased revenues for manufacturers (Dolan et al., 2021), which may in turn discourage the development of products with a high share of Medicaid use.

The Inflation Reduction Act (IRA) of 2022 introduced important reforms to the reimbursement of drug products under Medicare (see Box 5-4 for more details).³ In addition to introducing inflation penalties in Medicare, the IRA conferred authority to the Centers for Medicare & Medicaid Services (CMS) to directly negotiate prices with manufacturers for 10 to 20 drugs per year, with negotiated prices applied beginning in 2026. CMS draft guidance released in May 2025 acknowledges that unmet need is one of the factors to be considered in the negotiation process (Klomp, 2025).

Limited Applicability of Therapeutics in Terms of Treatment Duration or Circumstances

The duration of use of a therapy is also an important market force. For drug developers, there is a greater incentive to invest in chronic disease states where the duration of therapy is not limited and therefore, there are greater opportunities to recover research and development costs than with acute conditions. The reason this occurs is two-fold. One issue is described

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³ Inflation Reduction Act of 2022, H.R.5376, 117th Congress (2022), https://www.congress.gov/bill/117th-congress/house-bill/5376 (accessed May 31, 2025).

in the behavioral economics literature of irrational purchaser preferences. Although it is rational to pay a lot more up front to cure a disease than to make a steady stream of payments over time, there is a tendency to underestimate the true cost of the stream of payments. This is because of significant underestimation of future costs, known as hyperbolic discounting (Kirby, 1997), and because of underestimation of total cost when it is divided into separate payments, known as partitioned pricing (Greenleaf et al., 2016; Lee et al., 2014; Morwitz et al., 1998; Xue and Ouellette, 2020).

This is further complicated by the fragmented U.S. health insurance system, and specifically, by the “churn” in commercial insurance coverage. Since people change insurance plans so frequently in the United States, no single insurer wants to pay the large costs up front, since it may lose the patient to another plan shortly thereafter and not receive any long-term savings from their high short-term investment in treatment. Furthermore, states with balanced budget requirements (35 states require the budget to be balanced at year end) make it challenging for state programs, such as Medicaid, to pay such a large sum up front (Tax Policy Center Urban Institute & Brookings Institution, n.d.).

The second reason is that even if purchasers are totally rational, a company with market power (as a result of having a patented drug) will find producing a repeat-purchase product more profitable than a onetime cure, which is what economists would call a “durable good” (Bureau of Economic Analysis, 2018). A manufacturer may be happy to sell a durable good (in this case, a curative therapy) at a high price at first for patients willing to pay but will eventually want to lower the price in the future to elicit more sales from patients who were unwilling to pay the initially high price. This pricing strategy risks limiting sales if payers are unwilling or unable to make the budgetary adjustments necessary to ensure access to these products. Therefore, manufacturers may prefer to develop and commercialize a less durable good that would allow for lower pricing but longer-term use to achieve their desired profits.

The situation described above creates a disincentive to develop curative therapies that have short treatment times. Treatments for hepatitis C are an illustrative example of this problem. When the early direct-acting antiviral drugs and drug combinations became available, their pricing became problematic since a defined treatment course of several weeks led to a cure. Because there was no possibility of an “annuity” over time within which to recoup investment, there was a market reluctance to invest in successful products (as in the case of Sovaldi), along with the required investment in many of the other programs that often prove to be failures. When successful treatments were developed, the cost of those treatments became a major barrier to access because of the high per-patient costs and the number of eligible patients. In addition, many patients in need of treatment were covered

under state budgets (including those incarcerated and those insured under state Medicaid programs), which meant that access to treatments varied by where a person lived.

While some payers eventually decided to cover the cost of these therapies because treating hepatitis C reduces its spread and ultimately reduces the target population of those needing treatment, the country is still far from the goal of eradicating hepatitis C (Fleurence and Collins, 2023). Although the landscape for coverage of these drugs is changing, only eight states have eliminated coverage restrictions that limit access to these drugs (Davey et al., 2024). Largely not factored into such health economic assessments was the potential for developing liver cancers over a longer period of time, which would not be a factor for commercial payers whose insured populations are typically only enrolled in their plans for relatively short periods of time, as described above. The commensurate reduction in cost burden to payers over time resulted in some additional coverage for these medications, although more coverage will be needed to eradicate hepatitis C.

Conclusion 4-1: Innovative therapies are emerging for rare diseases and other complex conditions, offering a potential for cure. However, the fragmented payment system within the United States is a barrier to patient access, resulting in underinvestment in developing curative therapies. The current U.S. market and policy environment is unprepared to manage these one-time, very high-cost therapies. There is a need for a clearer reimbursement structure for innovators developing these high-cost curative treatments.

These same market forces can also apply to the development of drugs for exceptional (low-probability, high-risk) circumstances, such as countermeasures for biological weapons, antimicrobials targeting ultraresistant bacteria, and treatments for infectious diseases with pandemic potential. The commercial upside for these therapies is inherently limited because they are developed with the understanding that they should only be used in exceptional cases. In addition, widespread use of antimicrobials for ultraresistant infections would lead to resistance to these treatments, undermining their usefulness. Therefore, as Box 4-4 describes, there are few market incentives to develop these critically important therapies because of their limited use profiles.

Length and Cost of Clinical Trial

The duration, and therefore the cost, of clinical trials can also affect investment decisions in certain therapeutic areas. Recruitment into clinical trials can be more challenging, and therefore more expensive, for some

diseases. For example, many trials for mental health conditions, such as depression, are particularly challenging for recruitment. For example, one study offering cognitive behavioral therapy by computer had enrollment rates ranging from 2 percent to 60 percent and actual participation rates of 3 percent to 25 percent (Kaltenthaler et al., 2008). In another study examining treating diabetes in individuals with depression, recruitment into the study took over double the amount of time initially budgeted (Myers et al., 2019). This likely influences investment decisions, perhaps decreasing potential investment into these more difficult-to-recruit diseases and conditions.

The length of the trials is also one of the reasons that there is a lack of investment in preventative therapeutics or early-stage interventions. For example, an early-stage intervention for preventing cancer can take decades to observe outcomes (e.g., the development of cancer), depending on the natural history of a particular tumor type, and speed of progression (Serrano et al., 2019). The length of these trials and the amount of follow-up required to show evidence of efficacy is cost-prohibitive for many companies. Therefore, cancer innovation tends to focus on later-stage cancer therapies, where trials can be run more quickly and for lower cost as the prognosis for patients with late-stage cancer is often poor and survival is a key endpoint for many of these trials (Budish et al., 2015). One potential solution to these lengthy clinical trials is to expeditiously develop

and validate surrogate endpoints. Although these endpoints are not direct measures of clinical benefit, if they are reasonable predictors of clinical benefit, they can be used to more rapidly evaluate efficacy (FDA, 2019). With the development and use of better surrogate endpoints for early-stage cancer therapies, patients could get access to medications that are reasonably expected to have an effect, with the expectation that manufacturers will confirm clinical benefit at a later date.

Scientifically Complex Populations

There are certain populations that are scientifically complex, such as pregnant or lactating individuals and pediatric populations, making research in these populations more costly and therefore less likely to occur. Although there are unique challenges for each population, there is a mismatch in investment in innovations compared with the disease burdens that affect each group.

Pediatric drug development has lagged behind research to address adult conditions. In addition to heightened ethical scrutiny, pediatric clinical trials require specialized expertise to properly evaluate pharmacokinetics, pharmacodynamics, and efficacy in children as they age (IOM, 2012). Furthermore, recruitment for pediatric trials often requires more trial sites than adult trials to recruit sufficient numbers of participants across age groups. Most pediatric conditions are also considered rare, which presents some of the same challenges outlined in the earlier section about small patient populations (Speer et al., 2023). Congress has passed legislation creating financial incentives and regulatory requirements to encourage research for pediatric populations (see Chapter 5 for more details), and these have been helpful in getting more pediatric information in drug labeling (FDA, 2022). However, most drugs used in children still do not contain pediatric prescribing information, and this continues to be the case, even for new drugs with a postmarketing requirement to conduct pediatric studies (Carmack et al., 2020).

Pregnant and lactating populations are also scientifically complex and, similar to pediatric populations, require additional resources to conduct research (NASEM, 2024a). Although ethical considerations and liability concerns are often raised as barriers to conducting research with these populations, evidence supports the ethical case for including these populations in research (NASEM, 2024a; Task Force on Research Specific to Pregnant Women and Lactating Women, 2018; WHO, 2023), and there is little evidence of increased liability for clinical trials involving pregnant or lactating populations (NASEM, 2024a). However, given the increased cost associated with conducting research with these populations and given that pregnant and lactating women can be prescribed medications without

specific labeling information, there is little financial incentive to conduct research with these populations (NASEM, 2024a). This lack of incentives prevents innovation and investment for research on high-burden diseases with large unmet needs that affect these populations, such as preeclampsia, preterm birth, gestational diabetes, and hyperemesis gravidarum.

All of the market forces covered in this section contribute to continued unmet needs for diseases and conditions that have high disease burdens. These market forces contribute to the misalignment discussed in Chapter 3. The next chapter reviews the levers that policy makers can use—and have used—to address some of the factors discussed in this section and ultimately reduce the misalignment in investments for diseases with high burdens and unmet needs.

Finding 4-2: Despite early signs of efficacy or even FDA approval of a drug, some therapeutics are shelved or pulled from the market because there is not a large enough economic incentive or return on investment for a company to fully develop the drug or continue manufacturing it once approved.

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