Liang (Leon) Xu adopted his research track in the supply chain of pharmaceuticals as a doctoral student when his former adviser was diagnosed with cancer.

The significance of his research today looms large, as the impending global distribution of a COVID-19 vaccine has grabbed headlines.

“My research focuses on the entire supply chain from drug discovery and FDA approval, to distribution, pricing and utilization,” Xu, assistant professor of supply chain management and analytics, said. “When I was admitted to Penn State University, my previous adviser was a very respected Chinese scholar named Dr. Susan Xu. She was diagnosed with a terrible form of brain cancer, and there were few treatment options. Nevertheless, she was a very strong person and was actively seeking treatments.”

The clinical trials available to his adviser were restrictive, and because of that she was not able to receive experimental treatments for a promising new drug. She died in 2014.

“This started my thinking about the FDA drug approval process,” he said. “After reading up on the literature for the drug approval process, I found it usually takes 10-12 years. This is a lengthy process and typically costs about $2.6 billion to innovate and discover a new molecule to treat disease.”

Xu explained the FDA tries to speed up the process for things such as developing a vaccine, but they are conscious of not compromising the scientific process, which involves multiple trials to demonstrate safety and effectiveness. His recent paper, “Inducing Compliance with Post-market Studies for Drugs under FDA’s Accelerated Approval Pathway,” published in Manufacturing & Service Operations Management, examines how the industry might implement a new mechanism into the process to help strike the right balance between speed and effectiveness.

Currently, small clinical trials take place to indicate whether a drug might work.

“For example, in cancer they use the trial to see if the drug can shrink the tumor size. That’s a pretty good approximation of the true clinical benefit, which is the survival rate. If the drug is promising, they’ll give an accelerated approval to start selling the drug,” Xu said.

Because such clinical trials cannot fully measure actual survival rates, the FDA requires post-market studies by pharmaceuticals who are granted speedy approvals. Although it sounds like a great compromise to grant the post-market studies, Xu expressed concern about past effectiveness.

“In practice, once the drug is on the market, pharmaceutical companies may lose incentive to finish or even begin their post-market trials,” he said. “Once they can sell the drug, why should they spend more money to do trials? Also, if you do the study you might find out the drug doesn’t work, and the approval decision could be reversed, in which case you lose that market.”

According to FDA studies, about one third of post-market studies are delayed, and of those, some delays last four to eight years — sometimes until the patent expires. In these cases, investing in more studies would not be economically viable. This is where Xu’s latest research comes into play.

“My research looks at how to induce compliance on those post-market studies,” he said. “We talked to the FDA about how to implement something useful. We looked into a user fee manufacturers would pay when they submit a drug for approval. It might be up to $2 million.”

He examined a hypothetical process by which the fee would be customized according to the timeline the company would be willing to commit to the post-market study. If the company commits to a shorter post-market study timeline they would pay a smaller fee.

“One of the excuses pharmaceutical companies use for the delay of the post-market study is the it’s too difficult because it’s hard to find volunteer patients to conduct the research,” said Xu, who believes the differentiated fee could help provide incentives to ensure companies are truthfully revealing the difficulty in conducting the study, and are diligent in their responsibility to follow through with post-market studies.

“We hope our research will eventually push new policy, but that is quite challenging. In this paper, we did a case study for a drug that has been delayed for 12 years, so we looked at what would happen if we applied this new fee mechanism on that case. We are happy at this point to be communicating with the FDA and providing them our ideas,” he said.

Jennifer Ryan, Ron and Carol Cope Professor of Supply Chain Management and Analytics and Department Chair, noted Xu’s hiring in the fall of 2019 could not have been more timely in terms of the impact his research brings in light of a global pandemic.

“When we hired Leon, we understood that well-managed health care supply chains are critical for providing high quality and efficient patient care,” Ryan said. “However, we did not know that just six months later we’d be at the start of a pandemic that would severely strain those supply chains. It is so important to have experts such as Leon who can provide advice on best practices for pharmaceutical distribution. Given COVID-19, having a faculty member with Leon’s expertise, both in pharmaceutical distribution and in the FDA processes for accelerated drug approval, has been a great learning opportunity for College of Business students and faculty.”

COVID-19 Supply Chain Management and Analytics