Japan Liberalizes Regenerative Medicine

by on September 14, 2015 at 7:24 am in Economics, Law, Medicine | Permalink

Japan is liberalizing its approval process for regenerative medicine:

…Regenerative medicines in Japan can now get conditional marketing approval based on results from mid-stage, or Phase II, human trials that demonstrate safety and probable efficacy. Once lagging behind the United States and the European Union on approval times, there is now an approximately three-year trajectory for approvals, according to Frost’s Kumar. That compares with seven to 10 years before.

…Around the world, companies have also faced setbacks while pushing such treatments. In the U.S., Geron Corp., which started the first nation-approved trial of human embryonic stem cells, ended the program in 2011, citing research costs and regulatory complexities.

…While scientists globally have worked for years in this field, treatments have been slow to come to market. But there is hope in Japan that without the political red tape, promising therapies will emerge faster and there will be speedier rewards.

Japan is liberalizing because with their aging population treatments for diseases like Alzheimer’s and Parkinson’s disease are in high demand. Under the new system, a firm with a gene or regenerative therapy (e.g. stem cells) can get conditional approval with a small trial. Conditional approval means that the firm will be able to sell its procedure while continuing to gather data on efficacy for a period of up to seven years. At the end of the seven year period, the firm must either apply for final marketing approval or withdraw the product. The system is thus similar to what Bart Madden proposed for pharmaceuticals in Free to Choose Medicine.

Due to its size and lack of price controls, the US pharmaceutical market is the most lucrative pharmaceutical market in the world. Unfortunately, this also means that the US FDA has an outsize influence on total world investment. The Japanese market is large enough, however, that a liberalized approval process if combined with a liberalized payment model could increase total world R&D.

Breakthroughs made in Japan will be available for the entire world so we should all applaud this important liberalization.

Hat tip: Michael Mandel.

1 Just Saying September 14, 2015 at 7:47 am

Any recommendations for how the US can stop subsidizing the rest of the world? It seems we’re paying for everyone’s else’s medication by not having price controls.

2 John L. September 14, 2015 at 8:50 am

Get price controls if you want them so much. And if having a productive pharmaceutics industry is such a burden, get rid of it.
Complaining about that is like saying that by being a billionaire Bill Gates is saying good bye to all that sweet food stamps money. You can make other people worse off by taking their food stamps, but, as far Gates is concerned, that’s all.

3 dan1111 September 14, 2015 at 9:35 am

I think it is a complaint that other countries are not paying their fair share for drug R&D. Which is a fair point. All of the fairly rich countries in the world benefit more or less equally from drug development (since the production cost is a very small portion of most drug costs, and drug companies can easily price discriminate between countries, beneficial new drugs will get into price controlled markets). So Americans are paying a lot more for the same thing.

4 John L. September 14, 2015 at 10:37 am

Europeans know they won’t be better off paying more for what they need. How much is one’s “fair share” is a subjective issue anyway, but if it is really an important one, America can impose price controls and be no worse off than any other country . By the way, does European socialized medicine strengthen the demand for drugs (some of them at least)? I really do not know. If they do and “the production cost is a very small portion of most drug costs”, it must at least help a little.

5 Nathan W September 14, 2015 at 11:37 am

I plead ignorance, but my understanding is that Americans are more over-prescribed than other countries. Among other things, most countries have very strong rules regarding the ways that pharmaceuticals can market to doctors, so (according to an argument I am familiar with) doctors are less likely to prescribe unnecessary or ineffective medications.

Is it true that American doctors can get kickbacks for prescriptions?

6 Brett September 14, 2015 at 10:39 am

Just go ahead and get price controls. It will force the US and elsewhere to start under-writing the cost of developing medicine. Right now, government mental research is mostly basic research, the kind of stuff that helps you find potential targets for drugs but does nothing to test whether they actually work as medicine or not.

7 Nathan W September 14, 2015 at 11:34 am

Gotta regulate corporate donations to political campaigns first.

The pharmaceuticals have bought both sides of all the big races.

8 Hasdrubal September 14, 2015 at 1:16 pm

Export tarriffs, maybe. And taxes on sales abroad for drugs developed (would have to spend a lot of time working on the qualifier there) that would bring the effective cost up to US costs. Done right, you would raise the price in the rest of the world, lower the price in the US, and keep profit or time to recoup sunk costs or whatever constant.

_If_ done right, which I’m pretty sure isn’t completely possible. But I bet we could screw over the rest of the world at least. >.>

9 Harun September 14, 2015 at 3:44 pm

It would not be hard. Just set up a most favored nation rule for drug pricing based on OECD countries.

If France cuts the price, then we get the same price.

The drug companies would then stop allowing France to cut the price. They would most likely announce global pricing to be the new policy.

France might just break the patents, but then it would be a trade war…and France would look kind of like a jerk for refusing to pay the fair, global price.

10 Justin Kelly September 14, 2015 at 6:33 pm

Go through their 10ks sometime, Pharmaceuticals maintain on average a 15% profit margin and spend more on marketing than they do R&D. That ignore the fact that they are constantly taking research grants and donations to fund their research, then patent the result for themselves.

If we deregulated the health industry they would not be able to get away with this sort of thing.

11 anon September 14, 2015 at 7:28 pm

What’s your point Justin? Don’t let the industry have any revenue because only a significant portion of it goes into R&D rather than all of it?

12 Thomas Taylor September 14, 2015 at 9:49 pm

The point seems to be about the old wives tale that prices must be highbecause of R&D is ridiculous. The Europeans did something about it, why can’t we?

13 So Much For Subtlety September 14, 2015 at 8:07 am

Breakthroughs made in Japan will be available for the entire world so we should all applaud this important liberalization.

There is political red tape in much of the world because a lot of people are very uncomfortable with a procedure that looks a lot like putting small human beings through a blender so that the good bits can be sucked out with a straw.

By way of contrast vampires achieved long lives in a much more restrained way.

I am not sure it follows that it is a good thing that the Japanese have made it so much easier to do. We have already seen that entrenched cultural attitudes in South Korea led to exploitation of female graduate students by Hwang Woo-suk.

There are a lot of restrictions on human trials in the West. So the drug companies are doing work in the Third World where such rules rarely apply. I am not sure exporting the risk of the next thalidomide to India is an improvement. As much as we all might benefit from the results. Any more than the fact we benefit from freezing and high altitude experiments done by You Know Who justifies what was done.

All in all, it is not obvious to me that this is a good thing at all. And I say this as someone who might (and whose immediate family certainly would) benefit from such breakthroughs.

14 Axa September 14, 2015 at 8:22 am

America, land of contrasts. One guy can be Linus Pauling, another one can be SMFS.

15 So Much For Subtlety September 14, 2015 at 6:11 pm

Well there is some truth to that. After all, I am unlikely to advise you to risk Vitamin C overdose because of some rumor I heard on the internet.

Nor am I likely to be awarded the Lenin Prize for working so hard to make it possible for the Soviets to commit genocide in the West.

16 Thomas Taylor September 14, 2015 at 9:51 pm

At the other hand, your Nobel Prize must be in the mail.

17 albatross September 14, 2015 at 2:57 pm

The obvious way it can go badly is if a lot of people with degenerative diseases get ineffective treatments, because they’re prescribed medicines that appear safe but don’t yet have convincing evidence that they’re effective. I’m not sure how we’d ever know whether we’d really optimized the tradeoff between benefitting from useful medicines earlier and wasting resources/inflicting side-effects on patients with useless medicines.

Doesn’t this also shorten the drug pipeline, and thus improve the profitability of drug development, in Japan? Again, it’s not obvious to me if this is an improvement or not, nor even how you’d tell. Many of those medicines will eventually be found to be of marginal value (meaning they’re harmful when you include side-effects), but more medicines will get far enough to eventually be noticed as providing a real benefit. I doubt we’ll ever be able to tell if the really helpful medicines were kept alive by this change.

18 So Much For Subtlety September 14, 2015 at 6:16 pm

Some people might think that the killing of embryos and the extraction of stem cells, if that is in fact what they are doing, is the process already going wrong.

However if they are using adult stem cells, it could go badly wrong if they introduce more prion-type diseases into the general population. Or if they discover a whole new class of diseases like they did with prions. We won’t know until they start killing people.

It is true that inflicting treatments that don’t work on people with dementia is not likely to harm anyone but the patient. And not to be too crass about it, they are hardly going to complain are they? However they are also talking about gene technology and inflicting untested permanent changes on the gene pool that will inevitably have unintended consequences is so stupid only a scientist would think to do it.

19 Wwebd replies to SFMS in relative defense of scientists September 14, 2015 at 9:23 pm

SMFS – one reason why humans, whether very small or very large or in between, should not be commodified, even “benevolently”, is because every decision to indulge in such commodification objectively reduces the historical reaction time allowed to a given civilization to prevent subsequent weaponization of that commodification by less “benevolent” people, who feel “justified” in part by the prior “scientific benevolence.” Intended consequences have, over the last several thousand years, caused more suffering than unintended consequences. The stupidity of scientists qua scientists has a natural limit; a limit they can, and often do in their frequent misanthropic moments, overcome by negatively inspiring the rest of humanity, whom they consider to have few (or fewer, from the scientists’ point of view) natural limits on natural expressions of stupidity. Aristotle and the philosophers of natural law knew that, but their works are rarely taught anymore.

20 So Much For Subtlety September 15, 2015 at 1:50 am

Wwebd replies to SFMS in relative defense of scientists September 14, 2015 at 9:23 pm

That is a very qualified defense of scientists. I am not sure it deals with my objections though. You are saying because the intended consequences of meddling are so much worse than the unintended ones that it is a good thing scientists are freer to do their work? Wouldn’t it be better if they were even more heavily regulated?

I think it is a concern if anyone makes this sort of meddling easier and with fewer safeguards. Whether the consequences are intended or not. Some things, not many, really do need regulating.

21 Wwebd replies to SFMS in relative defense of scientists September 15, 2015 at 8:37 am

SMFS – I agree with the points you are making. To expand on your last sentence, some countries and some scientific organizations are more reluctant than others to try to regulate in certain dangerous fields where the self-regulation of individual civilized scientists is clearly not enough. A major reason for their reluctance is (I believe) a nationalistic lack of foresight as to how other countries will steal and misuse the intellectual property they have created. Basic Bulletin of Atomic Scientists stuff.

22 Moreno Klaus September 14, 2015 at 8:14 am

Alex Tabarrok and his pro-market mood affiliation…Just ask health economists or industry insiders what they think about this. They will tell you there are very good reasons for this process to take very long time…

23 jpa September 14, 2015 at 9:27 am

since none of replied here, could you share why there are very good reasons for this to take a long time?

24 Moreno Klaus September 14, 2015 at 11:16 am

It is hard to prove a drug is effective (how much does it cost to build an RCT? How much time/patients until you have enough statistical power to draw conclusions?) and even harder to prove it is cost-effective compared to other already existing drugs. Unless you are working on a disease area where you are comparing “parachute vs no-parachute”. That is, the benefit would need to overwhelming. But for the average drug you can expect it not to be the case.

25 Harun September 14, 2015 at 3:45 pm

Surgeries are dangerous, too.

They of course don’t need the same lengthy approval.

26 mavery September 14, 2015 at 3:55 pm

MK points out the issue of having a long time to vary the efficacy of most new treatments. While true, that is not the reason to be cautious when it comes to approving new drugs. The reason is moral hazard. Many folks don’t pay the full (or in many cases, any) portion of the cost of their prescriptions. A “possibly effective” medication can be marketed quite easily (you just de-emphasize the “possibly” part), leading patients to demand it and doctors to proscribe it. Then the government ponies up the bill. Even without the moral hazard, you run into situations where folks are convinced to spend lots of money on ineffective treatments. Worse, some of these treatments may have side effects that have not been fully explored through the limited trials necessary to get them through the first step of this liberalized approval process.

As always, it comes down to the details. There are intelligent ways to do this type of thing, allowing limited trial access to treatments that are as yet unproven and limiting government exposure to moral hazard. But it seems to me that degenerative conditions which are both terrifying and have treatments that must by their nature be at least partially preventative create a particularly high risk case for expedited approval.

27 dan1111 September 14, 2015 at 9:37 am

It is not a simple issue with a quick fix, but the claim that all “health economists” and “industry insiders” think that the process needs to take this long is pure baloney.

28 Alex Tabarrok September 14, 2015 at 9:42 am
29 Axa September 14, 2015 at 9:57 am

Alex, it’s been more than 10 years since the year 2000. Perhaps it’s time to read the literature once again or even ask professionals about it.

“And research into regenerative medicine has been going at a pretty fast pace. Yes, there have been a lot of novel breakthroughs in the past few years. It seems that things are moving relatively rapidly to true translation and clinical practice. When you think about it, it usually takes 10 to 14 years to bring a drug to market. Well, the entire field of pluripotent stem cells is 14 or 15 years old. And yet, in those 15 years there are already clinical trials in place.”


30 dan1111 September 14, 2015 at 10:35 am

So, after 15 years of research in a promising area, there are trials ongoing in humans, but drugs coming to market are still years away.

The fact that this is called a “fast pace” seems like evidence for, not against, Alex’s point.

31 Moreno Klaus September 14, 2015 at 11:26 am

Unfortunately to prove that a drug is effective takes this long (and the field is entirely new, so it is prudent). Relaxing this means potentially more false-positive drugs into the market, higher overall cost (?)….

32 Axa September 14, 2015 at 11:26 am

From the very same interview to a guy that actually works in stem cell research:

“And if you include the non-pluripotent cells, then there are already five or six products in the U.S. and other countries. There’s Provenge [for prostate cancer], Appligraf [to treat diabetic foot ulcers], Carticel [to replace knee cartilage], Gintuit [to promote healing after gum surgery] and Fibrocell is replacing fibroblasts.”

33 dan1111 September 14, 2015 at 6:01 pm

@Axa, yes but the field that they describe as 14 to 15 years old is pluripotent stem cells. I don’t believe there are any drugs on the market from that field.

34 Moreno Klaus September 14, 2015 at 11:08 am

Most of your links go to your own research loool …. See my point? 😉

35 dan1111 September 14, 2015 at 6:03 pm


36 OnlyTheImportantThings September 14, 2015 at 8:18 am

There is only one salient aspect of this blog post. (How much) Will this hasten the most devastating scourge affecting the human race–male pattern baldness?

37 rayward September 14, 2015 at 9:05 am

Here’s the counter-argument to Tabarrok’s anti-regulatory blog posts regarding the FDA (http://theincidentaleconomist.com/wordpress/), in which the author (Bill Gardner) makes the ironic point that “we should be looking for every opportunity to transform policy making into an empirically-driven enterprise. Experimental data are more valuable than our theories. Let’s consider evaluating the FDA the same way the FDA evaluates drugs”. My view is that preying on desperate people may be good business but it is immoral. Extremism in the defense of liberty is no vice may work as a political slogan, but not good government.

38 rayward September 14, 2015 at 9:08 am
39 dan1111 September 14, 2015 at 9:40 am

How is this a counter-argument to Tabarrok? And where did the idea that any reduction in drug regulation amounts to “preying on desperate people” come from?

40 albatross September 14, 2015 at 3:02 pm

How would we know if we were preying on desperate people, except in hindsight. We have a slider bar which can make it harder or easier to get a drug approved for use. If we slide the bar toward “easier,” then more drugs with marginal effects get used, which costs money and makes sick patients worse off from side-effects, but also, really effective drugs get out into the world and into use more quickly. If we slide the bar toward “harder,” then fewer drugs with marginal effects get used, but really effective drugs take several more years before they are widely used.

41 albatross September 14, 2015 at 3:03 pm

How do you decide where on the slider bar to stick the “preying on the desperate” label?

42 Harun September 14, 2015 at 3:47 pm

That’s the toggle where it says “right’s idea or left’s idea”

43 Axa September 14, 2015 at 9:21 am

@Alex, please consider the following situation:

If the company sells the treatment, it implies the patient is paying. If the patient pays, results are expected. Establishing treatment efficacy is a damned hard job, this is why the randomized control trial methodology was developed. In this methodology there is a thing called the control group. So, which kind of client is going to pay to be part of a double blind experiment?

This is complicate. Negative control groups don’t exist in this scheme because no one is going to pay to receive a placebo. So, the alternative is just working with positive control groups. Still, this is a happy outcome if there’s only one treatment method. If the same company or a different one has 5 similar but different methodologies to treat the same condition, it’s a great setup for control groups thus science….however, which kind of client would like pay to be in the treatment control group where the scientist thinks has the lower potential but anyway is worth to study for comparison?

But that’s just me, this is the opinion of a guy who studies stem cells for a living: “proposals for deregulation come shrouded in appealing messages that shift adroitly in response to critiques: freedom of choice, giving hope to dying patients, fighting bureaucratic obstructionism and, of course, innovating medicine. But it is a business model that removes the incentives to make drugs and treatments ever better. It offloads financial risk from investors and companies to patients, and requires the very ill to pay for interventions that are unlikely to work.”


And one case of stem-cell miracle cure: http://www.nature.com/news/stem-cells-taking-a-stand-against-pseudoscience-1.15408

44 jpa September 14, 2015 at 9:31 am

This is a business model problem, not a regulatory problem. Pay for results is very common in the business world. (pay per lead, pay per sale) The first pharma company that offers that type of payment model for an experimental drug will make a tidy profit. Of course the state won’t allow it. It hates competition with its regulatory regime.

45 dan1111 September 14, 2015 at 10:49 am

They raise some interesting points, but it hardly seems decisive to me.

Their claim that drug companies will no longer have the incentive to prove their drugs are safe and effective is not true. Ultimately, they will need evidence their product works to get market share. Selling their drug forever as an experimental treatment won’t be effective.

There are issues that need to be worked out in terms of evidence gathering after a drug hits the market. However, clinical trials are widely acknowledged to have severe limitations that need supplementation with real-world evidence, anyway. Drugs often work in a controlled research setting, but not in messy real life care. Trials are conducted on a nonrepresentative subgroup of the population, and the results may not translate to other groups (the lack of evidence around medication in pregnancy is the most visible example of this).

Real-world evidence is the direction we need to be heading for pharmacological research, and ending the sharp dividing line between research and the market will facilitate this.

46 Axa September 14, 2015 at 11:34 am

The claim of the guys in Nature’s opinion piece is pretty consistent with USANA and Herbalife succesful business stories. I don’t think any established drug company will switch to snake oil sale. However, new business that have nothing to lose don’t need evidence to make a profit.

Perhaps, I shouldn’t write about USANA, they sue their critics.

47 GW September 14, 2015 at 10:55 am

I don’t understand Tabarrok’s economics here:

“sell its procedure while continuing to gather data on efficacy” means nothing other than guaranteeing that money will inevitably be spent on some number of expensive new drugs that don’t work and drugs that don’t work will be used instead of therapies with known efficacy.

And will a “liberalized payment method” actually take into account the absence of information with regard to efficacy? If efficacy is not (yet) shown, will this be reflected in a lower price? Will insurance companies cover drugs without knowing their efficacy? Will they be able to negotiate prices based on efficacy information as it accumulates?

48 ydpZYZyFxHMYJrW October 11, 2015 at 10:08 pm

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