Senators Ted Cruz (R-Texas) and Mike Lee (R-Utah) have just introduced a bill that would implement an idea that I have long championed, making drugs, devices and biologics that are approved in other developed countries also approved for sale in the United States. Highlights of the “Reciprocity Ensures Streamlined Use of Lifesaving Treatments Act (S. 2388), or the RESULT Act,” include:

  • Amending the Food, Drug and Cosmetic Act to allow for reciprocal approval of drugs, devices and biologics from foreign sponsors in certain trusted, developed countries including EU member countries, Israel, Australia, Canada and Japan.
  • Encouraging the FDA to expeditiously review life-saving drug and device applications, this legislation would provide the FDA with a 30-day window to approve or deny a sponsor’s application….
  • The HHS Secretary is instructed to approve a drug, device or biologic if the FDA confirms the product is:
    • Lawfully approved for sale in one of the listed countries;
    • Not a banned device by current FDA standards;
    • There is a public health or unmet medical need for the product.
  • If a promising application for a life-saving drug is declined Congress is granted the authority to disapprove of a denied application and override an FDA decision with a majority vote via a joint resolution.

In explaining why he introduced the bill Senator Cruz argued:

We continue to lose far too many of our loved ones to the “invisible graveyard,” as economist Alex Tabarrok has described: lives that could have been saved but for a bureaucratic barrier that rejects medical cures and innovation…The bill I am introducing takes the first step to reverse this trend. It provides for reciprocal drug approval, so that cures and medical devices that are already approved in other countries can more expeditiously come to the U.S.

Here is the job market paper of Nathan Petek, from the Booth School of Business, University of Chicago:

Abstract: The marginal benefit of health care determines the extent to which policies that change health care consumption affect health. I use variation in access to hospitals caused by nearly 1,300 hospital entries and exits to estimate the marginal benefit of inpatient care. I show that hospital entries and exits cause sharp changes in the quantity of inpatient care, but there is no evidence of an effect on average mortality with tight confidence intervals. I find suggestive evidence of an effect on mortality in rural areas and for the over-65 population with magnitudes that imply the marginal benefit of inpatient care is significantly higher for these populations than for the average patient.

Even for rural areas and the elderly, an effect is not seen until more than a year after the event.

By the way, $900 billion is spent annually at U.S. hospitals.

For the pointer I thank David, a loyal MR reader.

Why medical progress is difficult

by on December 8, 2015 at 2:09 am in Data Source, Medicine | Permalink

Here is part of the abstract of a new NBER paper from Gisela Hostenkamp and Frank R. Lichtenberg:

We use Danish diabetes registry and health insurance data to analyze the extent, consequences, and determinants of under-use and overuse of oral anti-diabetic drugs.

Less than half of patients consume the appropriate amount of medication–between 90% and 110% of the amount prescribed by their doctors.

The life expectancy of patients consuming the appropriate amount is 2.5 years greater than that of patients consuming less than 70% of the prescribed amount, and 3.2 years greater than that of patients consuming more than 130% of the prescribed amount, controlling for time since diagnosis, insulin dependence, comorbidities, age, gender and education. Patients consuming the appropriate amount are also less likely to be hospitalized than under- or over-users.

And of course that is from Denmark, which is supposed to be a culture with relatively strong norms of conscientiousness.

China fact (estimate) of the day

by on December 7, 2015 at 2:08 am in Economics, Law, Medicine | Permalink

The China Medical Doctors’ Association recently found that 13 per cent of doctors surveyed had been physically attacked in the past year.

The FT article by Andrew Ward and Patti Waldmeir is interesting throughout, here is another bit:

Doctors are paid on average one-fifth the amount received by their counterparts in Europe and are required to see up to 150 patients a day.

Overall the Chinese health care system is considered to be extremely corrupt.

The job market paper of Amanda Nguyen, of UCLA, is on that topic, I found her results intriguing:

Despite its illegality, prostitution is a multi-billion dollar industry in the U.S. A growing share of this black market operates covertly behind massage parlor fronts. This paper examines how changes to licensing in the legal market for massage parlors can impact the total size and risk composition of the black market for prostitution, which operates either illegally through escorts or quasi-legally in massage parlors. These changes in market structure and risk consequently determine the net impact of prostitution on sexually transmitted diseases (STDs) and sexual violence. I track the impact of two policy changes in California that resulted in large variation in barriers to entry via massage licensing fees. Using a novel dataset scraped from Internet review websites, I find that lower barriers to entry for massage parlors makes the black market for prostitution larger, but also less risky. This is due to illegal prostitution buyers and suppliers switching to the quasi-legal sector, as well as quasi-legal sex workers facing a reduced wage premium for high-risk behavior. Consequently, the incidence of gonorrhea and rape falls in the general population. I also present evidence that growth in the quasi-legal sector imposes a negative competition externality on purely legal massage firms.

I don’t find the rape result intuitive, but I am seeing it pop up in a number of papers, so perhaps it should be taken seriously.

A Dual-Track Drug Approval Process

by on December 2, 2015 at 7:22 am in Economics, Law, Medicine | Permalink

In a post earlier this year I noted that Japan has significantly liberalized its approval process for regenerative medicine. Writing in Forbes, Bart Madden and Nobelist Vernon Smith outline a similar proposal for the United States.

Recently, Japanese legislation has implemented the core Free To Choose Medicine (FTCM) principles of allowing not-yet-approved drugs to be sold after safety and early efficacy has been demonstrated; in addition, observational data gathered for up to seven years from initial launch will be used to determine if formal drug approval is granted.

…FTCM legislation in the U.S. would create a dual track system (see figure below) that preserves the existing FDA clinical trial process while offering patients an alternative. Patients, advised by their doctors, would be able to contract with a drug developer to use not-yet-approved drugs after Phase I safety trials are successfully completed and one or more Phase II trials have demonstrated continued safety and initial efficacy. The resulting early access could make FTCM drugs available up to seven years before conventional FDA approval, which entails Phase III randomized control trials and a lengthy FDA review before the FDA makes an approval decision.


…The heart of the dual track system is the Tradeoff Evaluation Drug Database (TEDD) which would be available to the public through a government-supervised web portal. TEDD would contain all treatment results of FTCM drugs including patients’ health characteristics and relevant biomarkers, but no personal identification. This open access database would be a treasure-trove of information to aid drug developers in making better R&D decisions consistent with fast-paced learning and innovation.

…Today’s world of accelerating medical advancements is ushering in an age of personalized medicine in which patients’ unique genetic makeup and biomarkers will increasingly lead to customized therapies in which samples are inherently small. This calls for a fast-learning, adaptable FTCM environment for generating new data. In sharp contrast, the status quo FDA environment provides a yes/no approval decision based on statistical tests for an average patient, i.e., a one-size-fits-all drug approval process.

I hold the Bartley J. Madden Chair in Economics at the Mercatus Center so I am biased but this is an important proposal. Japan is leading the way and similar ideas are being discussed in Great Britain but as the most important pharmaceutical market in the world, the United States has an outsize influence on world drug development. We need to lower costs and speed new drugs to market.

Rosanna Smart, a job market candidate from UCLA, has a very interesting job market paper (pdf) on this question.  Here is the abstract:

Almost half of the US states have adopted \medical marijuana” laws (MMLs),and 58% of Americans now favor marijuana legalization. Despite public support, federal law continues to prohibit the use and sale of marijuana due to public health concerns of increased abuse, drugged driving, and youth access. Using evidence from MMLs, this is the first paper to study whether growth in the size of legal marijuana markets affects illegal use and its associated health consequences. By collecting new data on per capita registered medical marijuana patient rates, I investigate how state supply regulations and changes in federal enforcement affect the size of this legal market. I then study how illegal marijuana use and other health outcomes respond to changes in legal availability. I find that growth in the legal medical marijuana market significantly increases recreational use among all age groups. Increased consumption among older adults has positive consequences in the form of an 11% reduction in alcohol- and opioid-poisoning deaths. However, increased consumption among youths leads to negative externalities. Raising the share of adults registered as medical marijuana patients by one percentage point increases the prevalence of recent marijuana use among adolescents and young adults by 5-6% and generates negative externalities in the form of increased traffic fatalities (7%) and alcohol poisoning deaths (4%).

Those results are consistent with my intuitions.  When it comes to “those who already are screwed up,” namely the older generation, it is best to shunt them off into pot, compared to the relevant alternatives.  But when it comes to the younger generation, the new norm that “pot is OK” may in fact not be best in the longer run.  So in sum,while I (TC, not the author necessarily) favor marijuana decriminalization, we should hold mixed moods towards its practical effects.

Kidney-DiseaseThe latest issue of the American Journal of Transplantation has an excellent and comprehensive cost-benefit analysis of paying kidney donors by Held, McCormick, Ojo, and Roberts. Earlier, Becker and Elias estimated that a payment of $15,000 per living donor would be sufficient to eliminate the US waiting list. The authors adopt a larger figure of $45,000 for living donors and $10,000 for deceased donors and find that even at these rates paying donors generates benefits far in excess of costs.

In particular, a program of government compensation of kidney donors would provide the following benefits (quoting from the article):

  • Transplant kidneys would be readily available to all patients who had a medical need for them, which would prevent 5000 to 10 000 premature deaths each year and significantly reduce the suffering of 100 000 more receiving dialysis.
  • This would be particularly beneficial to patients who are poor and African American because they are considerably overrepresented on the transplant waiting list. Indeed, it would be a boon to poor kidney recipients because it would enable them to reap the great benefits of transplantation at very little expense to themselves.
  • Because transplant candidates would no longer have to spend almost 5 years receiving dialysis while waiting for a transplant kidney, they would be younger and healthier when they receive their transplant, increasing the chances of a successful transplantation.
  • With a large number of transplant kidneys available, it would be much easier to ensure the medical compatibility of donors and recipients, which would increase the success rate of transplantation.
  • Taxpayers would save about $12 billion each year. Dialysis is not only an inferior therapy for end-stage renadisease (ESRD), it is also almost 4 times as expensive pequality-adjusted life-year (QALY) gained as a transplant.

Opioids for the masses?

by on November 24, 2015 at 1:45 am in Data Source, Economics, Law, Medicine | Permalink

This has long seemed to me an understudied topic, so I was interested to read the job market paper of Angela E. Kilby, who is on the market this year from MIT.  And she does what I like to see in a paper, namely try to figure out whether some practice or institution is actually worth it.

The background is this: “…In the face of concerns that undertreatment of pain was a “serious public health issue,” medically indicated use of these drugs over the past 15 years has increased dramatically, and attitudes have liberalized towards the use of opioids for chronic non-cancer pain.”

When it comes to the increased use of opioids, she finds the following trade-offs:

1. Since 1999, there has been a fourfold increase in drug overdose deaths linked to opiod pain relievers.  In 2013, the number of opiate-linked overdose deaths was 25,117, a higher number than I was expecting.  (But note that most of these can no longer be reduced by the feasible interventions under consideration.)

2. The increased use of opioids seems to pass a cost-benefit test, compared to the passage of a tougher Prescription Monitoring Plan.  With a host of caveats and qualifiers, she measures the pain reduction and other benefits from looser regulation at $12.1 billion a year and the costs of higher addiction rates, again from looser regulation, at $7.3 billion per year.

There is much more to it than what I am reporting, and in general I believe economists do not devote enough attention to studying the topic of pain.

UnitedHealth may exit the provision of ACA plans:

The nation’s largest health insurance provider, UnitedHealth Group, dealt a blow to the Affordable Care Act on Thursday when it warned it may stop offering coverage to individuals through public exchanges after taking a big hit to the bottom line from disappointing enrollment and the law’s unexpected effects.

The insurer’s withdrawal from the Obamacare exchanges would force some 540,000 Americans to find coverage from another provider.

UnitedHealth (UNH) downgraded its earnings forecast, bemoaning low growth projections for Obamacare enrollment and blaming the federal health care law for giving individuals too much flexibility to change plans.

People who purchase insurance through the public exchanges are typically heavy users of their plans, draining insurers’ profits, analysts say.

In a sharp reversal of its previously optimistic projections, UnitedHealth suspended marketing of its Obamacare exchange plans for 2016 — which the company has already committed to offer — to limit its exposure to additional losses.

“We see no data pointing to improvement” in the financial performance of public-exchange plans, UnitedHealth CEO Stephen Hemsley said on a conference call, though he added that “we remain hopeful” the market will recover.

The move comes amid indications that insurers are absorbing steeper costs than they expected from plans offered to individuals through the public exchanges, which are purchased online.

The average premium for medium-benefit plans offered to 40-year-old non-smokers is set to rise 10.1% in 2016, according to the Kaiser Family Foundation.

…Even though UnitedHealth wasn’t a major player yet on the ACA exchanges, the fact that it priced plans conservatively and entered cautiously made its statements more significant, said Katherine Hempstead, who heads the insurance coverage team at the Robert Wood Johnson Foundation.

“If they can’t make money on the exchanges, it seems it would be hard for anyone,” Hempstead said.

But that is not all the news.  There is also:

In many Obamacare markets, renewal is not an option

Shopping for health insurance is the new seasonal stress for many

Health care law forces business to consider growth’s costs

Many say their high deductibles make their health insurance all but useless

and my own Obamacare not as egalitarian as it appears

All five are from the NYT, the first three being from the last two or three days, the other two from last week.  They are not articles from The Weekly Standard

To put it bluntly, I don’t think the mandate part of the bill is working.  These are mostly problems which decay and get worse, not problems which self-correct.

On UnitedHealth, here is commentary from Megan McArdle.  Here is Bob LaszewskiHere is Vox.

That is the title of an Arnold Kling blog post, it runs like this (I am not adding an extra layer of indentation):

“With this:

Speaking this week at the EmTech conference in Cambridge, Massachusetts, Editas CEO Katrine Bosley said the company hopes to start a clinical trial in 2017 to treat a rare form of blindness using CRISPR, a groundbreaking gene-editing technology.

…The condition Editas is targeting affects only about 600 people in the U.S., says Jean Bennet, director of advanced retinal and ocular therapeutics at the University of Pennsylvania’s medical school.

I don’t think that the FDA is prepared for what is coming.”

Robert Pears of the NYT writes:

Obama administration officials, urging people to sign up for health insurance under the Affordable Care Act, have trumpeted the low premiums available on the law’s new marketplaces.

But for many consumers, the sticker shock is coming not on the front end, when they purchase the plans, but on the back end when they get sick: sky-high deductibles that are leaving some newly insured feeling nearly as vulnerable as they were before they had coverage.

“The deductible, $3,000 a year, makes it impossible to actually go to the doctor,” said David R. Reines, 60, of Jefferson Township, N.J., a former hardware salesman with chronic knee pain. “We have insurance, but can’t afford to use it.”

In many states, more than half the plans offered for sale through, the federal online marketplace, have a deductible of $3,000 or more, a New York Times review has found. Those deductibles are causing concern among Democrats — and some Republican detractors of the health law, who once pushed high-deductible health plans in the belief that consumers would be more cost-conscious if they had more of a financial stake or skin in the game.

My previous column on related issues, “Obamacare not as egalitarian as it appears,” is here.

Glasgow fact of the day

by on November 11, 2015 at 2:07 am in Books, Data Source, Medicine | Permalink

For 1998-2002, male life expectancy in the Calton district of Glasgow was fifty-four.

For those same years, male life expectancy in the well-off district of Lenzie, Glasgow was eighty-two, a rather large gap.

For purposes of contrast, by the way, at that time average life expectancy for men in India was sixty-two, eight years longer than for Calton.

That is all from Michael Marmot, The Health Gap: The Challenge of an Unequal World, pp.24-25.

Here is Adam Davidson:

I was just at two Amish weddings and would add a few observations:

– I wonder what they’d find for a later cohort. Amish folks born between 1890 and 1921 were almost all farmers. Today, fewer than 10% are. Most have far more sedentary jobs–though not as sedentary as mine. But they still eat as if they were out in the fields all day. Obesity is rampant and growing. Also, the diet has changed. The Amish eat a lot of processed, brand name food. They do have their own kitchen gardens, but salads are covered in dressing and cheese. In many homes, every meal (even breakfast!) comes with pie as desert.

– Nobody is left alone in old age. I had a long talk with an older Amish woman who couldn’t believe that, in NYC, some people live alone, interact with no close relatives or friends, have no one to watch over them. Her husband told a story of a very ornery old man with no children or wife who nobody likes but, still, people visit regularly to make sure he’s OK and to give him comfort.

– They absolutely use hospitals for urgent and emergent care. There are big fundraising auctions all the time to help those with big bills. And the church district will also help.

Yes, that is the Adam Davidson.

Here is my latest NYT Upshot column, on the topic of the Affordable Care Act.  Here is what is to me the key excerpt:

But there is another way of looking at it, one used in traditional economics, which focuses on how much people are willing to pay as an indication of their real preferences. Using this measure, if everyone covered by the insurance mandate were to buy health insurance as the law dictated, more than half of them would be worse off.

This may seem startling. But in an economic study, researchers measured such preferences by looking at data known as market demand curves. Practically speaking, these demand curves implied that individuals would rather take some risk with their health — and spend their money on other things — partly because they knew that even without insurance they still would receive some health care. These were the findings of a provocative National Bureau of Economic Research working paper, “The Price of Responsibility: The Impact of Health Reform on Non-Poor Uninsureds” by Mark Pauly, Adam Leive, and Scott Harrington; the authors are at the Wharton School at the University of Pennsylvania.

One implication is that the preferences of many people subject to the insurance mandate are likely to become more negative in the months ahead. For those without subsidies, federal officials estimate, the cost of insurance policies is likely to increase by an average of another 7.5 percent; even more in states like Oklahoma and Mississippi. The individuals who are likely losers from the mandate have incomes 250 percent or more above the federal poverty level ($11,770 for a single person, more for larger families), the paper said. They are by no means the poorest Americans, but many of them are not wealthy, either. So the Affordable Care Act may not be as egalitarian as it might look initially, once we take this perspective into account.

I should stress that, at this point, I don’t see any realistic alternative to trying to improve ACA.  Still, I find it distressing how infrequently this problem is acknowledged or dealt with, probably from a mix of epistemic closure, a “health insurance simply has to make people better off” attitude, and a dose of “let’s not give any ammunition to the enemy.”  In fact, I think a lot of Democratic-leaning economists and commentators are doing a real disservice to their own causes on this one.

It’s worth noting that Kentucky, one of the best-functioning ACA state exchanges, just elected a Republican governor who very explicitly pledged to tank the current set-up as much as possible, Medicaid too.  I think it’s time to admit this is not just Tea Party activism or Hee Haw political stupidity, rather a large number of the people subject to the mandate simply are not better off as would be judged by their own preferences.  And that is not a secondary problem of Obamacare, it is a primary problem.

Interestingly, I found the NYT reader comments on my piece to be fairly supportive, which is not always the case.  There’s a good deal of “this happened to me, too,” and not so much raw invective about whatever defects I may have.

I think it is a big mistake to argue Obamacare is on the verge of collapse, or whatever other exaggeration of the day may be at hand.  Still, I don’t find the current set-up of the exchanges to be entirely stable, at least not in terms of ongoing popularity, much less consumer sovereignty.

A key question is what happens moving forward.  One option, which I had not initially expected, is for the exchanges to narrow and evolve into an expanded version of some of the earlier plans for a segregated high-risk pool.  In that case, the argument would morph from “don’t worry, enough people will sign up for the exchanges” into “the welfare effects here are still positive, because fortunately not everyone signs up for the exchanges.”  The high risk pool would then at some point require additional subsidies.  In the past, I argued that the penalties for not signing up were too low, but under this scenario it may be desirable to lower rather than raise those penalties.

We’ll see.  The piece covers other issues as well, do read the whole thing.

Here is Megan on the costs of ACA plans.  Here are some interesting calculations from Jed Graham.