Results for “reciprocity”
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Do you have reciprocity anxiety?

Namely the fear of owing other people, or institutions, a favor, or maybe just the possible perception of such?:

The researchers believe reciprocity anxiety is likely to be greater the bigger a favour and the more public its receipt. They think it’s a trait that companies should take an interest in – while loyalty schemes, vouchers and other freebies have obvious appeal to many customers, results from two initial studies suggested that these marketing strategies are actually likely to deter others…

In a follow-up study, volunteers imagined a shop attendant offering them a free drink and plate full of snacks. Afterwards, high scorers in reciprocity anxiety scored lower for customer satisfaction and they said they would be less willing to visit the store again and less willing to spread a good word about the shop.

“Reciprocity works to establish a psychological bond” between customer and firm, the researchers said, but the discomfort it causes can backfire among those high in reciprocity anxiety, especially if they feel the benefits reflect badly on them or that they will struggle to reciprocate (around 18 per cent of people tested in these new studies scored highly in the trait; age and gender were unrelated).

Here is the full article, and the pointer is from Michelle Dawson.  Finally:

…I wonder how it might impact the ways that people manage their friendships and other relationships – perhaps high scorers in reciprocity anxiety are inclined to turn down invitations, seek help or receive other friendly favours, putting them at risk of loneliness and isolation.

Pharmaceutical Reciprocity for Canada

If pharmaceutical reciprocity is a good idea for the United States, it’s a great idea for smaller countries. Indeed, this is mostly what happens in practice, even if not by law, since smaller countries can’t afford or justify the expensive US process. Fred Roeder of the Montreal Economic Institute makes the case for reciprocity in Canada:

…reciprocal recognition of drug approval authorities on both sides of the Atlantic would incentivize Canadian, European and American authorities to spend less time and money conducting parallel reviews. If the HPFB, the FDA or the EMA approved a drug, patients in Canada, Europe and America would have immediate access to it — increasing consumers’ choice as new drugs are offered to patients faster and more affordably, with less red tape driving up costs.

A reduction in approval time can be a win-win for patients and firms because a decrease in approval time is an increase in effective patent length without an actual increase in patent length. The numbers below are optimistic, but the idea that streamlining approval can increase profits and stimulate investment is correct:

These market-oriented reforms would not benefit not only consumers, but the pharmaceutical companies as well, expanding the timespan of the patents. On average, new drugs have a mere 10 to 14 years of patent protection remaining by the time they are sold to consumers after they have successfully jumped over all the government hurdles. Streamlining the drug approval process would increase the timespan of patented drugs on the market by 50 to 70 per cent.

Roeder also mentions Bart Madden’s important book Free to Choose Medicine. (For those who don’t know, I am proud to be the Bartley J. Madden chair in economics at Mercatus at GMU.)

Reciprocity and Muscular Dystrophy

For years, muscular dystrophy patients in the United States have been purchasing the drug deflazacort — used to stabilize muscle strength and keep patients mobile for a period of time — from companies in the United Kingdom at a manageable price of $1,600 a year.

But because an American company just got approval from the Food and Drug Administration to sell the drug in the United States, the price of the drug will soar to a staggering $89,000 annually, the Wall Street Journal reported last week.

Because the FDA restricts the importing of drugs from overseas if a version is available domestically, patients are stuck with the new, expensive version. This makes deflazacort the perfect case for advocates of international drug reciprocity — a reform that would make it easier for consumers to buy drugs that have been approved in other developed countries.

That is the introduction to an interview with yours truly in the Washington Post. I discuss thalidomide and the race to the bottom argument. Here is one other bit:

IT: Do you have any thoughts about the potential for FDA reform under this new administration and Congress?

AT: Peter Thiel’s speech at the Republican National Convention reminded us that we used to take big, bold risks — like going to the moon. Today, to say a project is a “moon shot” is almost a put-down, as if going to the moon never happened. We have become risk-averse and complacent, to borrow a term from my colleague Tyler Cowen. The result of the incessant focus on safety is playgrounds without teeter totters, armed guards at our schools and national monuments, infrastructure projects that no longer get built, and pharmaceutical breakthroughs that never happen.

The new administration is unpredictable, but when it comes to the FDA, unpredictable is better than business as usual.

The administration has yet to appoint a great FDA commissioner. Early names floated included Balaji Srinivasan, Jim O’Neill, Joseph Gulfo, and Scott Gottlieb but Srinivasan seems to have removed himself from the running. O’Neill would be great but I don’t think the US is ready, so that leaves Gulfo and Gottlieb. My suspicion is that Trump will like Gulfo because of Gulfo’s entrepreneurial experience but, as I said, the new administration is unpredictable.

Drug Reciprocity with Europe Gains Support

As loyal readers know, I’ve long been in favor of a system where a drug approved in another major, developed country is also approved here. For a long time it seemed as if I was shouting in the wilderness but in the last few years support for the idea has grown, as the Cruz-Lee Reciprocity bill indicates. In A Cure for Swelling Drug Prices: Competition, Greg Ip at the WSJ notes another new development:

Mr. Tabarrok says the FDA should also offer reciprocal approval of drugs that regulators in other advanced countries have already cleared. Imports of generics from countries with government-negotiated prices ought not to be as controversial as patent-protected drugs because they involve far less expensive and risky research. Indeed, the Generic Pharmaceutical Association and its European equivalent, Medicines for Europe, have proposed a “single development pathway” under which approval in one jurisdiction would automatically confer approval in the other.

The proposed plan is for generics only where the issues are simpler but Greg is right to conclude more generally:

The FDA has long insisted, for safety reasons, that it approve all drugs regardless of whether they have been approved overseas. But if the FDA was once a better regulator than its overseas peers, it isn’t now. Ken Kaitin, a professor of medicine at Tufts University who has studied drug regulation around the world, says there is “absolutely no evidence” the U.S. drug supply is safer than in Britain, Canada or Europe.

Thus, the FDA wouldn’t be compromising safety by harmonizing its approvals with foreign regulators. Indeed, by making more drugs available at lower cost, it could ultimately make Americans healthier.

Economists on FDA Reciprocity

Daniel Klein & William Davis surveyed economists about whether it would be an improvement to reform the FDA so that “as soon as a new drug is approved by any one of five [FDA approved international] agencies, that drug automatically gains approval in the United States.” They report:

Of the 467 economists who answered the question and did not mark “Have no opinion,” 53 percent agreed that the reform would be an improvement, while 29 percent disagreed. (The remainder said they were “neutral.”) Moreover, those favoring the reform were more likely to say they held their belief “strongly.” Hence, the balance of economist judgment certainly leaned in favor of the liberalization.

Economists are not the only ones in favor of reciprocity. Others are also coming around, at least partially. In Generic Drug Regulation and Pharmaceutical Price-Jacking I argued in response to the massive increases in the price of Daraprim (generic name Pyrimethamine) that we ought to allow importation:

Pyrimethamine is also widely available in Europe. I’ve long argued for reciprocity, if a drug is approved in Europe it ought to be approved here. In this case, the logic is absurdly strong. The drug is already approved here! All that we would be doing is allowing import of any generic approved as such in Europe to be sold in the United States.

In a paper in JAMA discussing the same case, Drs Jeremy Greene, Gerard Anderson, and Joshua M. Sharfstein agree, writing:

A second option is to temporarily permit the importation of drug products reviewed by competent regulatory authorities and approved for sale outside the United States. For example, Glaxo, the original manufacturer of pyrimethamine, sells a version of the drug approved for use in the United Kingdom at less than $1 per tablet.

Dr Sharfstein by the way was Principal Deputy Commissioner of the US Food and Drug Administration from March 2009 to January 2011.

Addendum: I will be discussing/debating pharmaceutical policy with Dr. Sharfstein at on event sponsored by the Council on Foreign Relations in Washington, DC the morning of Monday January 25. Invitation only but email me if you want an invite.

Senators Cruz and Lee Introduce Reciprocity Bill

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.

The FDA and International Reciprocity

Bacterial meningitis causes swelling of the membranes covering the brain and spinal cord. In the United States the disease kills approximately 500 people a year, often within days of infection. Survivors can have permanent disabilities including paralysis and mental disabilities. Since March seven cases of the type B strain have been diagnosed at Princeton University, with one case just last week. A vaccine exists and is available in Europe and Australia but the FDA has not permitted the type B vaccine for use in the United States.

The Centers for Disease Control and Prevention, however, has lobbied the FDA and they have now received special and unusual permission to import the type B vaccine. Following the CDCs recommendation, Princeton University has agreed to  administer and pay for the vaccine for any student that wants it.

It’s good that the FDA has lifted the ban on the type B vaccine but why should Americans have to wait for the FDA? Americans living in Europe or Australia can be prescribed the vaccine so why not here? I believe that Americans should have the right to be prescribed any drug that has been approved in Europe, Australia, Canada, Japan or other developed nation.

Indeed, as Dan Klein and I wrote at FDAReview.org, international reciprocity of drug approvals is simple common sense:

If the United States and, say, Great Britain had drug-approval reciprocity, then drugs approved in Britain would gain immediate approval in the United States, and drugs approved in the United States would gain immediate approval in Great Britain. Some countries such as Australia and New Zealand already take into account U.S. approvals when making their own approval decisions. The U.S. government should establish reciprocity with countries that have a proven record of approving safe drugs—including most west European countries, Canada, Japan, and Australia. Such an arrangement would reduce delay and eliminate duplication and wasted resources. By relieving itself of having to review drugs already approved in partner countries, the FDA could review and investigate NDAs more quickly and thoroughly.

As has now become clear, international reciprocity is not just about choice it can also save lives.

A Pox on the FDA

Monkeypox isn’t in the same category of risk that COVID was before vaccines but it’s a significant risk, especially in some populations, and it’s a test of how much we have learned. The answer is not bloody much. Here’s James Walsh in NYMag:

As monkeypox cases have ticked up nationwide, the White House and federal agencies have repeatedly assured the public that millions of vaccine doses will be distributed to at-risk populations before the end of the year. Yet since the World Health Organization announced the global monkeypox outbreak in May, only tens of thousands of shots have been administered in the U.S. The slow start is due, at least in part, to the fact that 1.1 million doses have been stored in a Denmark pharmaceutical facility while the Food and Drug Administration has taken almost two months to approve their release here, according to people familiar with the situation. FDA officials only began to inspect the facility last week. The lag time, public-health experts say, is indicative of the federal government’s lackadaisical approach to a growing public-health emergency.

…It’s unclear why the FDA took so long to send inspectors to Denmark. The agency regularly conducted virtual inspections of drug facilities early in the COVID-19 pandemic, according to the agency’s guidance, and public-health activists are demanding answers. “Members of at risk communities are being turned away from monkeypox vaccination because these vaccines are not available in sufficient quantity in the U.S., but instead sitting in freezers in Denmark,” members of the advocacy group PrEP4All and Partners in Health wrote in a letter to federal officials overseeing the outbreak response last week.

Compounding their frustrations was the FDA’s refusal to accept an inspection done last year by its counterpart, the European Medicines Agency, which deemed the company’s facility in compliance with the FDA’s own standards.

“The FDA does not grant reciprocity for EMA authorization of any vaccines, for monkeypox or other diseases,” a spokesperson for the FDA said in a statement.

Is there anyone in the United States who is saying, “I am at risk of Monkeypox and I want the vaccine but I don’t trust the European Medicines Agency to run the inspection. I’d rather wait for the FDA!” I don’t think so. James Krellenstein, an activist on this issue, asks:

“Why were the Europeans able to inspect this plant a year ago, ensuring these doses can be used in Europe and the Biden Administration didn’t do the same,” he added. “The FDA is making a judgment that they’d rather let gay people remain unvaccinated for weeks and weeks and weeks than trust the European certification process.”

Many people want to be vaccinated:

New York City has received just 7,000 doses from the federal government amid the national vaccine shortage. Meanwhile, the city Department of Health and Mental Hygiene’s appointment booking system has failed to keep up with the high demand for the shots — most recently on Wednesday.

…The mounting frustrations left health officials and Mayor Eric Adams on the defensive, pushing back against comparisons to New York’s struggles during the early days of the coronavirus vaccine, which was beset by computer glitches and supply shortages.

This is a classic case for reciprocity. Any drug, vaccine, test or sunscreen (!) approved by a stringent regulatory authority ought to be conditionally approved in the United States.

Addendum: If you are not furious already–and you should be–remember that during COVID the FDA suspended factory inspections around the world creating shortages of life-saving cancer drugs and other pharmaceuticals. As I wrote then “Grocery store workers are working, meat packers are working, hell, bars and restaurants are open in many parts of the country but FDA inspectors aren’t inspecting. It boggles the mind.”

Hat tip: Josh Barro.

Photo Credit: Nigeria Centre for Disease Control.

The FDA is Increasing Skin Cancer

Americans who travel to the beaches in France, Spain, or Italy routinely do something that is illegal in the United States–they buy and use European sunscreens to protect themselves from sunburn and skin cancer. Suncreens in Europe and Asia are better than in the United States because more ingredients are allowed and these create more effective and more pleasing suncreens. I’ve been writing about this since 2013! My view hasn’t changed:

My rule is very simple. I don’t think the FDA is better than the EMA so if any drug or device is approved in Europe it ought to be available for purchase in the United States with a label saying “Approved by the EMA. Not approved by the FDA.” (By the way, we do have reciprocity type agreements with Canada and New Zealand for food so this would not be unprecedented.)

Here’s the latest from Amanda Mull writing in the Atlantic:

Newer, better UV-blocking agents have been in use in other countries for years. Why can’t we have them here?

In formal statements and position papers, doctors and cancer-prevention advocates express considerable interest in bringing new sunscreen ingredients to the American market, but not a lot of optimism that any will be available soon.

…In 2014, Congress passed a law attempting to speed access to sunscreen ingredients that have been in wide use in other countries for years, but it hasn’t really worked. “The FDA was supposed to be fast-tracking these ingredients for approval, because we have the safety data and safe history of usage from the European Union,” Dobos said. “But it seems to continually be stalled.” According to Courtney Rhodes, a spokesperson for the FDA, manufacturers have submitted eight new active ingredients for consideration. The agency has asked them to provide additional data in support of those applications, but none of them has yet satisfied the agency’s requirements.

“In the medical community, there is a significant frustration about the lack of availability of some of the sunscreen active ingredients,” Henry Lim, a dermatologist at Henry Ford Health, in Michigan, told me. The more filters are available to formulators, the more they can be mixed and matched in new ways, which stands to improve not just the efficacy of the final product, but how it feels and looks on your skin, and how easy it is to apply. On a very real level, making sunscreen less onerous to use can make it more effective. “The best sunscreen is going to be the one you’re going to use often and according to the directions,” Dobos said. Skin cancer is the most common type of cancer in the United States, and by one estimate, one in five Americans will develop it in their lifetime.

Hat tip: Joe.

Infant Formula, Price Controls, and the Misallocation of Resources

For the week of April 3, at least 12 states faced out of stock rates higher than 40 percent, including Connecticut, Delaware, Montana, New Jersey, Rhode IslandI’ve been reluctant to write about the shortage of infant formula simply because it’s so tiring to say the same thing over and over again. Obviously, this is a classic case where the FDA should allow imports of any food or baby formula approved by a stringent authority. (Here’s the US Customs and Border Patrol bragging about how they nabbed 588 cases of infant formula from Germany and the Netherlands as if it were cocaine.) Scott Lincicome has an excellent run down which covers not just the FDA but the problems caused by trade regulation and the WIC program as well.

What I want to do is focus on something less discussed: Why does the shortage vary across the country and even city by city?

I believe one reason is implicit price controls, either due to fear of regulatory backlash, regulatory constraints through other programs, or a misplaced desire not to upset consumers.

Price controls create shortages–that much is well known–but they also create a misallocation of goods. No doubt you have seen pictures from the 1970s of long lines of cars waiting to get gasoline. But there weren’t lineups everywhere at all times–rather we had the strange situation where there were shortage of gasoline in some places while, just a hundred miles away, there was plenty. Or shortages one day and surpluses the next.

Prices rationally allocate goods across space and time in response to shifts in demand and supply. If demand increases in one place, for example, prices rise, creating an incentive to bring in supplies from elsewhere. A rising price signals where supplies are needed and creates an incentive to deliver. Or, as Tyler and I put it, A price is a signal wrapped up in an incentive. A price controlled below the market price creates a shortage and it also kills the signaling and incentive function of prices. The result is allocational chaos: Shortages in some places and times and excess supply in other places and times.

In fact, price controls in a capitalist economy give you a window onto a planned economy. If you think of communism as a system of universal price controls this allocation chaos is the essence of why a communist state cannot rationally allocate resources.

Tyler and I discuss allocational chaos in our chapter on price controls in Modern Principles of Economics. See also this excellent video.

The prisoner’s dilemma for prisoners and Mafia men

We develop experimental evidence on cooperation and response to sanctions by running prisoner’s dilemma and third party punishment games on three different pools of subjects; students, ordinary criminals and Camorristi (Neapolitan ‘Mafiosi’). The latter two groups were recruited from within prisons. Camorra prisoners show a high degree of cooperativeness and a strong tendency to punish defectors, as well as a clear rejection of the imposition of external rules even at significant cost to themselves. The subsequent econometric analysis further enriches our understanding demonstrating inter alia that individuals’ locus of control and reciprocity are associated with quite different and opposing behaviours amongst different participant types; a strong sense of self-determination and reciprocity both imply a higher propensity to punish for Camorra inmates, but quite the opposite for ordinary criminals, further reinforcing the contrast between the behaviour of ordinary criminals and the strong internal mores of Camorra clans.

Here is the paper by Annamarie Nese, et.al., via Ethan Mollick and Ilya Novak.

Why Doesn’t the United States Have Test Abundance?!

We have vaccine abundance in the United States but not test abundance. Germany has test abundance. Tests are easily available at the supermarket or the corner store and they are cheap, five tests for 3.75 euro or less than a dollar each. Billiger! In Great Britain you can get a 14 pack for free. The Canadians are also distributing packs of tests to small businesses for free to test their employees.

In the United States, the FDA has approved less than a handful of true at-home tests and, partially as a result, they are expensive at $10 to $20 per test, i.e. more than ten times as expensive as in Germany. Germany has approved over 50 of these tests including tests from American firms not approved in the United States. The rapid tests are excellent for identifying infectiousness and they are an important weapon, alongside vaccines, for controlling viral spread and making gatherings safe but you can’t expect people to use them more than a handful of times at $10 per use.

We ought to have testing abundance in the US and not lag behind Germany, the UK and Canada. As usual, I say if it’s good enough for the Germans it’s good enough for me.

Addendum: The excellent Michael Mina continues to bang the drum.

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What I’ve been reading

1. Russ Banham, The Fight for Fairfax: Private Citizens and Public Policymaking.  A well-informed story of the great men and women who built up Fairfax County, Virginia, including Til Hazel, Sid Dewberry, Earle Williams, Jack Herrity, George Johnson, Dwight Schar, and others.  WWNN: “We were never NIMBY!”  It is striking how much the key builders were not born as elites.

2. Dan Levy, Maxims for Thinking Analytically: The wisdom of legendary Harvard professor Richard Zeckhauser.  How many of us will end up getting books such as this in our honor?  If you are curious, Zeckhauser’s three maxims for personal life are: “There are some things you just don’t want to know,” “If you focus on people’s shortcomings, you’ll always be disappointed,” and “Practice asynchronous reciprocity.”  Zeckhauser, by the way, was on my dissertation committee.

3. Adeeb Khalid, Central Asia: A New History from the Imperial Conquests to the Present.  Could this be the best history of Central Asia?  The author takes special care to tie the region to the histories of Russia and China, the author seeming to have a specialization in Russian history, and for me that makes the entire enterprise far more intelligible.  Useful for Xinjiang history as well, here is one useful review of the book.

4. Paul Greenhalgh, Ceramic: Art and Civilisation.  Picture book!  Need I say more?  And a big one.

Edward J. Watts, The Eternal Decline and Fall of Rome: The History of a Dangerous Idea.  How has the decline of Rome been discussed and analyzed throughout the ages, including by the Romans themselves?

Loyd Grossman, The Artist and the Eternal City: Bernini, Pope Alexander VII, and the Making of Rome.  Has all the virtues of a picture book, but the price of a regular book.  With the common educated public, Bernini is still probably underrated.

Michael S. Malone, The Big Score: The billion dollar story of Silicon Valley is the new Stripe Press reprint.

Seth David Radwell, American Schism: How the Two Enlightenments Hold the Secrets to Healing Our Nation.  This is not a book written for me, but it is nonetheless good to see someone putting forward Enlightenment ideals as a solution to our problems.

Hungary’s Vaccine Approval Rule

AP: Hungarian health authorities were the first in the EU to approve the Sinopharm jab for emergency use on Jan. 29. That came after a government decree streamlined Hungary’s vaccine approval process by allowing any vaccine administered to at least 1 million people worldwide to be used without undergoing review by the country’s medicines regulator.

The country expects to receive 5 million total doses of the Sinopharm vaccine over the next four months, enough to treat 2.5 million people in the country of nearly 10 million.

Authorize any vaccine already used by at least 1 million people is a type of reciprocity or peer-review rule in which you speed up approval in your country based on data from another country. As with all such rules, it’s imperfect–new and extensive use will reveal common, serious side effects and many uncommon ones as well but extensive use is not a guarantee of safety or efficacy. Nevertheless, when time is of the essence the 1 million+ rule is a smart rule.

Hat tip: Bart Madden.

Against Regulatory Nationalism

I’ve long argued that if a drug or medical device is approved in another country with a Stringent Regulatory Authority it ought to be approved in the United States. But, of course, the argument is even stronger in the other direction. Drugs and devices approved in the United States ought to be approved elsewhere. Indeed, this is how much of the world actually works because most countries do not have capability to evaluate drugs and devices the way the FDA or say the EMA does. Although it’s the way the world works, few will admit it because that would violate pretensions of regulatory nationalism. Moreover, keeping up with pretenses means transaction costs and unnecessary delays.

The price of such regulatory nationalism can be very high as indicated in this interview with Adar Poonawalla, chief executive of the Serum Institute of India (SII), the world’s largest producer of vaccines.

Some people think the reason that rollout has been slow in many countries is because the developers who hold the patents on the vaccines have licensed too few manufacturers to make them. Do you agree?

No. There are enough manufacturers, it just takes time to scale up. And by the way, I have been blown away by the cooperation between the public and private sectors in the last year, in developing these vaccines. What I find really disappointing, what has added a few months to vaccine delivery – not just ours – is the lack of global regulatory harmonisation. Over the last seven months, while I’ve been busy making vaccines, what have the US, UK and European regulators been doing? How hard would it have been to get together with the World Health Organization and agree that if a vaccine is approved in the half-dozen or so major manufacturing countries, it is approved to send anywhere on the planet?

Instead we have a patchwork of approvals and I have 70m doses that I can’t ship because they have been purchased but not approved. They have a shelf life of six months; these expire in April.

Did you get that? Regulatory nationalism has added months to vaccine delivery and now threatens to put to waste millions of stockpiled doses.

Addendum: See also Scott Sumner on the costs of regulatory nationalism.