A Dual-Track Drug Approval Process

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.


Interesting proposal. I am in favor of the basic idea of patients being free to choose drugs that haven't gone through a full approval process.

However, the idea of an open access database of individual treatment results is naive and unworkable. Simply removing patients' identifiers is not sufficient to make data anonymous. In detailed health data, it is possible to identify a patient in the database based on known characteristics/events, which then allows learning private health information about the patient. There are techniques that can be introduced to lessen this risk, but these techniques also reduce the usefulness of the data. It wouldn't be possible to meaningfully evaluate drugs based on a database that had been anonymised to the point that there is no risk of identifying anyone. This is why individual-level health databases are typically not open access. They require additional controls, beyond simply de-identifying the data, to ensure patient confidentiality.

This is a minor point, really, because the kind of research they propose can and should be done--just not in an open access database. But it does betray the lack of subject matter expertise of the authors. Someone with health research credibility really needs to be involved for such a proposal to get any traction.

I assume this database will be large, so that at least 10 patients will receive treatment X. As long you remove the date of birth (day/month) and location, it should be fine no?

Unfortunately no is the correct answer. People have shown remarkable ability to reverse engineer identities.

For example from a database of large numbers of cell phone locations and times, 4 points uniquely identify a customer 95% of the time.

While I believe the rewards of more open anomomized medical data exceeds the risk, many others don't like the trade off.

I would think that if you simply offered people the choice to opt out, most would be ok with their medical information going into this sort of database.

Exactly. If I am getting treatment for AIDs maybe I'll prefer to keep it off. Otherwise, if I get heart disease and am overweight with glacoma and testing three new drugs I won't give a crap if some one can reverse engineer my ID. Whatever. Share the data. Then let me use any drug approved in any first world country. My life is not yours to babysit.

But you would need to correlate that with the ID of a natural person, and the cell company already has that information. Better to make the cellular subscription process anonymous, and in the medical context, have all treatment be anonymous.

Properly anonymizing data is like properly doing encryption. Even those skilled in the art make mistakes, and have to fight against people attacking them from the future. That's saying nothing about the amateurs who don't even know enough to be scared.


Cynthia Dwork, of Microsoft, gives a great talk on "differential privacy," basically the ability to extract useful information on individuals from large anonymized datasets. Moreno's lay assumption is unfortunately very wrong.


But i still dont get how this information can be used to "hurt" people. I think the only people interested in this kind of information would be insurance companies, but I imagine that most of the people in the database would be older people, who are probably already insured somehow and whose Insurance premium already covers "expensive chronic diseases". So what are your thoughts on what can go wrong here, with this possibility of reverse engineering?

Many people don't want their medical histories available free online. Bad enough that their Ashley Madison and V-Tech and Patreon accounts are already out there.

I don't know, people might want to know other's std status, for example.

If I'm thinking of hiring you, I might want to know that you're on antidepressants. Or that you had a prior suicide attempt.

Or that you were treated for substance abuse. Or had therapy after child abuse.

It doesn't seem hard to imagine why people would want privacy in this respect. Maybe I'm missing your point.

I'm not sure that trying to restrict access to the DB gains anything - it will known doubt be broken into and published eventually anyway. It is probably sufficient to make it illegal to misuse the information in hiring decisions, for example.

These databases really don't leak that often, because they aren't open-access. It's not like Joe Random can test for an SQL injection against them.

"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. " I admit this looks exciting, it is important that patients are free to choose, but there is a reason why RCT's exist. The statistical issues relative to small numbers of patients and events make it hard to estimate what is the true effect of the medicine. I estimate therefore the impact of this will not be that large. The time where a new medicine would improve the hazard ratio of survival for a patient like a "parachute" is long past. Also by "customized therapy" you should read extremely expensive, unlikely to be cost-effective therapy, unless proper risk-stratification is possible. And how will doctors handle this? Do you think they have time to think about what is the best treatment process, if there are like 7 new treatments that have come up in the last 5 years? They are basically shooting in the dark then...So while i think this could have some impact in a handful of cases, i am a little pessimistic, about whether this will represent a huge improvement for the average patient.

It will need to be patient driven, patients will know more about their rare disease than any doctor and choose their own treatment. Statistical issues are irrelevant since this is not a statistical approach but an empirical one. Still, stage II is way too late and we will probably still need to obtain a lot of medicine contrary to regulation.

>We need to lower costs and speed new drugs to market.

You are laboring under the delusion that these are goals that the Feds share.

The current system works perfectly fine, from their point of view. It employs a very large number of well-connected people, gives them high pay and incredible benefits, and all the while enshrining them with a tremendous amount of dictatorial power.

You need to explain why they would consider giving any of that up. Otherwise, you're just whining.

So tell me: whats the alternative Jim?

Essentially the FDA is dragging their feet so that drugs get tested on Third Worlders before they get approved in the USA. Any really bad effect will become apparent while the First Worlders wait. What Alex is proposing is that the First World 'do its share' (voluntarily) instead of relying on guinea pigs from developing countries. The benefits are faster drugs, the drawbacks are obvious. Seems OK to me.

'The drawbacks are obvious. Seems OK to me'

You go first:


From your link, seems like a Hollywood Happy Ending, not to be confused with a Thai Happy Ending... all's well that ends well.


“The men went down like dominoes. They began tearing their shirts off complaining of fever, then some screamed that their heads were going to explode. After that they started fainting, vomiting and writhing around in their beds.” ...Two weeks later, two men remain in hospital; one still in intensive care and conscious, the other said to be making good progress

Golly Gee Whiz, what's the alternative to government dictatorial power ??

Can you spell l-i-b-e-r-t-y and individual choice?

RE ("..the core Free To Choose Medicine (FTCM) principles..") :

Principles? America don't need no stinkin' principles!
The government/FDA very vigorously oppose such principles.

The free-to-choose principle of medicine (and most everything else) is already embedded in the U.S. Constitution principles and law, but obviously quite easy to ignore.

"government dictatorial power" :) You gave me a good laugh thank you ;)

What do you mean by the government blocking low cost?

Do you mean the Federal government of We the People is blocking tax payers paying all the costs of the medical care you decide you want?

Or do you mean that the Federal government is blocking your ability to capture and hold hostage people and resources until they manufacturer the drug you want and give them to you for free?

Or that the government is failing to enslave drug makers so it can deliver the drugs you want without cost to you?

Obviously you blame the government for blocking my buying a Tesla Model S for the $2500 I've spent on my electric trike and trailer, right?

In a free market, everything can be free if you have no money - that's why it's called free!


I don't doubt this is the future of the drug approval process. How do I know? I have been spending time in hospitals and long-term care facilities with older family members, and the volume of drugs consumed in those places may well exceed the volume of food. Death is a scary prospect, and those facing it are prone to snake oil salesmen. At the margin (this is the MR blog), some lives may be extended by access to more drugs, but the cost will be enormous, not just the expense (much of it not paid by the persons consuming the drugs) but in terrible side effects and in some case accelerated deaths (the main problem in hospitals and extended care facilities is over-medication not under-medication). To Tabarrok, "freedom" means the right to sell and consume snake oil; to the sick and aging, "freedom" means nothing left to lose.

How dare dying people try to extend their lives in ways you dont approve.

How dare they ask me to pay for drugs that haven't been shown to be effective?

This is fine right up until the moment Medicare has to start paying for drugs that don't work, which is the moment this process goes into effect.

I'd also love to see the data on how many people's lives are not extended because the right drugs were not available to them quickly enough. Please give it to me in QALYs so as not to provide too much credit for keeping someone on respirator support alive.

The real problem is that somehow you have the FDA in the role of deciding if medicine is "worth it."

The FDA should just be a clearinghouse for making sure tests are run properly, stamping out publication bias and running follow-ups on drug effectiveness.

Medicare and the insurance companies should have their own metrics for deciding when a drug is "worth it."

But all those people calling for these changes blame the FDA for the high price of the drugs that are in trials that the FDA allows random patients permission to buy from the drug companies who then charge extremely high prices or refuse to sell at all, and blame the FDA for insurers refusing to pay for these drugs.

Alex implies that this process will allow drug companies to sell biologics for $100 that require $5000 in labor cost in a small lab to make for researchers running drug trials. After all, he would never argue the FDA gets to order Medicare pay whatever price drug companies demand for any drug patients want.

Or would he?

The FDA doesn't really say whether it's "worth it" in any economic sense. At most, they balance the efficacy against toxicity and make sure that there is some measurable positive effect.

Not just "drugs" but also medical devices and manufacturing processes, which also require stringent approval.

If sold as medical devices which qualify them for government payment, a criteria used by the private sector to avoid paying for them as medical devices covered by insurance.

Hundreds of millions of people have devices and other stuff inserted in them that are not covered by the FDA. Let's start with earings, nose rings, tongue and other body part rings. Then there are the elements embedded in your body under the skin by body illustrators (tattoos). At the end of the 90s, punk made getting titanium fixtures embedded in your skull popular with some, and with Madison Ave, who paid for the medical procedures so stainless spikes could be screwed into your head to create a mohawk.

My bike shop specializes in adapting bikes for use by the disabled, and none of it requires any government approval because none of it is charged to Medicare or Medicaid. None is a device or change "prescribed" by a doctor and thus legally medical treatment. Doctors telling you to exercise is not prescribing, so insurers, government, don't need to pay your gym fees, nor can you deduct them as medical for tax dodging.

Very little related to "plastic" surgery requires FDA approval beyond the fact that the drugs and tools and materials are standard medical practice costs paid by government in other contexts and thus FDA approved.

If you want to build a robot arm for someone who lost an arm, just do it. Just don't expect taxpayers to pay for your labor and materials even if you are helping the Iraq vet hit by a landmine. Thank you for your patriotic free labor, no FDA approval required.

Yeah!!! This!!!!

This seems like a step in the right direction but, wow, what a mess it will be to interpret that data. "Biomarkers," now there's a rabbit hole if there ever was one.

Could you or Tyler offer thoughts on placebo effects in the context of a health care market? How can patients, or doctors, make decisions based on effectiveness given the prevalence of placebo effects? Is the entire supplement industry not a giant market for placebos in almost all cases? Is the health care market separable from the supplement market given that many people under care are also on supplements, with or without their doctor's knowledge (not that the doctor's knowing changes anything)? What does this say about health care as a market?

Earlier posts seem dismissive of placebo effects, but here is discussion of some recent research:

The existence of the placebo effect is proof, that we still dont know what we are doing... a fundamental part of medicine is still poorly understood.

No, we know what we are doing, if we admit that reality is very complex.

We understand the placebo effect. We just can't turn it on or off for someone else like a light switch. In fact, we can't even stop from turning it on in other people. So, we use double blind trials so the doctor and patient try to turn on the placebo effect by believing they are getting the magical cure.

Thus all patients in trials get the best possible known cure, hope and optimism.

We also know placebo effect is not effective for some people, and that it often wears out.

But the placebo effect is more generally effective than most drugs prescribed. But no drug company is willing to do the drug trials to get FDA approval for an inert pill that insurers will pay for so doctors can prescribe the pill for people with flu, cold, depression, anxiety, stage 4 cancer. It would give caretakers a mission so they are doing something instead of feeling helpless.

Are you sure that the Japanese system is not holding back FDA approved drugs, and that the short cut is simply those choosing FDA approved drugs that have not yet been approved by the Japanese authorities. Just because you are approved in the US does not mean you are automatically, and without delay, approved abroad.

'I hold the Bartley J. Madden Chair in Economics at the Mercatus Center so I am biased'

Man, back in the day, any comment pointing out the mere fact that the first accomplishment noted on Prof. Tabarrok's GMU faculty home page was his holding that chair, at center with no official connection to GMU (well, OK, the fact that the GMU Foundation contributes upwards of 10 million dollars to a non-GMU policy institute is at least a type of connection) was grounds for comment deletion - without even any explicit mention of his being biased.

And having the graphic called 'bartgraph' is hilarious - but at least Prof. Tabarrok is up front about that bias thing. Or he is subtly revealing what he thinks about the entire subject with a sly Simpsons reference.

It wasnt 'any' comment that was the problem, it was hundreds of them, over and over again, with no connection what so ever with the subject being discussed.

thalidomide thalidomide thalidomide thalidomide thalidomide

There, we got that out of the way.

A big risk of an approach like this is that you will often make it impossible to recruit patients for Phase III trials. People will refuse to take the chance of being in the placebo (or standard-of-care) arm. Many, many drugs have looked great in Phase II, and then either shown lack of efficacy or safety problems in Phase III. I worked on a drug for head trauma, including stroke, that showed 30% improvements in mortality and morbidity in Phase II, but no improvement at all in Phase III. It was subsequently abandoned. If you take away the possibility of completing Phase III trials, you lose this filtering process.

This is the only comment I agree with so far. Lots of drugs fail in Phase III. Often, toxic effects show up that were not noticed in Phase II. Short-circuiting the Phase III trials would be a really bad idea.

And you can be sure that there will be unscrupulous people who will take advantage of this, like Stanislaw Burzynski who is keeping his "antineoplastons" in Phase II forever.

Of course, its the course of the "false-positives". With small sample size and short follow-up there are a lot of degrees of freedom for pharmaceutical companies... Its hard to understand why Alex seems to ignore this. He probably understands the statistical problems associated with this fast-track approach better than I do so....

Maybe only approve the use of drugs only for terminally ill patients. I know of a cancer drug that has just completed Phase 1 and 20 of 40 terminally ill patients who would otherwise be dead are still alive (as of Sept - last update from company). The treatment has minimal side effects (low grade fever) yet under the current regime it will be years before it has FDA approval.

Right, but you will get the same data sooner since once enough people consume the drug in phase II, you will know if it works or not. Yes, the later phases will be eliminated, but this is a good thing.

What you do not understand is that the market eliminates the option of refusing to join a stage 3 trial and not get the drug.

Alex blames the FDA for the labor costs of manufacturing a drug. If the FDA dictated, you would work for free, paying all your costs of living from your savings and pay for all the materials you need.

In a free market, every thing is free, without cost.

I've listened to multiple advocates for the kinds of changes Alex is advocating, and one complaint is the FDA giving "compassionate" exceptions turned down only for the implanting of goat gonads and other Mexican cures by the sponsor of Wolfman Jack, but not requiring drug companies to manufacture and supply the drugs for free, or the FDA is not ordering Medicare to pay for the price demanded by the the drug company.

I understand that drug company management also seek to prevent lawsuits from investors that result from doctors and patients making claims about an untested drug's effectiveness, resulting in stock prices soaring, then crashing when patients drop like flies. Then hedge funds sue the drug company executives for allowing false information from being published, costing them billions in losses.

I'm still a 'government should be a monopsony buyer to lower drug prices' guy. Yes, I'm aware of the innovation implications. Willing to be convinced otherwise.

"We need to lower costs and speed new drugs to market."

Remove the FDA's authority to approve drugs, and change it to an authority to recommend drugs (like Consumers Union).

It's ridiculous to not respect the right of an adult to put into her or his body whatever she or he wants.

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