Category: Medicine

Makena and the Orphan Drug Act

Makena is a drug used for premature birth therapy. It’s been available off-label for a long-time but KV pharmaceuticals ran a clinical trial and applied for FDA approval under the Orphan Drug Act (ODA). Under the ODA, KV is entitled to seven years of market exclusivity, this is even stronger than a patent because it gives KV the right to exclude from the market any drugs (not just similar drugs) that treat the same condition.

Now that KV has a monopoly—enforced against compounding pharmacies by threats from the FDA—the price will rise from about $10 to a listed price of $1,500. Naturally a lot of people are outraged.

In The Blessed Monopolies (pdf) I  explained how the ODA and similar rules such as pediatric exclusivity can be gamed by pharmaceutical firms for big profits. The early AIDS drug AZT managed to get market exclusivity under the ODA, for example, because it appeared when the patient population was below 200,000, thus meeting ODA requirements, even though everyone knew the patient population was expanding rapidly.

Once a drug is off-patent, however, there is very little incentive to study it further or to run the clinical trials necessary to get FDA approval. Although the drug has been used off-label for some time (another example of the importance of off-label prescribing) a decent clinical trial still has considerable value. The problem is that as with patents there is very little connection between the effort required to get exclusivity under the ODA and the potential profits (see my paper Patent Theory v. Patent Law).

Despite my skepticism of the ODA, however, I was convinced by Lichtenberg and Waldfogel’s Does Misery Love Company that the ODA as a whole has done some good. Lichtenberg and Waldfogel find that after the ODA was passed (but not before) mortality rates for people with orphan diseases decreased faster than mortality rates for those with more common diseases. The decrease in mortality was consistent with the introduction of more new drugs for orphan diseases.

The important point is that like patents the ODA should be evaluated as a rule and not on a case-by-case basis. I am all for patent reform and FDA/ODA reform but this is truly a case where we don’t want to throw the baby out with the bathwater.

Hat tip: Eddie W.

Addendum: See also Derek Lowe who, as usual, offers intelligent comments.

One account of what political elections are for

From David Brooks's new blog:

What do you do after your party wins an election? In a forthcoming study for the journal Computers in Human Behavior, Patrick Markey and Charlotte Markey compared Internet searches in red and blue states after the 2006 and 2010 elections. They found that the number of searchers for pornography was much higher right after the 2010 election (a big G.O.P. year) than after 2006 (a big Democratic year). Conversely, people in blue states searched for porn at much higher rates after 2006 than after 2010. One explanation is this: After winning a vicarious status competition, people (predominantly men, I guess) tend to seek out pornography.

And David's new book is here.

The new federalism, New Hampshire style

A lot of governors don't want high-speed rail and at least one state is wondering whether it wants a new hospital:

New Hampshire Public Radio ran a story yesterday about Governor Lynch's request that hospitals in the state stop building new facilities.  Normally, governors never miss an opportunity to encourage new business in their state, because in most markets, greater investment leads to better services or lower prices.  Finally, policy makers understand that the normal rules don't apply in health care:

[T]hese facilities are driving up utilization and driving up health care costs. Those are costs that we all see in our ever-increasing health insurance premiums. To that, I say enough.

That is from Andrew Samwick.  This shows how deeply the current system of both health care finance and American federalism is broken.  It is not that the governor was suddenly persuaded by…Robin Hanson.  Instead, the shadow value of "money to spend as the governor wants it spent" is rising rapidly and old political equilibria are falling away, in Wisconsin too.

The Great Stagnation in medicine

Here is one bit from a very good Robert Gordon essay (which I will cover again in a while):

…if one starts down the road of comparing changes in life expectancy, the yearly rate of increase in life expectancy at birth during 1900–50, resulting in substantial part from the inventions of the Second Industrial Revolution, was 0.72 percent per year, the 0.24 percent annual rate during 1950–95.

James Le Fanu, in his 2000 history of modern medicine, lists definitive moments of modern medicine.  In the 1940s there are six such moments, seven moments in the 1950s, six moments in the 1960s, a moment in 1970 and 1971 each, and from 1973-1998, a twenty-five year period, there are only seven moments in total.

For his "Dates of the discovery and sources of the more important antibiotics," the list starts in 1929-1940 with penicillin and ends in…1963, with Gentamicin.

Ezra has a very good post on penicillin.  Megan has a very good post and piece on the drying up of the pharmaceutical pipeline.  Andrew Jack has a very good and scary piece on the withering of pharmaceuticals innovation in the UK.

As Le Fanu writes: "Currently most medical researchers would concede that progress has slowed in recent years…"

As an aside, this has a number of political economy implications for health care reform, none of them cheery.  In both Washington and in the blogosphere, we're very focused on insurance and coverage issues, but is not the innovation pipeline more important?  Does it receive one-tenth the discussion?  One-fiftieth?  Does a slow pipeline mean that health care policy is doomed to be unpopular?

Quick quiz: is health care a growing or a shrinking part of the U.S. economy?

Budget sentences to ponder

The regression coefficient of -0.07 suggests that in countries where revenues as a share of GDP were 10 percentage points lower in 1979, health care spending increased as a share of GDP by 0.7 less in the next 30 years.  This association is consistent with the hypothesis that high tax rates limit the further growth of public contributions to health spending because of the much larger economic costs…and because of political pressures against high tax rates, a result also found in a cross-country study…

That is from the scary paper by Katherine Baicker and Jonathan Skinner, "Health Care Spending Growth and the Future of U.S. Taxes."  (Can anyone find an ungated copy?  Can we all say a hail to James M. Buchanan?)

As for today's announced budget, Kevin Drum serves up some relevant remarks.

Malaria and IQ

The figure below, from Bill Gates's annual letter, shows that countries with a higher disease burden have lower average IQs. The theory is that building brains and fighting disease are metabolically costly so more effort to fend disease diverts resources from brain development lowering IQ. 

Malaria-iq
Tyler blogged this research earlier writing "I'm not sure the authors have a very good test against alternative hypotheses, but still a correlation remains after making some appropriate adjustments."

Further evidence on causality is given by Atheendar Venkataramani in Early Life Exposure to Malaria and Cognition and Skills in Adulthood. Venkataramani finds that men born after widespread malaria eradication began in Mexico in the late 1950s have higher IQs (Raven scores) and are more likely to work in white collar jobs than men born shortly before eradication efforts began. Importantly, the effect is larger for men born in those states that began with high exposure to malaria.   

Sentences to ponder, the progress of health

Even in health care the big explosion was 1900 to the 1960s, when life expectancy rose from 47 (only modestly above Roman levels), to about 70 (only modestly below current levels.) 

That is from Scott Sumner and the post is interesting throughout, also see Scott's additions in the comments.  It is odd that many people are citing health improvements as evidence against my arguments for a slowdown in progress for the median individual, when, as Scott's quotation indicates, the opposite is more likely the case.  Scott is a very literal reader, in the best sense of that term, and thus he is careful not to confuse my claims with weaker and less defensible versions of related ideas (and there are indeed many of those).

Here is Michael Mandel, arguing that the innovation slowdown starts in 1998-2000, rather than the early to mid 1970s, and attributing it largely on the biosciences.

Racial stereotypes and death statistics

Andrew Noymer, Andrew Penner, and Allya Saperstein report:

Recent research suggests racial classification is responsive to social stereotypes, but how this affects racial classification in national vital statistics is unknown. This study examines whether cause of death influences racial classification on death certificates. We analyze the racial classifications from a nationally representative sample of death certificates and subsequent interviews with the decedents' next of kin and find notable discrepancies between the two racial classifications by cause of death. Cirrhosis decedents are more likely to be recorded as American Indian on their death certificates, and homicide victims are more likely to be recorded as Black; these results remain net of controls for followback survey racial classification, indicating that the relationship we reveal is not simply a restatement of the fact that these causes of death are more prevalent among certain groups. Our findings suggest that seemingly non-racial characteristics, such as cause of death, affect how people are racially perceived by others and thus shape U.S. official statistics.

Interview with Mark Pauly

Via Ezra, with Ezra:

Tell me about your involvement in the development of the individual mandate.

I was involved in developing a plan for the George H.W. Bush administration…One feature was the individual mandate. The purpose of it was to round up the stragglers who wouldn’t be brought in by subsidies. We weren’t focused on bringing in high risks, which is what they're focused on now. We published the plan in Health Affairs in 1991. The Heritage Foundation was working on something similar at the time.

What was the reaction like after you released it?

There was some interest from Republicans. I don’t recall whether they formally wrote a bill or just floated it as an idea, but Democrats in Congress said it was "dead on arrival." So that was the end of my 15 minutes.

Does disability insurance discourage employment?

Jagadeesh Gokhale writes:

Jobs lost during the recent recession caused a deluge of applications to the Social Security Disability Insurance program – more than 6 million each year in 2009 and 2010 – and threw into relief the fact that the SSDI program is structurally unsound.

The current applications surge will accelerate the exhaustion of SSDI's trust fund and will force Congress to have to choose among two unpalatable options – increase SSDI payroll taxes or reduce benefit allowance rates.

But that is not enough. If the particularly vulnerable population the SSDI is designed to serve is to be protected, while preserving incentives to work, the program has to be radically restructured.

Even in normal economic times, those with marginally physical or mental impairments apply in the hope of acquiring disabled status under SSDI. Among those already receiving SSDI benefits, the incentive to return to the work force is very poor.

Revealing one's ability to work, especially if it's in a low-paid occupation, could cause permanent loss of SSDI benefits. Strong work disincentives under SSDI result from its eligibility standard that guides benefit awards: an inability to engage in substantial gainful activity for 12 months or more.

Is this an underreported story?  What's the success rate on coming out of disability and finding a decent job?  What percent of the disabled, permanently unemployed are truly unable to engage in productive work?  I was put onto this question by a tip from Larry Katz.

The doc fix

Jon Chait has a column on the doc fix and he complains about some of the other policy analysts.  I understand that the doc fix is not a net cost of ACA, since we have been doing it anyway, and I understand that the Republicans are being hypocrites on the issue.  But I have a broader question.  Should we be doing the doc fix at current levels?  If I were a supporter of single payer, I would wish to cut the doc fix.  That is, after all, how single payer systems save so much money, compared to the U.S. system.  They use monopsony to lower reimbursement rates and the quality of outcomes does not always suffer much, if at all.

So are the single payer advocates in fact advocating an end or limit to the doc fix?  That is a literal and naive question — I am not pretending I have caught anyone in a contradiction.  Is Krugman here endorsing the doc fix?  I am not sure, but he does call it "necessary."

One might argue "cutting reimbursement rates works only when you can do it to all rates."  Otherwise doctors flock to the privately insured patients and ration the rest.  Maybe so, but Medicare covers a lot of health care in this country and it's hard to see most doctors giving up on covering old people.  Medicare ought to give the government some monopsony levers and even if supply is a constraint, pushing some elderly further back in the queue does not have to be a bad thing, all constraints considered.  Furthermore we are often told that cutting reimbursement rates will work when it comes to pharmaceuticals, so why not doctors?

Why don't I hear more about this issue?  I would consider joining a liberaltarian alliance to lower the doc fix.  Is there one to be had?

Addendum: Here is Levin's response to Chait.

Mandates don’t stay modest, a continuing series

This remains an underreported story:

Should health insurers have to cover treatment of Lyme disease? What about speech therapy for autistic children? Or infertility treatments?

Can they limit the number of chemotherapy rounds allowed cancer patients? Or restrict the type of dialysis offered to people with kidney disease?

This week an independent advisory group convened by the Obama administration launched what is likely to be a long and emotional process to answer such questions…

Under the health-care overhaul law, beginning in 2014 all new insurance plans for individuals and small businesses will have to include a package of minimum "essential benefits" falling into 10 general categories – ranging from hospitalization, to prescription drugs, to rehabilitative and habilitative services. But Congress largely left it to Secretary of Health and Human Services Kathleen Sebelius to decide how detailed to make the essential benefits package and what exactly to put in it.

Defenders of ACA do not in general like to confront the "at what margin?" question.  The rhetoric used to argue for the bill usually suggests that the mandate must indeed be extended.  I will keep my eye on this issue.  Here are previous installments in the series.

The Doctor Might See You Now

That's the title of a new paper by Craig Garthwaite of Northwestern.  The abstract is this:

In the United States, public health insurance programs cover over 90 million individuals. Changes in the scope of these programs potentially can have large effects on physician behavior. This study finds that following the implementation of the State Children’s Health Insurance program, physicians decreased the number of hours spent with patients, but increased participation in the expanded program. Suggestive evidence is found that this decrease in hours was achieved through shorter office visits. These results are consistent with the predictions from a mixed economy model and provide evidence of the potential effects of recently passed public insurance expansions.

In other words, whether you favor ACA or not, the supply side constraints are starting to bite.

One way to cut health care spending

Total national health spending grew by 4 percent in 2009, the slowest rate of increase in 50 years, as people lost their jobs, lost health insurance and deferred medical care, the federal government reported on Wednesday.

Here is more.  This was also striking:

“Federal Medicaid spending increased 22 percent in 2009, the highest rate of growth since 1991,” Ms. Martin said, while “state spending decreased 9.8 percent, the largest decline in the program’s history.”

Retail spending on prescription drugs, however, continued to rise at a rapid rate, higher than in 2008.