Results for “fda” 324 found
The Worst Idea I have Heard Today
One idea that might prevent a repeat of the turmoil: a commission that
would vet financial products before their release, akin [to] the Food and Drug Administration’s
evaluation of drugs before they’re released to the market. McFadden
suggested, “we may need a financial-instrument administration that
tests the robustness of financial instruments and approves only the
uses where they can do no harm.”
Nobel laureaute Daniel McFadden quoted at Real Time Economics. Do tell what will be left when we approve only things "that can do no harm."?
Might I also suggest that before calling for a financial FDA, Prof. McFadden should investigate what economists who have studied the matter have concluded about the safety and effectiveness of the real FDA.
Letter to the NEJM
The issue of off-label prescribing is heating up again. A recent article in the New England Journal of Medicine by Randall Stafford made the case for greater regulation. I am concerned that the benefits of off-label prescribing are not fully appreciated. Dan Klein and I wrote a letter to the NEJM – which they declined to publish – in response. Here’s the letter:
Dear NEJM,
R.S. Stafford writes that off-label prescribing “permits innovation in clinical practice … offers patients and physicians earlier access to potentially valuable medications and allows physicians to adopt new practices based on emerging evidence.” Nevertheless, he calls for greater FDA regulation.
In contrast, we argue that the efficacy of off-label usage suggests that less FDA regulation of first or on-label usage would increase innovation and offer patients earlier access to new medications.
Off-label prescribing is regulated by the judgments of doctors, medical researchers, industry, the patient community, and patients. This system offers patients a more nuanced approach to care than a top-down approach. We should extend this approach to new drugs as well as to new uses for old drugs.
Our perspective is bolstered by a large survey of physicians which demonstrates strong support for off-label prescribing and considerable support for reducing FDA regulations on new drugs.
Daniel Klein
Alexander Tabarrok
George Mason University
On a Fast Track to Nowhere?
Periodically when the FDA is criticized for slowing the approval of new drugs they announce a new policy like Fast Track. I’m skeptical of these announcements since they are inconsistent with the FDA’s incentives. A recent investigative report in the Cleveland Plain Dealer seems to suggest that I am right to be skeptical but in the end makes me wonder whether Fast Track may be useful after all. Here’s the part that supports my skepticism.
A decade ago, the Food and Drug Administration introduced a Fast
Track designation for drugs in development that was intended to speed
the availability of medical treatments for serious diseases.However, a seven-month investigation by The Plain Dealer shows that
this government blessing has not increased the number of drugs approved
or moved them to market faster.…Dr. John Jenkins, director of the FDA’s Office of New Drugs,
acknowledged that the Fast Track designation only gives companies the
same access to FDA programs that was already in place when they lobbied
Congress for the provision in 1997."There’s really not much other, if any, benefit for Fast Track," he said.
The report, however, makes a big deal of the fact that stock prices do respond positively to Fast Track designation. The report spins this as pump and dump with the FDA in effect doing the pumping and insiders and hedge funds doing the dumping.
…frenzied trading occurs regularly when companies announce Fast Track
status. The number of shares bought and sold more than doubled on 49
percent of days that companies announced Fast Track designations.
Trading was 10 times higher than the day before in 22 percent of
instances….hedge funds and others who [short the stock] bet that the price of a
stock will fall – and it often does after the initial jump a company
receives from Fast Track designation.
But I’m also skeptical of stories that suggest markets are systematically fooled by non-events and the numbers presented do not seem wildly inconsistent with a modest but real positive signal from being listed as Fast Track.
Stock prices of companies that trade on the New York Stock Exchange
rose just 1 percent after Fast Track announcements… Excluding these companies, most of which are major
pharmaceutical firms, Fast Track announcements boosted stock prices
11.5 percent.
I’ll call this one a draw until further information arrives. What wisdom does the crowd offer?
Hat tip to Mike Giberson at Knowledge Problem.
Surgery vs. Drugs
Levitt and Dubner discuss bariatric surgery in their most recent NYTimes column. Writing on their blog (they or their publicist) say this:
Bariatric surgery is often the most effective treatment for the morbidly obese,
and with a mortality rate of around one percent, it isn’t terribly risky…
Not terribly risky!!! I consider a 1% chance of death to be very risky, perhaps worthwhile for some morbidly obese people but when 1 in every 100 patients doesn’t make it off the table that is not good odds.
What I find most interesting, however, is that I don’t think that any drug, even one with net benefits, could pass FDA trials with a mortality risk of 1%. Recall that Rezulin was pulled from the market when 63 out of 750,000 people developed liver problems (the actual number may have been higher of course but the numbers aren’t even close.)
It doesn’t make sense to regulate one source of risk at much higher rates than another source, given equal benefits. It’s quite possible, for example, that patients denied risky weight loss drugs turn to even riskier bariatric surgery. (I am not arguing this point here, I am explaining why efficiency requires that equal risks be regulated equally).
So if it doesn’t make sense to regulate one source of risk at much higher rates than another source, should surgery be regulated more or drugs less?
The roots of medical innovation
In a much-praised piece, Jon Cohn argues that the NIH, not commercial incentives, is the key to American medical innovation. He writes:
The great breakthroughs in the history of medicine, from the development of the polio vaccine to the identification of cancer-killing agents, did not take place because a for-profit company saw an opportunity and invested heavily in research. They happened because of scientists toiling in academic settings. "The nice thing about people like me in universities is that the great majority are not motivated by profit," says Cynthia Kenyon, a renowned cancer researcher at the University of California at San Francisco. "If we were, we wouldn’t be here." And, while the United States may be the world leader in this sort of research, that’s probably not–as critics of universal coverage frequently claim–because of our private insurance system. If anything, it’s because of the federal government.
The single biggest source of medical research funding, not just in the United States but in the entire world, is the National Institutes of Health (NIH): Last year, it spent more than $28 billion on research, accounting for about one-third of the total dollars spent on medical research and development in this country (and half the money spent at universities).
A few points should be made:
1. The strength of American medical innovation stems from the combination between the NIH, private philanthropy, and commercial incentives. Cohn has lots of (just) praise for the NIH, as basic research is often a public good. But he doesn’t say enough about philanthropy, and he confuses pro-NIH evidence with showing the superfluity of commercial incentives.
2. Send some flowers to Cynthia Kenyon, whom I could not personally quote in this manner with a straight face. You would never know that universities are profiting from drugs, and patenting them, at an unprecedented rate. Universities are also forming partnerships with drug companies at an unprecedented rate.
3. Companies must work very hard to translate basic research into usable applied form and the U.S. is a clear world leader in this regard. A drug idea is not the same as a drug. Cohn at times admits this, but is he really denying that the supply curve here slopes upward with regard to expected profits? You can cite all kind of "mixed" factors about commercial incentives but at the end of the day that is the basic question.
4. Statins, Prozac, and anti-AIDS drugs are notable examples of #1. Or try this list of Merck products. Merck and Pfizer are much more than simply marketing or doctor bribery machines, although admittedly they are that too.
5. The standard arguments against commercial "me-too" drugs are considerably overrated.
6. FDA restrictions are at least partly responsible for the costly, overly concentrated, and blockbuster-oriented nature of U.S. and other pharmaceutical companies. Tight regulations discriminate against the small company and the small idea. Even if you think tight regulations are a good idea, don’t blame these tendencies on the big bad corporations.
7. It is odd for Cohn to cite me as his libertarian foil, since the referenced piece very clearly cites the NIH as a critical factor behind American medical innovation. This odd citation again represents the desire to replace "anti-commercial" arguments with an easier-to-make "pro-NIH" case.
9. The NIH works as well as it does because the money is mostly protected from Congress. It is not a success which can easily be replicated. The more money is at stake, the more Congress wants to influence allocation. We should guard this feature of the system jealously and try to learn from it. If we can.
The bottom line: Arguments for the NIH are not arguments against the importance of commercial incentives for medical innovation.
Addendum: Read Clive Crook too.
The Tyranny of the Market
This new book is by sometimes Slate.com columnist and U. Penn economist Joel Waldfogel, of "Deadweight Loss of Christmas" fame. The subtitle is "Why You Can’t Always Get What You Want."
This well-written monograph is the best extant non-technical treatment of fixed costs and how they limit product diversity. On a given night, you can’t see a live performance of Samuel Beckett in Topeka, Kansas but maybe you can in the larger New York City; fixed costs are why they won’t set up the stage and hire the cast for only five viewers.
But Waldfogel is more pessimistic about the market than I am. The book’s opening example is about how hard it is to find radio stations in underpopulated areas; satellite radio is mentioned on p.120 but I would have started with its reach and also its limitations (and here). There is internet radio as well. The first example in the empirical chapter is that it takes $900 million on average to develop a new drug, but regulations and the FDA are not mentioned.
I can recommend this book but I do not agree with its central conclusion: "Markets do not avoid the tyranny of the majority." There are very few areas of my life, if any, where markets force me to follow the wishes of the majority.
Oddly the biggest problem is not mentioned and that is style and marketing. Retail outlets do not carry many items, not because they couldn’t hang some of the stuff from the ceiling, but rather because they wish to project a focused image. In other words, the real problem, when there is one, is the very limited attention spans of the consumers and the ad watchers and the product line gossipers.
No right to save your life
A Federal court overturned last year’s shocking decision from the DC Circuit Court of Appeals saying that dying patients have
a due process right to access drugs once they have been through
FDA approved safety trials. In January I wrote:
Unfortunately, I do not think that the Abigail Alliance can win the
case; recognizing the rights that the DC Circuit of Appeals recognized
would be too big a blow to our nanny state.
Thus I am a little disappointed but not surprised. I am pleased that the brief prepared by Jack Calfee, Dan Klein, Sam Peltzman, Benjamin Zycher and myself was cited in the dissent. The majority also avoided the sweeping policy generalizations that we wrote the brief to
discourage, thus I think we won a rear-guard victory and can keep up the battle on other fronts.
Thanks to Ted Frank for the pointer and his work behind the scenes.
Sadly, the average economist is no Milton Friedman.
It beggars belief when economists at Princeton, Harvard and Berkeley claim that they are lone voices in the wilderness boldly striking heterodox positions against the hegemony of “free market economics.”
David Card, for example, says “You lose your ticket as a certified economist if you don’t say any kind of price regulation is bad and free trade is good.” Really? Card and Krueger’s famous paper on the minimum wage was a 1993 NBER working paper published in the AER in 1994. What happened then in 1995? Was Card decertified, drummed out of the profession, vilified by his peers? Hardly, in 1995 David Card was honored (deservedly imho) by the American Economic Association with the John Bates Clark medal.
Dani Rodrik says “I fall into the methods of the mainstream, but not the faith,” which he defines as the belief that more markets and free trade are always good and government regulation is always bad. Give me a break. Let’s go to the data.
Klein and Stern surveyed members of the AEA on a host of policy questions bearing on markets and government regulation. The result, “Only a small percentage of AEA members ought to be called supporters of free-market principles.”
Even on the minimum wage, support for which Card says gets you decertified, the mean economist position is in between “support mildly” and “have mixed feelings.” Indeed, even Card has mixed feelings about the minimum wage! (See his book with Krueger in which he points out that the minimum wage is not a very effective way to help the poor). On a host of other issues concerning government regulation, like support for OSHA, the FDA, and the EPA, the mean economist is somewhere between strongly and mildly support.
Only on free trade is there strong opposition to government regulation in the form of tariffs. Thank goodness for small mercies.
One meal at Per Se
Many people consider Per Se the best restaurant in Manhattan, here are some trade-offs:
The single most caloric menu item was the foie gras, weighing in at
435.4 calories; followed by café Liégeois (basically a gourmet brownie
with ice cream), with 185.8 calories. The single least caloric was the
buttermilk sorbet, owing in part to its spoon-size portion (23
calories). All told, the nine courses tallied 1,230.8 calories, 59.7
grams of fat, and 101.7 grams of carbs. The total rises to 2,416.2
calories, 107.8 grams of fat, and 203.7 grams of carbs if you include
the extras: a salmon amuse-bouche, wine, dinner rolls with
butter, and chocolate candies. These might not seem like giant numbers,
but that one lunch has 60 percent more fat than the average adult, on a
2,000-calorie regimen, should eat in a day, according to the FDA. To
work off that meal, a 155-pound person would have to walk the route of
the New York City Marathon, plus an additional five miles. Or he could
swim round-trip from Battery Park to the Statue of Liberty nearly three
times, or do basic yoga for 13 hours and 42 minutes. It’s also roughly
equal in calories to six slices of DiFara‘s cheese pizza, ten Gray’s Papaya‘s hot dogs, or, it seems appropriate to note, four and a half Big Macs.
If we can assume linearity, this $250 meal (plus wine and tax and tip) costs you about $9 worth of health. In other words, don’t worry about it. Here is more, via Jason Kottke.
Price Controls on Pharmaceuticals
Frank Lichtenberg uses a novel strategy to estimate the effect of price controls on innovation. Simplifying (see the paper for details) Lichtenberg argues that the profit from a pharmaceutical is essentially P*Q-FC where P is price, Q is quantity and FC is fixed cost. Most of the fixed cost is due to research and development and getting through FDA hurdles.
The key to Lichtenberg’s strategy is to note that changes in Q have the same effect on profit and thus on the incentive to innovate as changes in P (this is not really true since changes in P also influence Q but Lichtenberg adjusts for the elasticity of demand). Moreover we can estimate the effect of changes in Q on innovation by looking at how the incidence of a disease influences innovation. Lichtenberg finds, for example, that pharmaceutical innovation is higher among cancers with greater incidence (e.g. lung versus pancreatic cancer). Using the Q to innovation relationship he estimates that a 10% reduction in price would reduce pharmaceutical innovation by 5%.
We know that pharmaceutical innovation saves lives and has a very high benefit to cost ratio. Thus, price controls or other restrictions that reduce prices are almost certainly a bad idea.
Indeed, as I have argued before, health care spending on the margin has very low value. We know, for example, that Medicare regions that spend twice as much on patients have no better outcomes. Spending on health care research and development, however, has very high value. Thus price controls would be a disaster – reducing high value R&D and replacing it with low value current spending.
I fear that short-term thinking by politicians and the public will destroy the US pharmaceutical industry.
Links
1. Electoral advice, backed by statistics: Should Democrats move to the left on economic policy? No.
2. Do you hoard or delete emails? What does that say about your personality? I delete.
3. America’s orchestras have a new recording deal.
PDUFA
PDUFA, the Prescription Drug User Fee Act, is a shining example of a Pareto optimal policy innovation. First passed in 1992 the act was essentially a deal between the drug manufacturers and the FDA that said we, the manufacturers, are willing to pay an extra tax for submitting new drug applications to the FDA so long as the tax is earmarked for hiring more FDA staff to accelerate new drug review.
Critics of PDUFA claim that it has reduced safety and made the FDA a "servant of industry." It’s true that to avoid conflicts of interest it might have been better had Congress funded the FDA at optimal levels but when has Congress ever done anything optimally? Prior to PDUFA millions of dollars in pharmaceutical
investment was regularly being held in limbo for want of a much cheaper FDA reviewer.
A new working paper from Tomas Philipson and co-authors presents the most sophisticated cost-benefit analysis of PDUFA. They find that PDUFA did increase manufacturer profits and reduce FDA review times. Moreover, they find no evidence that safety declined under PDUFA. Most importantly faster review times meant big gains for consumers which they evaluate as equivalent to savings of 180 to 310 thousand life-years.
Would Aspirin Be Approved Today?
I’ve often said that if aspirin were invented today it would not be approved by the FDA. Drug researcher Derek Lowe says I’m wrong – aspirin wouldn’t even make it out of the lab. Read the whole thing.
Thanks to Ted Frank for the pointer.
Tyler Cowen pretends he is a Democrat
If I were a Democrat…
First, I would not cite evidence about how Western European countries spend less on health and are healthier than U.S. citizens. This data set, if you take it seriously, also implies that the marginal product of more health care, adjusting for income and a few other variables, is zero. Expanding health care would not be important. Now I believe this is an incorrect conclusion, but that is what shows up in this data. We should not invoke this data selectively.
Second, I would recognize that American policy generally works (or doesn’t work) by building upon existing institutions. The most likely form of national health care — for better or worse — would extend a version of Medicare to more people. This would not lower health care costs, whether in gross or quality-adjusted terms. Keep in mind that negotiating price reductions does not per se lower real resource costs at all.
I would disaggregate health care systems and see where we could do the most good:
1. Step up R&D subsidies through the NIH and our university system, both high quality institutions. Their autonomy and micro-fiefdoms provide a good framework for risk-taking and innovation. The returns to medical R&D are extremely high. Furthermore the case for market failure, based on the inability to capture the full social gains from a new idea, is simple.
2. Redo the Medicare drug bill so that people can understand it (even I can’t, nor does my mother), and so more people benefit. If need be, we can do this in budget-neutral fashion. The Bush plan is a mess.
3. Invest in local public health systems. Preventive care is important, especially for the poor. Price can be an obstacle but often the relevant constraints are behavioral in nature. Public health care systems should be easy and inviting, and they have to become part of life routines. Government can be part of the solution. Strong local public health care also will improve surveillance and later surge capacity if a pandemic comes along; this added benefit is significant.
4. Borrow a page from the libertarian litany about the FDA.
5. Institute prizes for successful vaccines. We have been discouraging vaccine production when we should be encouraging it; Michael Kremer has some intriguing proposals.
All those options are doable. All would save lives. None are fiscal disasters. They offer something for both rich and poor. They lay out a positive and constructive role for government, while keeping room for the private sector. None raise the prospect of excess bureaucracy or discourage innovation. None rest on the questionable belief that government as single supplier or payer would improve efficiency. And they are all areas where the Republicans are dropping the ball.
I would cut talk of national health insurance. I would cease obsessing over the number of "40 million uninsured," however good a debating point it may be. Many of these people are either linked to immigration or get decent medical coverage in any case. I would admit that we cannot take care of everyone and that we face tough trade-offs.
Hmmm…these counterfactuals are fun. What should I try next? Pretending I am a Republican? But for now, it is back to normal life…and so we return to your regularly scheduled programming. But comments are open, in case Kevin Drum’s readers wish to pretend they are libertarians…
Lawsuits vs. regulation
Is this left-wing fantasy or unpleasant truth?
Roughly speaking, most European countries have adopted a regulatory model in order to keep corporate abuse in check. There are drawbacks to this model, but it does result in relatively few lawsuits. Conversely, in the United States, business-friendly conservatives have fought to keep regulation light. This often leaves lawsuits, which are inevitably less predictable and more arbitrary than regulation, as the only avenue that ordinary citizens have for checking corporate abuse.
But Geoghegan points out that it’s not just inadequate regulation that has led to the rise in torts. It’s also the demise of unions. In the past, he says, employee grievances from unionized workers were mostly handled via arbitration, which is quick and easy. But with arbitration mostly gone, largely replaced by a mass of confusing and poorly enforced civil rights legislation, the only remedy an employee has if she’s unjustly fired is a lawsuit, and this is fundamentally a more scorched-earth process than old style arbitration…
Is the Vioxx decision in fact the best argument for the FDA? Should we move, as Alex has suggested, to make FDA-approved drugs immune from such lawsuits? Can we precommit to taking certain actions out of the legal nexus in this fashion? File this one under "Top Ten Topics I Wish People Would Study More."
Here is Kevin Drum’s full post and review. Addendum: Here is Jane Galt’s excellent response, read it.