Results for “fda” 465 found
Marcia Angell’s Mistaken View of Pharmaceutical Innovation
At Econ Talk, Marcia Angell discusses big Pharma with Russ Roberts. I think she gets a lot wrong. Here is one exchange on innovation.
Angell: The question of innovation–you said that some people feel, economists feel, [the FDA] slows up innovation: The drug companies do almost no innovation nowadays. Since the Bayh-Dole Act was enacted in 1980 they don’t have to do any innovation….
Roberts: But let’s just get a couple of facts on the table…[The] research and development budget of the pharmaceutical industry is, in 2009, was about $70 billion. That’s a very large sum of money. Are you suggesting that they don’t do anything–that that’s mostly or all marketing? That they are not trying to discover new applications of the basic research? It seems to me basic research is an important part. Putting that research into a form that can make us healthier seems to be a nontrivial thing. You think they are–what are they doing with that money?
Angell: If you look at the budgets of the major drug companies–just go to their annual reports, their Security and Exchange Commission (SEC) filings, you see that Research and Development (R&D) is really the smallest part of their budget. If you look at the big companies you can divide their budget into 4 big categories. One is R&D, one is marketing and administration; the other is profits, and the other is just the cost of making the pills and putting them in the bottles and distributing them. The smallest of those is R&D.
Notice that Angell first claims the pharmaceutical companies do almost no innovation then, when presented with a figure of $70 billion spent on R&D, she switches to an entirely different and irrelevant claim, namely that spending on marketing is even larger. Apple spends more on marketing than on R&D but this doesn’t make Apple any less innovative. Angell’s idea of splitting up company spending into a “budget” is also deeply confused. The budget metaphor suggests firms choose among R&D, marketing, profits and manufacturing costs just like a household chooses between fine dining or cable TV. In fact, if the marketing budget were cut, revenues would fall. Marketing drives sales and (expected) sales drives R&D. Angell is like the financial expert who recommends that a family save money by selling its car forgetting that without a car it makes it much harder to get to work.
Later Angell tries a third claim namely that pharma companies do no innovation because their R&D budget is mostly spent on clinical trials and, “it’s no secret how to do a clinical trial.” I find this line of reasoning bizarre. I define an innovation as the novel creation of value, in this case the novel creation of valuable knowledge. Is Angell claiming that clinical trials do not provide novel and valuable knowledge? (FYI, I have argued that the FDA is overly safety conscious and requires too many trials but Angell breezily and nastily dismisses this argument). In point of fact, most new chemical entities die in clinical trial because what we thought would work in theory doesn’t work in practice. Moreover, the information generated in the clinical trials feeds back into basic research. Angell’s understanding of innovation is cramped and limited, she thinks it begins and ends with basic science in a university lab. Edison was right, however, when he said that genius is one percent inspiration and ninety-nine percent perspiration–both parts are required and there is no one-way line of causation, perspiration can lead to inspiration as well as vice-versa. Read Derek Lowe on the reality of the drug discovery process.
Angell infuses normative claims to the industrial organization of the pharmaceutical industry. Over the past two decades there has been an increase in the number of small biotechnology companies, often funded by venture capital. Most of the small biotechs are failures, they never produce a new molecular entity (NME). But a large number of small, diverse, entrepreneurial firms can explore a big space and individual failure has been good for the small-firm industry which collectively has increased its discovery of NMEs. The small biotechs, however, are not well placed to deal with the FDA and run large clinical trials–the same is also true of university labs. So the industry as a whole is evolving towards a network model in which the smaller firms explore a wide space of targets and those that hit gold partner with one of the larger firms to pursue development. Angell focuses in on one part of the system, the larger firms and denounces them for not being innovative. Innovation, however, should be ascribed not to any single node but to the network, to the system as a whole.
Angell makes some good points about publication bias in clinical trials and the sometimes too-close-for-comfort connections between the FDA, pharmaceutical firms, and researchers. But in making these points she misses the truly important picture. Namely that new pharmaceuticals have driven increases in life expectancy but pharmaceutical productivity is declining as the costs of discovering and bringing a new drug to market are rising rapidly (on average ~1.8 billion per each NME to reach market). In my view, the network model pursued on a global scale and a more flexible and responsive FDA, both of which Angell castigates, are among the best prospects for an increase in pharmaceutical productivity and thus for increases in future life expectancy. Nevertheless, whatever the solutions are, we need to focus on the big problem of productivity if we are to translate scientific breakthroughs into improvements in human welfare.
Marijuana, Prescription Requirements and the Doctrine of Informed Consent
It used to be common for physicians to withhold information and even to misinform patients “for their own good.” Authorities as venerable as Hippocrates advocated that some information be concealed from patients. Today, most of us would find it outrageous if a physician misinformed his patient to perform surgery regardless of the reasons. Changes in public opinion and a series of court cases have overruled medical paternalism. In the 1914 case Schloendorff v. Society of New York Hospital, Benjamin Cardozo wrote:
Every human being of adult years and sound mind has a right to determine what shall be done with his own body; and a surgeon who performs an operation without his patient’s consent commits an assault for which he is liable in damages. This is true except in cases of emergency where the patient is unconscious and where it is necessary to operate before consent can be obtained.
It wasn’t until the late 1950s and in particular the 1957 case Salgo v. Leland Stanford, however, that the doctrine of informed consent (DIC) became well accepted in practice and in medical ethics. The doctrine of informed consent has both consequentialist and deontological justifications. On the consequentialist side, informed consent generally leads to better medical outcomes. Patients are also better able to understand their own overall interests than are others so the DIC leads to better overall welfare. On the deontological side, it is today widely accepted that all patients have a right to autonomy and that physicians cannot justly abrogate that right even in the patient’s own interest. It would be wrong to require someone to undergo surgery even if such surgery was necessary to save their life.
In an interesting paper in the Journal of Medical Ethics Jessica Flanigan argues that the same reasons which support the doctrine of informed consent also support a patient’s right to use pharmaceuticals without a doctor’s prescription. Based on Peltzman and Temin she argues that the consequential outcomes of prescription-only have not been good, at least not overwhelmingly so. Most importantly, patient autonomy applies just as much to the choice to medicate as to the refusal to medicate:
Citizens have rights of self-medication for the same reasons that they have rights of informed consent. The prescription drug system has bad consequences and it privileges regulators’ and physicians’ judgements about a patient’s health over the patient’s judgement about her overall well-being. Most troublingly, the prescription drug system violates patients’ rights.
Instead, I propose that prohibitive pharmaceutical policies, which are a kind of strong paternalism, be replaced by nonprohibitive policies that enable patients to obtain whatever medicines they choose while promoting informed consumer choices by making expert advice readily available.
Notice that the argument is not simply that prescription only requirements are against social welfare but rather that support for the doctrine of informed consent also supports the right to use pharmaceuticals without getting the consent of an official.
I am pleased that the voters in Colorado and Washington approved adults to use marijuana for any purpose. In the future people will be shocked that we arrested millions for marijuana use in the same way that we are shocked that doctors used to perform surgeries without a patient’s informed consent.
Should there be required labeling of GMOs?
Here is one on-the-mark take (of many):
…there have been more than 300 independent medical studies on the health and safety of genetically modified foods. The World Health Organization, the National Academy of Sciences, the American Medical Association and many others have reached the same determination that foods made using GM ingredients are safe, and in fact are substantially equivalent to conventional alternatives. As a result, the FDA does not require labels on foods with genetically modified ingredients because it acknowledges they may mislead consumers into thinking there could be adverse health effects, which has no basis in scientific evidence.
Or try the National Academy of Sciences from 2010:
Many U.S. farmers who grow genetically engineered (GE) crops are realizing substantial economic and environmental benefits — such as lower production costs, fewer pest problems, reduced use of pesticides, and better yields — compared with conventional crops, says a new report from the National Research Council.
Here is a good NYT summary Op-Ed on that report. There is not the scientific evidence for Mark Bittman’s recent evaluation that:
G.M.O.’s, to date, have neither become a panacea — far from it — nor created Frankenfoods, though by most estimates the evidence is far more damning than it is supportive.
It’s the tag there that is problematic. He doesn’t offer a citation, nor has he in past columns offered convincing material to back this evaluation (you can read here for a somewhat more detailed account from Bittman; it simply minimizes benefits and does not support “by most estimates the evidence is far more damning than it is supportive”). This earlier critique of Bittman is on the mark on virtually every point.
The standards of evidence being applied here are extremely weak. In that last Bittman link he wrote that:
…The surge in suicides among Indian farmers has been attributed by some, at least in part, to G.E. crops…
The link is to a sensationalistic Daily Mail (tabloid) story, yet that gets translated into “has been attributed by some.” In that story, the suicides were caused by indebtedness and supposedly the debts were in part caused by a desire by farmers to buy GMO crops. In comparable terms one could write that anything one spends money on could cause suicide through the medium of indebtedness.
By the way, the Wikipedia treatment gives some more detailed citations suggesting that GMO crops are not a significant cause of farmer suicides in India. The most careful study of the matter reports this:
We first show that there is no evidence in available data of a “resurgence” of farmer suicides in India in the last five years. Second, we find that Bt cotton technology has been very effective overall in India. However, the context in which Bt cotton was introduced has generated disappointing results in some particular districts and seasons. Third, our analysis clearly shows that Bt cotton is neither a necessary nor a sufficient condition for the occurrence of farmer suicides. In contrast, many other factors have likely played a prominent role.
I would in fact be more supportive of the GMO labeling idea if renowned food writers such as Bittman, and many others including left-wing economists, would come out and boldly proclaim the science about GMOs to their readers. Too often the tendency is to use a “I’ll try not to say anything literally incorrect, while insinuating there are big problems” method of scoring points against big agriculture. (Another common trope is to switch the discussion to “distribution” and to suggest, either explicitly or implicitly, that a net benefit technology such as GMOs is somehow unnecessary or undesirable; dare I utter the words “mood affiliation“?) GMO labeling is the one issue which has gained legal traction, so critics of “Big Ag” just can’t bring themselves to give it up.
Bittman’s whole column is about GMOs, but he gets at the important point only in his final sentence:
[With better information] We’d be able to make saner choices, and those choices would greatly affect Big Food’s ability to freely use genetically manipulated materials, an almost unlimited assortment of drugs and inhumane and environmentally destructive animal-production methods.
Overuse of antibiotics and animal treatment (both cruelty and environmental issues) — now those are two very real problems, backed by overwhelming scientific evidence. The fact that the California referendum is instead about GMOs — which have overwhelming scientific evidence for net benefit and minimal risks — is the real scandal.
It’s time that our most renowned food writers woke up to that difference. In the meantime, they are doing both us and themselves a deep disservice.
Rand Paul Wants to Bring European Medicine to the United States
From a Rand Paul press release:
Today the U.S. Senate voted to pass the Food and Drug Administration Safety and Innovation Act (S.3187), which included language inserted by Sen. Rand Paul. This language would force the FDA to accept data from clinical investigations conducted outside the United States, including the European Union, to speed the process of getting life-saving drugs on the market by the FDA.
“Innovation in clinical drug trials should not be confined to the data received from trials in the United States. Findings from countries that incorporate the same rigorous requirements as we do when developing life-saving drugs and devices should be accepted by the FDA as well,” Sen. Paul said.
I agree but I would go further: Any drug or medical device introduced into say the EU, Japan, Canada or Australia ought to be automatically approved in the United States within 90 days. Such a procedure would reduce delay, eliminate needless duplication and cut costs.
Think about it this way: Europeans don’t regard the FDA as the best or final arbiter of safety and efficacy so why should we?
See FDAReview.org, especially the section on reform options, for more.
Assorted links
1. On Posner and Weyl, John Cochrane is essentially correct.
2. Peter Thiel lecture notes on attracting venture capital.
3. Who complains the most about political polarization”: the polarized.
Assorted links
1. World’s first commercial 3-D chocolate printer, story here, beware noisy video at that link.
2. Cardboard arcade made by a nine-year-old boy, hat tip to Karina and Chad.
3. Tightening antibiotic use for livestock; let’s hope it works, a partial but not complete Coasian trade says it won’t, in a pinch farmers will buy vets. More here.
Assorted links
1. Blog on Tajik anecdotes and photos.
2. Acemoglu and Robinson on why Haiti is so poor.
3. Economics and evolutionary biology reading list, and Singapore whiskey.
4. How one man beat the casinos?
5. Is the King’s Gambit finally busted by computers? Fantastic story, recommended.
Charles Duhigg’s The Power of Habit
The skills necessary to ride a bike are multifaceted, complex and not at all obvious or even easily explicable to the conscious mind. Once you learn, however, you never forget–that is the power of habit. Without the power of habit, we would be lost. Once a routine is programmed into system one (to use Kahneman’s terminology) we can accomplish great skills with astonishing ease. Our conscious mind, our system two, is not nearly fast enough or accurate enough to handle even what seems like a relatively simple task such as hitting a golf ball–which is why sports stars must learn to turn off system two, to practice “the art of not thinking,” in order to succeed.
Habits, however, can easily lead one into error. In the picture at right, which yellow line is longer? System one tells us that the l
ine at the top is longer even though we all know that the lines are the same size. Measure once, measure twice, measure again and again and still the one at top looks longer at first glance. Now consider that this task is simple and system two knows with great certainty and conviction that the lines are the same and yet even so, it takes effort to overcome system one. Is it any wonder that we have much greater difficulty overcoming system one when the task is more complicated and system two less certain?
You never forget how to ride a bike. You also never forget how to eat, drink, or gamble–that is, you never forget the cues and rewards that boot up your behavioral routine, the habit loop. The habit loop is great when we need to reverse out of the driveway in the morning; cue the routine and let the zombie-within take over–we don’t even have to think about it–and we are out of the driveway in a flash. It’s not so 
great when we don’t want to eat the cookie on the counter–the cookie is seen, the routine is cued and the zombie-within gobbles it up–we don’t even have to think about it–oh sure, sometimes system two protests but heh what’s one cookie? And who is to say, maybe the line at the top is longer, it sure looks that way. Yum.
System two is at a distinct disadvantage and never more so when system one is backed by billions of dollars in advertising and research designed to encourage system one and armor it against the competition, skeptical system two. Yes, a company can make money selling rope to system two, but system one is the big spender.
Habits can never truly be broken but if one can recognize the cues and substitute different rewards to produce new routines, bad habits can be replaced with other, hopefully better habits. It’s habits all the way down but we have some choice about which habits bear the ego.
Charles Duhigg’s The Power of Habit, about which I am riffing off here, is all about habits and how they play out in the lives of people, organizations and cultures. I most enjoyed the opening and closing sections on the psychology of habits which can be read as a kind of user’s manual for managing your system one. The Power of Habit, following the Gladwellian style, also includes sections on the habits of corporations and groups (hello lucrative speaking gigs) some of these lost the main theme for me but the stories about Alcoa, Starbucks and the Civil Rights movement were still very good.
Duhigg is an excellent writer (he is the co-author of the recent investigative article on Apple, manufacturing and China that received so much attention) It will also not have escaped the reader’s attention that if a book about habits isn’t a great read then the author doesn’t know his material. Duhigg knows his material. The Power of Habit was hard to put down.
The Innovation Nation versus the Warfare-Welfare State
We like to think of ourselves as an innovation nation but our government is a warfare-welfare state. To build an economy for the 21st century we need to increase the rate of innovation and to do that we need to put innovation at the center of our national vision. Innovation, however, is not a priority of our massive federal government.
Nearly two-thirds of the U.S. federal budget, $2.2 trillion annually, is spent on just the four biggest warfare and welfare programs, Medicaid, Medicare, Defense and Social Security. In contrast the National Institutes of Health, which funds medical research, spends $31 billion annually, and the National Science Foundation spends just $7 billion.
That’s me writing at The Atlantic drawing on Launching the Innovation Renaissance. Here is one more bit:
Our ancestors were bold and industrious–they built a significant portion of our energy and road infrastructure more than half a century ago. It would be almost impossible to build that system today. Could we build the Hoover Dam today? We have the technology but do we have the will? Unfortunately, we cannot rely on the infrastructure of our past to travel to our future. Airports, an electricity smart grid that doesn’t throw millions into the dark every few years, ubiquitous Wi-Fi — these are among the important infrastructures of the 21st century, and they are caught in the regulatory thicket.
Putting innovation at the center of the national vision is not simply about spending more, it’s about how we approach all problems. Read the whole thing for more discussion of regulation and other issues.
All hail Mike Mandel!
In June, I wrote How the FDA Impedes Innovation citing Mike Mandel’s excellent paper on Melafind, an innovative device for identifying melanomas that the FDA had deemed “not approvable.” Well just last week, the FDA backed down and approved Melafind for board-certified dermatologists who undergo a specialized training course. Importantly, that decision keeps the company in business and prepares a path for evolutionary improvements.
I believe that the FDA would not have reversed its decision without Mandel’s paper and the extensive media that covered this issue. All hail Mike Mandel!
Here is another piece of good news on an item recently covered by MR.
In September, I wrote Crowd Investing versus the SEC, discussing how expensive SEC regulations made it uneconomic for small firms to solicit small investments from large groups of investors. Last week the House passed the Entrepreneur Access to Capital Act, which lets businesses use crowd investing to sell unregistered securities as long as the total amount raised is $2 million or less and no individual investment exceeds $10,000 or 10 percent of the investor’s annual income. Another bill, The Small Company Capital Formation Act lets companies seeking less than $50 million in capital (previously just $5 million), proceed without going through the lengthy and costly SEC registration process.
Neither bill has passed the Senate but both passed the House overwhelmingly and President Obama endorsed both bills, saying they would reduce “the red tape that prevents many rapidly growing startup companies from raising much-needed capital.” Keep your fingers crossed.
Hat tip: PM.
Addendum: Holman Jenkins also deserves a special shout out on the FDA issue for covering this issue early and well in the WSJ.
Personalized Medicine
Patient X was rushed to the hospital for emergency surgery. As she entered the hospital she said to the anesthesiologist, “You may not want to use suxamethonium on me.”
“Have you had a previous reaction?” inquired the anesthesiologist.
“No.”
“Ah, a family member must have had a reaction.”
“No.”
“Why then are you concerned about this drug?”
“I’ve had a good portion of my genome sequenced,” the patient replied, “and I found that I have a genetic variation in the enzyme that breaks down suxamethonium and am part of the 5% of patients who respond unusually to this drug. I thought you should be aware of this information.”
The flabbergasted anesthesiologist wondered how long it would be before more of her patients came prepared with their own genetic code.
I made up the details of the conversation above, but otherwise the story is true. The patient was a customer of 23andme, a service that for around $200 will give you information on about half a million sites on your genome, how you differ from other people at those sites, and which of your variations are associated with various diseases, behaviors and capabilities.
The costs of sequencing are falling so rapidly it will soon make sense for everyone to carry their entire genetic code with them on a USB drive (23andme only identifies part of the code). In 2001 it cost Craig Venter $100,000,000 to sequence the first human genome (his own.) Today, it costs just $16,000; in a few years, it will cost less than $1,000–a 100,000-factor decrease in costs in less than two decades!
That’s me from a piece called The FDA and Personalized Medicine written to help launch a new blog from the Manhattan Institute, Medical Progress Today. I go on to argue that if we are to take advantage of the new possibilities for personalization “we must move the FDA away from pre-market gatekeeping and towards post-market surveillance and information provision.”
David Henderson, Rita Numerof and Paul Howard all comment.
Markets in everything, Hitler-themed beer edition
For German and Austrian tourists, it would seem, sold from northern Italy. It is also reported that Germans and Austrians are the people who complain the most about the product. Here is a photo. Here is a Google translate on the core article.
My apologies if this is not real, but as far as I can tell it seems to check out.
For the pointer I thank Daniel B.
Medicare Cost Control?
Long-time readers will know that I am skeptical of the FDA. Let’s ignore that for the purpose of this post. Now consider the following two quotes.
The FDA recommended unanimously that Avastin no longer be used to treat breast cancer, saying that the risks of the drug far outweighed any benefits.
…”Even though we have anecdotal information, we don’t have evidence that it prolongs survival or improves quality of life,” said Natalie Compagni-Portis, a patient representative and voting member of the FDA panel. In a series of four questions, the six-member panel voted across the board that the clinical trials conducted by Genentech did not provide evidence that Avastin prolonged life for breast cancer patients, nor did it improve their quality of life. The panel also recommended that FDA commissioner Peggy Hamburg should not continue to allow the drug to be used for breast cancer patients.
A strong statement from the FDA. Now compare:
Medicare will continue to cover Avastin for breast cancer treatment even if U.S. Food and Drug Administration Commissioner Peggy Hamburg decides to withdraw Avastin for such use, according to Don McLeod, a spokesman for the Centers for Medicare and Medicaid.
“The FDA decision, when it comes, does not affect CMS,” McLeod told Reuters.
How does this make sense? Does CMS have information that runs counter to the FDA’s information? If so, let’s hear it. Or is this just a turf war? What does this say about the prospects for cost control of Medicare?
Not From the Onion
The headline says it all:
House keeps farm subsidies, cuts food aid
Here are some of the other provisions which seem designed just to be ridiculed by Jon Stewart:
Directs the Agriculture Department to rewrite rules it issued in January meant to make school meals healthier. Republicans say the new rules, the first major overhaul of school lunches in 15 years, are too costly.
Forces USDA to report to Congress every time officials travel to promote the department’s “Know Your Farmer, Know Your Food” program, which supports locally grown food, and discourages the department from giving research grants to support local food systems. Large agribusiness has been critical of the department’s focus on these smaller food producers.
Prevents USDA from moving forward with new rules that would make it easier for smaller farmers and ranchers to sue large livestock companies on antitrust grounds. The proposed rules are meant to address the growing concentration of corporate power in agriculture.
Delays for more than a year new rules for reporting trades in derivatives, the complex financial instruments blamed for helping precipitate the 2008 financial crisis. A Republican amendment adopted Thursday would require the Commodity Futures Trading Commission, which funded in the bill, to first have other rules in place to facilitate its collection of derivatives market data.
Prevents the FDA from approving genetically modified salmon for human consumption, a decision set for later this year.
Questions the scope of Obama administration initiatives to put calories on menus and limit the marketing of unhealthy foods to children.
Don’t get me wrong, I’d probably do away with a number of these rules as well. But anyone who argues against making school meals healthier because it’s too expensive at the same time as they vote for keeping billions of dollars in farm subsidies is not concerned about expenses. What unites the bill is not ideology but protection of agribusiness.
Perhaps the most outrageous provision was one the good guys won:
Critics of farm subsidies did score one victory: The House voted to block a $147 million annual payment to Brazil’s cotton industry. The United States agreed to make that payment last year after Brazil’s industry complained to the World Trade Organization that Washington unfairly was subsidizing U.S. cotton farmers. The United States lost the WTO case and agreed to make the payments to Brazil as a settlement.
So not only have we been subsidizing cotton farmers but we have been paying Brazil to allow us to keep subsidizing cotton farmers. Incredible. I wonder whether this provision will make it into the final bill.
Drug Shortages
WP: Doctors, hospitals and federal regulators are struggling to cope with an unprecedented surge in drug shortages in the United States that is endangering cancer patients, heart attack victims, accident survivors and a host of other ill people.
Currently there are about 246 drugs that are in short supply, a record high. These shortages are not just a result of accident, error or unusual circumstance, the number of drugs in short supply has risen steadily since 2006. The shortages arise from a combination of systematic factors, among them the policies of the FDA. The FDA has inadvertently caused drugs long-used in the United States to be withdrawn from the market and its “Good Manufacturing Practice” rules have gummed up the drug production process and raised costs.
Here, for example, is an analysis from the summary report on drug shortages by the American Society of Health-System Pharmacists (ASHP), the American Society of Anesthesiologists (ASA), the American Society of Clinical Oncology (ASCO), and the Institute for Safe Medication Practices (ISMP).
Several drug shortages (e.g., concentrated morphine sulfate solution, levothyroxine injection) have been precipitated by actual or anticipated action by the FDA as part of the Unapproved Drugs Initiative, which is designed to increase enforcement against drugs that lack FDA approval to be marketed in the United States. (These drugs are commonly called pre-1938 drugs, referring to their availability prior to passage of the Food, Drug, and Cosmetic Act of that year.) Some participants noted that the cost and complexity of completing a New Drug Application (NDA) for those unapproved drugs is a disincentive for entering or maintaining a market presence. Other regulatory barriers include the time for FDA review of Abbreviated New Drug Applications (ANDA) and supplemental applications, which are required for changes to FDA-approved drug products (e.g., change in source for active pharmaceutical ingredients API, change in manufacturer). Manufacturers described this approval process as lengthy and unpredictable, which limits their ability to develop reliable production schedules.
and on GMP:
Manufacturing-related causes that contribute to drug shortages are multifactorial. Inability to fully comply with GMP, which results in production stoppages or recalls, was considered a major cause.
John Goodman at the Health Affairs Blog explains the details:
The Federal Food and Drug Administration (FDA) has been stepping up its quality enforcement efforts — levying fines and forcing manufacturers to retool their facilities both here and abroad. Not only has this more rigorous regulatory oversight slowed down production, the FDA’s “zero tolerance” regime is forcing manufacturers to abide by rules that are rigid, inflexible and unforgiving. For example, a drug manufacturer must get approval for how much of a drug it plans to produce, as well as the timeframe. If a shortage develops (because, say, the FDA shuts down a competitor’s plant), a drug manufacturer cannot increase its output of that drug without another round of approvals. Nor can it alter its timetable production (producing a shortage drug earlier than planned) without FDA approval.
Thus, it’s not any one thing that is causing the shortages but an accumulation of rules and regulations. The system plods along when all is normal, but when a novel situation develops the market can no longer adapt quickly and efficiently. As Michael Mandel puts it:
No single regulation or regulatory activity is going to deter innovation by itself, just like no single pebble is going to affect a stream. But if you throw in enough small pebbles, you can dam up the stream. Similarly, add enough rules, regulations, and requirements, and suddenly innovation begins to look a lot less attractive.
Add to all these pebbles the fact that various price controls have become more binding over time and thus have reduced the profits from being in the business at all and you have a recipe for deadly shortages.