Results for “fda”
465 found

Agricultural Extortion and Terrorism

by  Alex Tabarrok in

Single bottles of wine from La Romanée-Conti, the legendary vineyard of Burgundy, sell for upwards of $10,000. In 2010 the owner received a threat, the vineyard would be poisoned unless the owner paid one million euro. When the owner didn’t pay a map was delivered that identified several vines that had already been poisoned by drill and syringe. The French don’t want to talk about this and for good reason, agricultural extortion is very easy and they fear copycats.

I have thought about this issue on and off for many years beginning with the Chilean grape scare of 1989. In that scare an anonymous caller to the US Embassy in Chile announced that Chilean fruit had been injected with cyanide. The FDA found two grapes with evidence of cyanide poisoning. Exports of fruit from Chile were temporarily banned, millions of pounds of fruit were destroyed and the Chilean fruit industry lost millions of dollars.  Many people now think the call was a hoax and the FDA evidence mistaken but either way the point was demonstrated, it’s easy to create millions of dollars worth of damage.

A few other lesser known cases are even more concerning. In 1996, for example, the police were tipped off that liquid fat at a Wisconsin rendering plant had been contaminated doing some $250 million dollars worth of damage. The criminal probably would never have been caught had not more threatening letters and further contamination followed. Eventually a competitor was charged with the crime.

It would be easy to do billions of dollars worth of damage to crops and animals with little risk of being caught. As the Chilean case indicates, even a hoax can damage. Fortunately, criminals usually aren’t very smart. The vine poisoner mentioned earlier, for example, was caught trying to collect the money. A little bit of economics would have taught him that you can make lots of money from agricultural extortion without ever having to collect from the victim (and no, I am not saying how although it won’t be a mystery to most readers of this blog). Of course, a terrorist doesn’t even have to collect damages to succeed–just a bit of mad cow or corn rust and we are in trouble (and those aren’t even the biggest threats.)

I worry that this one of those dangers that is so threatening we are afraid to worry about it.

Food Safety and Culture

by  Alex Tabarrok in

Scientific American has an excerpt from Myhrvold, Young and Bilet’s magnum opus, Modernist Cuisine, in which they discusses the often arbitrary, subjective and culturally bound nature of “food safety” rules and practices.

In decades past, pork was intrinsically less safe than other meats because of muscle infiltration by Trichinella and surface contamination from fecal-borne pathogens like Salmonella and Clostridium perfringens . As a result, people learned to tolerate overcooked pork, and farms raised pigs with increasing amounts of fat—far more fat than is typical in the wild ancestors of pigs such as wild boar. The extra fat helped to keep the meat moist when it was overcooked.

Since then… producers have vastly reduced the risk of contamination through preventive practices on the farm and in meat-processing facilities. Eventually the FDA relaxed the cooking requirements for pork; they are now no different than those for other meats. The irony is that few people noticed—­culinary professionals and cookbook authors included….

After decades of consuming overcooked pork by necessity, the American public has little appetite for rare pork; it isn’t considered traditional. With a lack of cultural pressure or agitation for change by industry groups, the new standards are largely ignored, and many new publications leave the old cooking recommendations intact.

Clearly, cultural and political factors impinge on decisions about food safety. If you doubt that, note the contrast between the standards applied to pork and those applied to beef. Many people love rare steak or raw beef served as carpaccio or steak tartare, and in the United States alone, millions of people safely eat beef products, whether raw, rare, or well-done. Beef is part of the national culture, and any attempt to outlaw rare or raw steak in the United States would face an immense cultural and political backlash from both the consumers and the producers of beef.

…Cultural and political factors also explain why cheese made from raw milk is considered safe in France yet viewed with great skepticism in the United States. Traditional cheese-making techniques, used correctly and with proper quality controls, eliminate pathogens without the need for milk pasteurization. Millions of people safely consume raw milk cheese in France, and any call to ban such a fundamental part of French culture would meet with enormous resistance there….

Raw milk cheese aged less than 60 days cannot be imported into the United States and cannot legally cross U.S. state lines. Yet in 24 of the 50 states, it is perfectly legal to make, sell, and consume raw milk cheeses within the state. In most of Canada raw milk cheese is banned, but in the province of Quebec it is legal.

One point they don’t note is that there may be multiple equilibria–that is, it may be more dangerous to produce raw milk cheese in a country or region without a history of producing raw milk cheese than elsewhere. Still, this is no reason we shouldn’t be eating more horse.

Makena and the Orphan Drug Act

by  Alex Tabarrok in

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.

Advertising and pharmaceutical prices

by  Tyler Cowen in

The classic Chicago School result was that advertising for eyeglasses lowered prices, due to increased competition.  It doesn't seem the same is true for pharmaceuticals, as we see from Dhaval Dave and Henry Saffer:

Expenditures on prescription drugs are one of the fastest growing components of national health care spending, rising by almost three-fold between 1995 and 2007. Coinciding with this growth in prescription drug expenditures has been a rapid rise in direct-to-consumer advertising (DTCA), made feasible by the Food and Drug Administration’s (FDA) clarification and relaxation of the rules governing broadcast advertising in 1997 and 1999. This study investigates the separate effects of broadcast and non-broadcast DTCA on price and demand, utilizing an extended time series of monthly records for all advertised and non-advertised drugs in four major therapeutic classes spanning 1994-2005, a period which enveloped the shifts in FDA guidelines and the large expansions in DTCA. Controlling for promotion aimed at physicians, results from fixed effects models suggest that broadcast DTCA positively impacts own-sales and price, with an estimated elasticity of 0.10 and 0.04 respectively. Relative to broadcast DTCA, non-broadcast DTCA has a smaller impact on sales (elasticity of 0.05) and price (elasticity of 0.02). Simulations suggest that the expansion in broadcast DTCA may be responsible for about 19 percent of the overall growth in prescription drug expenditures over the sample period, with over two-thirds of this impact being driven by an increase in demand as a result of the DTCA expansion and the remainder due to higher prices.

The paper is here (NBER gate).  Here is a simpler paper on advertising and prescription drug expenditures.  Here is a related paper on the advertising topic.  Here is another paper which generates higher prices from advertising.  Pharmaceuticals could be different from eyeglasses for a few reasons, one being weaker contestability in the market, due to patent protection, another being that consumers process information about health care differently.  This paper suggests that co-payments don't much help reduce inappropriate demands for pharmaceuticals.   

I thank Eric John Barker for the initial pointer.

Should the SEC self-finance?

by  Tyler Cowen in

I haven't seen this issue receive much attention on the usual blogs (Yves Smith is one exception).  Here is one argument for self-finance:

The Obama administration has requested long overdue increases in both budget and staff for the S.E.C., and has plans to add as many as 374 employees. Those increases are vital, but because they’re dependent on Congress, there is no guarantee that they will be sustained.

Instead, the commission should finance itself – much as the Federal Reserve and the Federal Deposit Insurance Corporation do today through fees on banks. These two pivotal financial regulatory agencies thus have the flexibility to adjust their own staff.

And it appears easy:

Such a self-financing system would not mean higher fees; the commission collects far more in fees from corporate filings and stock market trading than it gets from Congress. But those fees go back into the federal coffers. In 2007, the S.E.C. brought in $1.5 billion, almost twice its 2007 budget.

This seems like a short-run improvement, but the idea nonetheless makes me a bit nervous.  What will it look like in practice, ten or fifteen years from now?  Was reliance on fees in every way beneficial for the FDA?  Admittedly, self-finance is one pathway to higher levels of finance, but the two issues are conceptually distinct and we might prefer to implement the appropriate level of finance directly through Congress.  I fear that in the longer run self-finance means that the SEC never wishes to see the financial sector shrink.  (Of course maybe it's not going to shrink anyway.)  A related question is what kind of internal controls the SEC would need to maintain its own fiscal discipline and prevent overspending, backed by an excess raising of funds and fees.  So whether self-finance is a good idea probably depends on what you are comparing it to.  A final question, and not a small one, is whether you think the SEC should be more independent from Congress.

Here is the SEC's own case for self-finance.  Here is a 2002 GAO study of the idea, very useful and it also discusses other cases of self-finance among regulatory authorities.

I don't have any strong conclusion here other than "maybe."  

The economics of placebos for self-remitting diseases

by  Tyler Cowen in

Daniel Carpenter, who just wrote the very impressive FDA book, has an interesting paper on his home page:

I develop a simple stochastic model of inference and therapeutic utilization in the presence of placebo effects, when the underlying medical condition may be self-remitting. In the model, expectations generate a “felt” health state which can mimic the medically cured health state even when the treatment in question has no real curing power. This effect may be augmented by self-limitation of the medical condition for which the treatment is utilized. A human agent then applies Bayes’ rule to the felt history as if it were generated pharmacologically. A more sophisticated agent knows of placebo effects but does not know the precise extent to which they contribute to curing. I describe the bias that attends inference and the under – or overutilization of therapies under such a model. A central result of the model is that human placebo learning is generally subject to greater bias in estimating treatment efficacy when diseases are self-limiting. Human agents may commit several types of decision errors under placebo learning. They may continually choose a more costly (expensive, hazardous) treatment when a less costly one would work as well, or they may continually use inferior treatments for life-threatening illnesses. When diseases are self-limiting, both these types of error are more likely when the human agent has high initial beliefs about the treatment. Possible applications of the model include the patent medicine industry, the robustness of markets for herbal and nutritional supplements, and the contemporary stability of counterfeit drug operations.

Of course this applies a lot more broadly than to medicine.  It helps explain why people overuse and underuse "treatments" of many different kinds, including education.  Here is Dan Carpenter's page on fly fishing.

Why are Americans more risk averse about medicine than Europeans?

by  Alex Tabarrok in

The stereotype is that Americans are more risk-loving and entrepreneurial than the less-rugged Europeans who instead seek shelter under the umbrella of the welfare state.  Yet when I talk about the FDA I point out that for many decades (from say the late 1960s to PDUFA in 1993 and perhaps again more recently) the FDA lagged behind its European counterparts in approving new drugs.  U.S. risk aversion in drug approvals is especially peculiar since the major scare which increased FDA powers and slowed down approvals was the thalidomide disaster but thalidomide was approved in Europe not in the U.S.  Nevertheless, we were the ones who got scared.

More recently, Scott Gotlieb argues that the Europeans have pushed H1N1 vaccine production forward using adjuvants and novel production techniques while the US has chosen less risky (some might say less entrepreneurial) older approaches.

The tort system is sometimes blamed for excess U.S. risk aversion but in both these cases it's mostly the U.S. government which is more risk averse than its European counterpart.  Moreover, the US government is more risk averse over medical matters and not say about sending troops abroad or about providing a safety net for other risks.

I think this is a puzzle.  Why has the U.S. government been more risk averse with regard to medicine than European governments but less risk averse in other areas?

Facts about airline water

by  Tyler Cowen in

Fact 1:

In the United States, drinking water safety on airlines is jointly
regulated by the EPA, Food and Drug Administration (FDA), and Federal
Aviation Administration (FAA). EPA regulates the public water systems
that supply water to the airports and the drinking water once it is
onboard the aircraft. FDA has jurisdiction over culinary water (e.g.,
ice) and the points where aircraft obtain water (e.g., pipes or
tankers) at the airport. In addition, air carriers must have
FAA-accepted operation and maintenance programs for all aircraft, this
includes the potable water system. (EPA)

Fact 2:

…the news carried stories that the US EPA had determined that 15% of
water on a sample of 327 aircraft flunked the total coliform standards
and inspections showed that all aircraft were out of compliance with
the national drinking water standards.

Rest assured, the EPA has crafted new rules to address the problem.

Debbie Hirst, not Stephen Hawking

by  Tyler Cowen in

Didn't I cover this story once before?

One such case was Debbie Hirst’s. Her breast cancer had metastasized, and the health service would not provide her with Avastin,
a drug that is widely used in the United States and Europe to keep such
cancers at bay. So, with her oncologist’s support, she decided last
year to try to pay the $120,000 cost herself, while continuing with the
rest of her publicly financed treatment.

By December, she had
raised $20,000 and was preparing to sell her house to raise more. But
then the government, which had tacitly allowed such arrangements
before, put its foot down. Mrs. Hirst heard the news from her doctor.

“He
looked at me and said: ‘I’m so sorry, Debbie. I’ve had my wrists
slapped from the people upstairs, and I can no longer offer you that
service,’ ” Mrs. Hirst said in an interview.

“I said, ‘Where
does that leave me?’ He said, ‘If you pay for Avastin, you’ll have to
pay for everything’ ” – in other words, for all her cancer treatment,
far more than she could afford.

Officials said that allowing
Mrs. Hirst and others like her to pay for extra drugs to supplement
government care would violate the philosophy of the health service by
giving richer patients an unfair advantage over poorer ones.

I'm not saying Obama wants to do this, I am saying there are some unacceptable features of Britain's NHS (update: the policy was reversed in 2008).  The point is not to compare those features to the problems with the U.S. system.  The point is that everyone is gainsaying the Hawking example without recognizing there have been other people in similar predicaments.  How could such a policy ever have been adopted in the first place?  This is just a reminder, it's not a prompt for you to repeat the familiar story that the U.S. pays more without getting better health care outcomes.

If you want to do a broader comparison, here is more on the NHS and drugs.  Did you know that Rilutek, the main drug (its efficacy is debated) for treating ALS (Lou Gehrig's disease), has been available in the UK since 1997.  It was approved by the FDA in 1995 though covered by Medicare only after the prescription drug bill.  As of 2004, single-payer system New Zealand wasn't offering the drug at all.  If you're wondering, single-payer Canada had approval of the drug in 2000, but with partial early usage in 1995.

By the way, Medicare does cover ALS, even if you're not 65, but various important forms of home adaptation and assistance are left uncovered, as is often the case with Medicare.  It seems the U.S. is the best place for drugs but quite possibly not the best coverage overall for ALS.  If you're looking for one good health care reform, consider dropping the reimbursement rate penalty for home care.

My knowledge of ALS-related issues is not extensive, but aren't such comparisons more interesting than reading another blog post bashing idiots? The more you bash the idiots, the more you are playing into the hands of…the idiots.

Barack Obama on Sweden

by  Tyler Cowen in

Read this post; here is Obama speaking:

Sweden, on the other hand, had a problem like this. They took over the
banks, nationalized them, got rid of the bad assets, resold the banks
and, a couple years later, they were going again. So you'd think
looking at it, Sweden looks like a good model. Here's the problem;
Sweden had like five banks. [LAUGHS] We've got thousands of banks. You
know, the scale of the U.S. economy and the capital markets are so vast
and the problems in terms of managing and overseeing anything of that
scale, I think, would — our assessment was that it wouldn't make
sense. And we also have different traditions in this country.

Here is a short movie by Ingmar Bergman.  Here is a Carl Milles sculpture.  Here is some cabbage with your pizza.

Econ Journal Watch

by  Tyler Cowen in

Table of Contents with links to articles (pdf)

The Worst Idea I have Heard Today

by  Alex Tabarrok in

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.