Results for “fda” 461 found
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.
The Vioxx Hex
It’s a real thrill when the editorial page of the Washington Post starts to sound like, well, me (e.g. here and here).
Politicians and regulators should be asking themselves whether a system of
massive cash awards to people who may or may not have been adversely affected by
Vioxx is a logical, fair or efficient way to run a drug regulatory system. They
should also be asking whether juries that scorn medical evidence are the right
judges of what information should or should not have been on a prescription
label. After all, Vioxx was produced and sold legally. The drug was approved by
the Food and Drug Administration, and its label did warn of coronary side
effects. It is possible, even probable, that Merck was negligent in its decision
to ignore early warnings of the cardiovascular risks of Vioxx. But the company
has already paid a price for that negligence, in the losses it has suffered
after abruptly taking Vioxx off the market. Fair compensation for the injured
needn’t entail disproportionate financial punishment as well.In the long term, using the courts to "send a message" to Merck isn’t going
to help consumers. If the result is an even more cautious FDA approval system
and a more cautious pharmaceutical industry, that will keep innovative drugs off
the market for much longer. More people will die waiting for new treatments. The
cost of producing new drugs will rise dramatically. Already, there are whole
areas of medicine — women’s health during pregnancy, for example — that are
made so risky by liability issues that companies may stop doing research in
them.The first principle of reforming this system should be that a company that
follows the FDA’s rather extensive guidelines should be protected from punitive,
if not compensatory, damages.
Dollar decline: optimism vs. pessimism?
Read Brad DeLong (the best econ post this week; for better or worse, no one gets impeached). My view is simple: I don’t much trust any very specific macro model. So I look at current market prices and I ask two questions. First, does the country in question have relatively sound fundamentals, relative to other parts of the world? Despite the erosion in the quality of governance in the U.S., I still answer yes. Second, I try to develop a crude but intuitive "theory" of what the market hasn’t taken into account. I don’t have a strong guess here but the Setser-Krugman pessimistic view seems well enough known that it doesn’t fit this bill. That gives me a second reason not to be a pessimist.
More specifically, I am not what Brad calls an "international finance economist":
International finance economists, by contrast, look at the asset markets. A 40% decline in the dollar over four years is a decline at the rate of 10% per year. Once financial markets convince themselves that such a decline is coming and that they need to be compensated for it, that ought to drive a 400 basis point wedge between U.S. and foreign long-bond expected returns.
I would be surprised if a dollar decline led to such consistently high interest rates in anticipation. Uncovered interest parity is an unreliable relationship and often the relevant variables behave more like random walks, whether or not they should according to theory. Also read this Economist article on why interest rates may not skyrocket if the dollar dives; links to specific papers are at the bottom of the article.
Addendum: I don’t think I have had any influence on his specific subsequent views, but I am proud to have had Stephen Jen as an undergraduate in the first class I ever taught at UC Irvine.
No Pain Relief for Tort Sufferers
James Hamilton takes a look at one of the key studies on Vioxx and heart attacks. He is not greatly impressed.
I took a look at one of the studies on which the decision was
justified, written by Dr. David Graham and co-authors and published in Lancet
in February. This study looked at 8,143 Kaiser Permanente patients who
had suffered a heart attack and had also at some point taken a
nonsteroidal anti-inflammatory drug (NSAID), of which Vioxx (rofecoxib)
is one. Of these patients, 68 were taking rofecoxib while 4,658 were
receiving no medication at the time of their heart attack, a ratio of
(68/4658) = 1.46%. For comparison, the study looked at 31,496 other
patients who had also at some point taken an NSAID, matched for
characteristics like age and gender with the first group, but who
didn’t have a heart attack. The ratio of rofecoxib users to those with
no current medication was slightly lower (1.05%) in this second group,
which one might summarize as a (1.46/1.05) = 1.39-fold increase risk of
heart attack from taking rofecoxib compared to no NSAID. Is that
statistically significant, in other words, can you rule out that you’d
see a difference of that size just by chance? Yes, the study claimed,
but just barely.On the other hand, this was not a controlled experiment, in which
you give the rofecoxib randomly to some patients and not others in
order to see what happens. Rather, something about either these
patients or their doctors led some of them to be using rofecoxib and
others not. Dr. Graham and co-authors looked at a variety of indicators
that suggested that the rofecoxib patients already had slightly
elevated risk factors for coronary heart disease. Once they controlled
for these with a logistic regression, their study found an elevated
risk factor of heart attack for rofecoxib takers of 1.34, which was not
statistically significantly distinguishable from 1.0.The strongest evidence from this study was a claimed dose-effect
relation. Of these 68 rofecoxib-using heart-attack patients, 10 of them
were taking doses above 25 mg per day. Only 8 patients in the much
larger control group were taking so high a dose, implying an elevated
risk factor of 5 to 1 for high-dose patients. Again observable risk
factors could explain some of this, with the conditional logistic
regression analysis bringing the implied drug-induced risk down to 3 to
1. According to the study, this elevated risk factor was still
statistically significant, even though the inference is based on the
experience of just 10 patients.The obvious question here is whether in fact the authors were able
to observe all the relevant risk factors. The study openly acknowledged
that it did not, missing such important information as smoking and
family history of myocardial infarction.…[E]ven if
there actually is an elevated risk of the magnitude the studies suggest
but can’t prove, the question is whether I might want to accept a 1 in 4,000 risk of dying from a heart attack in order to get the only medication timt makes my pain bearable and a mobile life livable. And if I say no to the Vioxx, I may end up taking something that is less effective for my pain but has risks of its own.…. How did we arrive at a
system in which 12 random Texans are assigned responsibility for
evaluating the scientific merits of statistical evidence of this type,
weighing the costs and benefits, and potentially sending a productive blue-chip American company into bankruptcy protection?
See also my op-ed Bringing the Consumer Revolution to the FDA.
Rx for OTC
I went to the doctor yesterday. I told him that to avoid altitude sickness in Peru I wanted a prescription for Diamox. He used to be surprised when I self-diagnosed but he knows me now. He wrote the prescription and I was done in less than four minutes. I like my doctor but this visit took an hour of my time and probably cost the insurance company at least $100, my deductible was $25. No big deal for me but a non-trivial expense for someone without insurance.
Why aren’t more pharmaceuticals available over the counter? In other words, why must we pay the priestly caste known as physicians for the right to treat ourselves? "Safety," we are told (second only to "for the children" as an excuse for giving up liberty). But, as Sam Peltzman pointed out long ago, safety runs both ways. Not getting a pharmaceutical because it’s too expensive and time consuming to go through a doctor has adverse safety consequences and there is no evidence that the costs of potential mistreatment outweigh the costs of undertreatment. (In anycase, politics not safety is often the reason for restrictions on OTC drugs e.g. the morning after pill.)
In fact, there are many countries where prescriptions are not required for legal medicines and they appear to do just fine. Writing in Reason, Kerry Howley points out (online version, the print version is longer and I am quoted) that in this respect if no other Myanmar is a bastion of rationality and liberty compared to the United States.
Last year, while living in the Southeast Asian nation of Myanmar,
my phones were tapped, my journals were read, my work was censored, and
for the first time in my life, I was given the authority to care for my
own body.There is no prescription drug system in Myanmar, but there are plenty of illnesses waiting to befall an effete Western immune system. My expatriate colleagues and I were free to treat our ailments as we saw fit.
We staved off food poisoning and bouts of malaria with frequent trips to
the local pharmacy, consulting doctors when necessary, but ultimately
responsible for our own medical decisions. We formed doctor-patient
relationships that were partnerships rather than paternalistic
hierarchies, and each of us lived to tell the story.Coming back to the States in the midst of hand-wringing about direct-to-consumer advertising, the restriction of life-saving cholesterol drugs, a wrenching process to make the morning-after-pill readily available, and now a push to put Sudafed behind the counter, it’s increasingly hard to understand why Americans cede crucial health decisions to the bureaucratic dithering of the FDA. In an age of empowerment through information, it is mind-boggling that patients are still willing to be silent spectators while their doctors call the shots.
The War on Drugs
Becker and Posner both argue against the War on Drugs. Becker writes:
After totaling all spending, a study by Kevin Murphy, Steve Cicala, and
myself estimates that the war on drugs is costing the US one way or
another well over $100 billion per year. These estimates do not include
important intangible costs, such as the destructive effects on many
inner city neighborhoods, the use of the American military to fight
drug lords and farmers in Colombia and other nations, or the corrupting
influence of drugs on many governments.
The best economics piece on this issue is Drug War Crimes a short book by Jeffrey Miron published by Independent Institute where I am the director of research. Miron demonstrates that the war on drugs greatly increases the violent crime rate (just as it rose during alcohol prohibition) and that the policy is not very effective in reducing consumption.
One interesting reason why the drug war reduces consumption less than people imagine is that prohibition reduces some costs. Drug sellers, for example, do not pay social security taxes for their employees, they do not follow minimum wage laws and they do not obey costly FDA regulations. On net prices are still pushed up by the threat of prosecution but the lack of taxes and regulations is a countervailing factor.