Results for “fda”
461 found

Against Historic Preservation

Larry Summers asks:

How…could our society have regressed to the point where a bridge that could be built in less than a year one century ago takes five times as long to repair today?

As I wrote in Launching:

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 the system today. Unfortunately, we cannot rely on the infrastructure of our past to travel to our future.

Summers alludes to the regulatory thicket as a cause of the infrastructure slowdown but doesn’t have much to say about fixing the problem. Here’s a place to begin. Repeal all historic preservation laws. It’s one thing to require safety permits but no construction project should require a historic preservation permit. Here are three reasons:

First, it’s often the case that buildings of little historical worth are preserved by rules and regulations that are used as a pretext to slow competitors, maintain monopoly rents, and keep neighborhoods in a kind of aesthetic stasis that benefits a small number of people at the expense of many others.

Second, a confident nation builds so that future people may look back and marvel at their ancestor’s ingenuity and aesthetic vision. A nation in decline looks to the past in a vain attempt to “preserve” what was once great. Preservation is what you do to dead butterflies.

Ironically, if today’s rules for historical preservation had been in place in the past the buildings that some now want to preserve would never have been built at all. The opportunity cost of preservation is future greatness.

Third, repealing historic preservation laws does not mean ending historic preservation. There is a very simple way that truly great buildings can be preserved–they can be bought or their preservation rights paid for. The problem with historic preservation laws is not the goal but the methods. Historic preservation laws attempt to foist the cost of preservation on those who want to build (very much including builders of infrastructure such as the government). Attempting to foist costs on others, however, almost inevitably leads to a system full of lawyers, lobbying and rent seeking–and that leads to high transaction costs and delay. Richard Epstein advocated a compensation system for takings because takings violate ethics and constitutional law. But perhaps an even bigger virtue of a compensation system is that it’s quick. A building worth preserving is worth paying to preserve. A compensation system unites builders and those who want to preserve and thus allows for quick decisions about what will be preserved and what will not.

Some people will object that repealing historic preservation laws will lead to some lovely buildings being destroyed. Of course, it will. There is no point pretending otherwise. It will also lead to some lovely buildings being created. More generally, however, the logic of regulatory thickets tells us that we cannot have everything. As I argued in Launching:

There are good regulations and bad regulations and lots of debate over which is which. From an innovation perspective, however, this debate misses a key point. Let’s assume that all regulations are good. The problem is that even if each regulation is good, the net effect of all the regulations combined may be bad. A single pebble in a big stream doesn’t do much, but throw enough pebbles and the stream of innovation is dammed.

It’s time to blow the dam. Creative destruction requires some destruction.

Might CRISPR prove to be regulatory arbitrage?

Last week, the U.S. Department of Agriculture (USDA) confirmed that it will not regulate the cultivation and sale of a white-button mushroom created using CRISPR

In this case, no foreign organism’s genetic material was introduced into the food, and that makes all the difference. If Yang had tackled mushroom browning by adding bits of genetic code from another organism, it would have been subject to USDA scrutiny as other non-browning produce has been. Until recently, genetic modification required the insertion of foreign viruses or bacteria, but CRISPR is more advanced than that. Because of that loophole, it’s not under the USDA’s jurisdiction. The EPA only regulates GMOs designed for pest control, and the FDA considers all GMOs to be safe. That leaves this non-browning mushroom cleared for take-off.

Scientists are excited. Anti-GMO advocates are disturbed. The public will probably continue to be more confused than anything else.

Here is the Rachel Feltman piece.  For the pointer I thank Cleveland Cavaliers fan Philip Wallach.

Why Buses and Other Things Should Be More Dangerous

Jeff Kaufman writes:

Buses are much safer than cars, by about a factor of 67 [1] but they’re not very popular. If you look at situations where people who can afford private transit take mass transit instead, speed is the main factor (ex: airplanes, subways). So we should look at ways to make buses faster so more people will ride them, even if this means making them somewhat more dangerous.

Here are some ideas, roughly in order from “we should definitely do this” to “this is crazy, but it would probably still reduce deaths overall when you take into account that more people would ride the bus”:

  • Don’t require buses to stop and open their doors at railroad crossings.
  • Allow the driver to start while someone is still at the front paying.
  • Allow buses to drive 25mph on the shoulder of the highway in traffic jams where the main lanes are averaging below 10mph.
  • Higher speed limits for buses. Lets say 15mph over.
  • Leave (city) bus doors open, allow people to get on and off any time at their own risk.

Other ideas?

Excellent recognition of tradeoffs. Pharmaceuticals should also be more dangerous.

Hat tip: Slate Star Codex.

Occupational Licensing Reduces Mobility

Brookings has a good memo on four ways occupational licensing reduces both income and geographic mobility. Here is point 1:

Since state licensing laws vary widely, a license earned in one state may not be honored in another. In South Carolina, only 12 percent of the workforce is licensed, versus 33 percent in Iowa. In Iowa, it takes 16 months of education to become a cosmetologist, but just half that long in New York. This licensing patchwork might explain why those working in licensed professions are much less likely to move, especially across state lines:

mobility-and-occ-licThe graph, is from the excellent White House report on occupational licensing. The first blue column says that workers in heavily licensed occupations are nearly 15% less likely to move between states than those in less licensed occupations–this is true even after controlling for a number of other variables that might differ across occupations and also influence mobility such as citizenship, sex, number of children, and education.

The orange column provides another test. An occupational license makes it difficult to move across states but not within a state. If workers in licensed occupations had lower rates of mobility for some other reason than the license then we would expect that workers in heavily licensed occupations would also have lower rates of within state mobility. The orange bars show that workers in heavily licensed occupations do have slightly lower rates of within state mobility but not by nearly enough to explain the dramatically lower rates of between state mobility.

Lower rates of worker mobility mean that workers are misallocated across the states in a similar way that price controls or discrimination misallocate resources and reduce total wealth. Lower rates of workforce mobility also increase the persistence of unemployment.

To its credit, the Federal government is investing in efforts to make licenses more portable including encouraging “cross-State licensing reciprocity agreements to accept each other’s licenses.” Cross-state reciprocity agreements sound like an excellent idea.

The Good News on Generic Drugs

Who could resist the story of Martin Shkreli and Turing Pharmaceuticals?  Shkreli is like a villain straight from central casting; having made millions, perhaps fraudulently, as a hedge manager, he turned to pharmaceuticals where, as CEO of Turing, he bought up the marketing rights to Daraprim (pyrimethamine), a drug used by pregnant women and AIDS patients (natch), and jacked up the price from $13.50 a pill to $750 a pill. Not content with monopolizing pharmaceuticals, Shkreli also aimed to monopolize hip hop music. Shkreli on his own was a great story but add some big price increases for a handful of other generic drugs and Shrekli became an irresistible lead to a story about seemingly widespread increases in generic drug prices.

If we dig deeper, however, the big news about generic drugs is good news. Generic drug prices are falling. Three recent studies of generic drug prices all point in the same direction. Express Scripts, a large prescription drug manager, found that:

From January 2008 through December 2014, a market basket of the most commonly used generic medications decreased in price by 62.9%.

In an excellent overview the Department of Health and Human Services concluded that:

…drug acquisition costs fell for a majority of generic Medicaid prescriptions measured by both volume and total generic expenditures.

Finally the AARP studied the prices of generic drugs used by older Americans and found that:

Between January 2006 and December 2013, retail prices for 103 chronic-use generic drugs that have been on the market since the beginning of the study decreased cumulatively over 8 years by an average of 22.7 percent.

— The cumulative general inflation rate in the U.S. economy rose 18.4 percent during the same 8-year period.

Patented drugs are increasing in price so to evaluate the benefit of price decreases for generics it’s important to know that between 80 to 90 percent of all prescriptions in the United States are for generic drugs.

Tomorrow: The Good News on the FDA and ANDAs.

Senators Cruz and Lee Introduce Reciprocity Bill

Senators Ted Cruz (R-Texas) and Mike Lee (R-Utah) have just introduced a bill that would implement an idea that I have long championed, making drugs, devices and biologics that are approved in other developed countries also approved for sale in the United States. Highlights of the “Reciprocity Ensures Streamlined Use of Lifesaving Treatments Act (S. 2388), or the RESULT Act,” include:

  • Amending the Food, Drug and Cosmetic Act to allow for reciprocal approval of drugs, devices and biologics from foreign sponsors in certain trusted, developed countries including EU member countries, Israel, Australia, Canada and Japan.
  • Encouraging the FDA to expeditiously review life-saving drug and device applications, this legislation would provide the FDA with a 30-day window to approve or deny a sponsor’s application….
  • The HHS Secretary is instructed to approve a drug, device or biologic if the FDA confirms the product is:
    • Lawfully approved for sale in one of the listed countries;
    • Not a banned device by current FDA standards;
    • There is a public health or unmet medical need for the product.
  • If a promising application for a life-saving drug is declined Congress is granted the authority to disapprove of a denied application and override an FDA decision with a majority vote via a joint resolution.

In explaining why he introduced the bill Senator Cruz argued:

We continue to lose far too many of our loved ones to the “invisible graveyard,” as economist Alex Tabarrok has described: lives that could have been saved but for a bureaucratic barrier that rejects medical cures and innovation…The bill I am introducing takes the first step to reverse this trend. It provides for reciprocal drug approval, so that cures and medical devices that are already approved in other countries can more expeditiously come to the U.S.

A Dual-Track Drug Approval Process

In a post earlier this year I noted that Japan has significantly liberalized its approval process for regenerative medicine. Writing in Forbes, Bart Madden and Nobelist Vernon Smith outline a similar proposal for the United States.

Recently, Japanese legislation has implemented the core Free To Choose Medicine (FTCM) principles of allowing not-yet-approved drugs to be sold after safety and early efficacy has been demonstrated; in addition, observational data gathered for up to seven years from initial launch will be used to determine if formal drug approval is granted.

…FTCM legislation in the U.S. would create a dual track system (see figure below) that preserves the existing FDA clinical trial process while offering patients an alternative. Patients, advised by their doctors, would be able to contract with a drug developer to use not-yet-approved drugs after Phase I safety trials are successfully completed and one or more Phase II trials have demonstrated continued safety and initial efficacy. The resulting early access could make FTCM drugs available up to seven years before conventional FDA approval, which entails Phase III randomized control trials and a lengthy FDA review before the FDA makes an approval decision.

bartgraph

…The heart of the dual track system is the Tradeoff Evaluation Drug Database (TEDD) which would be available to the public through a government-supervised web portal. TEDD would contain all treatment results of FTCM drugs including patients’ health characteristics and relevant biomarkers, but no personal identification. This open access database would be a treasure-trove of information to aid drug developers in making better R&D decisions consistent with fast-paced learning and innovation.

…Today’s world of accelerating medical advancements is ushering in an age of personalized medicine in which patients’ unique genetic makeup and biomarkers will increasingly lead to customized therapies in which samples are inherently small. This calls for a fast-learning, adaptable FTCM environment for generating new data. In sharp contrast, the status quo FDA environment provides a yes/no approval decision based on statistical tests for an average patient, i.e., a one-size-fits-all drug approval process.

I hold the Bartley J. Madden Chair in Economics at the Mercatus Center so I am biased but this is an important proposal. Japan is leading the way and similar ideas are being discussed in Great Britain but as the most important pharmaceutical market in the world, the United States has an outsize influence on world drug development. We need to lower costs and speed new drugs to market.

Hard to do large clinical trials

That is the title of an Arnold Kling blog post, it runs like this (I am not adding an extra layer of indentation):

“With this:

Speaking this week at the EmTech conference in Cambridge, Massachusetts, Editas CEO Katrine Bosley said the company hopes to start a clinical trial in 2017 to treat a rare form of blindness using CRISPR, a groundbreaking gene-editing technology.

…The condition Editas is targeting affects only about 600 people in the U.S., says Jean Bennet, director of advanced retinal and ocular therapeutics at the University of Pennsylvania’s medical school.

I don’t think that the FDA is prepared for what is coming.”

Competition Compounded

ArsTechnica: Turing Pharmaceuticals, the company that last month raised the price of the decades-old drug Daraprim from $13.50 a pill to $750, now has a competitor.

Imprimis Pharmaceuticals, Inc., a specialty pharmaceutical company based in San Diego, announced today that it has made an alternative to Daraprim that costs about a buck a pill—or $99 for a 100-pill supply.

Good news. Competition is working. But I was puzzled. In Generic Drug Regulation and Pharmaceutical Price-Jacking, I argued that competition was slow because the FDA makes it expensive and time consuming to get a generic drug approved for sale in the United States. Was I wrong about the difficulty of generic entry? No.

The drug that Imprimis Pharmaceuticals is selling is not FDA-approved. A bit of background is in order. Even today some drugs need to be tailor-made. A patient, for example, might not be able to swallow a pill so a licensed pharmacist may create for a specific, individual patient a small batch of the drug in liquid form. A pharmacy that does this kind of work is called a compounding pharmacy.

Compounding pharmacies have a long and tendentious history with the FDA. The FDA has always claimed that a new drug is a new drug, even one created only for a specific individual. Thus, the FDA has always said that it has the right to regulate compounding pharmacies just like manufacturers of new drugs. In practice, however, the FDA allowed the industry to proceed with little regulation.

In the 1990s some compounding pharmacies began to create large batches, especially of drugs in short supply, as a way of avoiding the FDA process. The FDA worried about quality control, however, and it re-evaluated its traditional hands off approach. A political battle then ensued in which Congress and the Supreme Court also had their say. In 2012, fungal meningitis outbreaks caused by poor quality control at the New England Compounding Center brought these issue to public attention and resulted in greater regulation of compounding pharmacies, albeit with clearer regulations on when a compounding pharmacy may sell large quantities.

Imprimis Pharmaceuticals did not apply for approval to sell a generic version of Daraprim. As I argued earlier, that would take years and cost millions of dollars. Instead, it is doing an old-style end-run of the FDA process by offering its alternative under the compounding pharmacy laws. That means that it can only sell to order, on a patient by patient, prescription by prescription basis. Since Daraprim is not widely used this may work. Indeed, I hope this end run works but my reading of the act is that compounders can only supply drugs in large quantities if they are on the FDA’s shortage list. Perhaps the FDA will look the other way, however, in order to send Turing and similar firms a message.

Generic Drug Regulation and Pharmaceutical Price-Jacking

The drug Daraprim was increased in price from $13.60 to $750 creating social outrage. I’ve been busy but a few points are worth mentioning. The drug is not under patent so this isn’t a case of IP protectionism. The story as I read it is that Martin Shkreli, the controversial CEO of Turing pharmaceuticals, noticed that there was only one producer of Daraprim in the United States and, knowing that it’s costly to obtain even an abbreviated FDA approval to sell a generic drug, saw that he could greatly increase the price.

It’s easy to see that this issue is almost entirely about the difficulty of obtaining generic drug approval in the United States because there are many suppliers in India and prices are incredibly cheap. The prices in this list are in India rupees. 7 rupees is about 10 cents so the list is telling us that a single pill costs about 5 cents in India compared to $750 in the United States!

drugs India

It is true that there are real issues with the quality of Indian generics. But Pyrimethamine is also widely available in Europe. I’ve long argued for reciprocity, if a drug is approved in Europe it ought to be approved here. In this case, the logic is absurdly strong. The drug is already approved here! All that we would be doing is allowing import of any generic approved as such in Europe to be sold in the United States.

Note that this is not a case of reimportation of a patented pharmaceutical for which there are real questions about the effect on innovation.

Allowing importation of any generic approved for sale in Europe would also solve the issue of so-called closed distribution.

There is no reason why the United States cannot have as vigorous a market in generic pharmaceuticals as does India.

Hat tip: Gordon Hanson.

Japan Liberalizes Regenerative Medicine

Japan is liberalizing its approval process for regenerative medicine:

…Regenerative medicines in Japan can now get conditional marketing approval based on results from mid-stage, or Phase II, human trials that demonstrate safety and probable efficacy. Once lagging behind the United States and the European Union on approval times, there is now an approximately three-year trajectory for approvals, according to Frost’s Kumar. That compares with seven to 10 years before.

…Around the world, companies have also faced setbacks while pushing such treatments. In the U.S., Geron Corp., which started the first nation-approved trial of human embryonic stem cells, ended the program in 2011, citing research costs and regulatory complexities.

…While scientists globally have worked for years in this field, treatments have been slow to come to market. But there is hope in Japan that without the political red tape, promising therapies will emerge faster and there will be speedier rewards.

Japan is liberalizing because with their aging population treatments for diseases like Alzheimer’s and Parkinson’s disease are in high demand. Under the new system, a firm with a gene or regenerative therapy (e.g. stem cells) can get conditional approval with a small trial. Conditional approval means that the firm will be able to sell its procedure while continuing to gather data on efficacy for a period of up to seven years. At the end of the seven year period, the firm must either apply for final marketing approval or withdraw the product. The system is thus similar to what Bart Madden proposed for pharmaceuticals in Free to Choose Medicine.

Due to its size and lack of price controls, the US pharmaceutical market is the most lucrative pharmaceutical market in the world. Unfortunately, this also means that the US FDA has an outsize influence on total world investment. The Japanese market is large enough, however, that a liberalized approval process if combined with a liberalized payment model could increase total world R&D.

Breakthroughs made in Japan will be available for the entire world so we should all applaud this important liberalization.

Hat tip: Michael Mandel.

Hemagglutinin-stem nanoparticles generate heterosubtypic influenza protection

The Nature article is here.  The FT put it differently: “Scientists make breakthrough in search for universal flu vaccine”  Here are many other articles on the same.

And how long did it take us, starting more or less from scratch, to make that Ebola vaccine?

Is it possible that our vaccine development capacity is seriously better than say ten years ago?

Are the biggest potential winners China, India, Indonesia, and Nigeria?

For a relevant pointer I thank J.

The economics of biosimilars

If I understand correctly, a biologic is “any medicinal product manufactured in, extracted from, or semisynthesized from biological sources,” and a biosimilar is a copy of a biologic.  Think of a biosimilar as harder to make than a generic drug and also requiring separate FDA approval.  Here is Wikipedia:

Unlike the more common small-molecule drugs, biologics generally exhibit high molecular complexity, and may be quite sensitive to changes in manufacturing processes. Follow-on manufacturers do not have access to the originator’s molecular clone and original cell bank, nor to the exact fermentation and purification process, nor to the active drug substance. They do have access to the commercialized innovator product.

Here is a Rand piece on the potential cost savings from biosimilars (pdf), but in percentage terms they do not become nearly as cheap as generic drugs, maybe 65-85% of the price of the original.

Zarxio was the first biosimilar approved by the United States, and the global biosimilars market could hit $55 billion by 2020.  Here is yesterday’s FT story about biosimilars draining away sales.

Here is a paper by Blackstone and Fuhr:

Various factors, such as safety, pricing, manufacturing, entry barriers, physician acceptance, and marketing, will make the biosimilar market develop different from the generic market. The high cost to enter the market and the size of the biologic drug market make entry attractive but risky.

Will cell therapies, which are relatively new and also hard to copy with biosimilars, save Big Pharma from the forthcoming patent cliff?

Biosimilars will become a bigger issue soon:

There are 11 biologic drugs that will face biosimilar competition in the next several years, according to data compiled by Evercore ISI. These drugs, which treat ailments from cancer to rheumatoid arthritis, raked in more than $50 billion combined in 2014.

The FDA is outlining biosimilar approval pathways, although the issue seems to be receiving almost zero attention from the outside world.

Are S&P 500 firms now 5/6 “dark matter” or intangibles?

Justin Fox started it, and Robin Hanson has a good restatement of the puzzle:

The S&P 500 are five hundred big public firms listed on US exchanges. Imagine that you wanted to create a new firm to compete with one of these big established firms. So you wanted to duplicate that firm’s products, employees, buildings, machines, land, trucks, etc. You’d hire away some key employees and copy their business process, at least as much as you could see and were legally allowed to copy.

Forty years ago the cost to copy such a firm was about 5/6 of the total stock price of that firm. So 1/6 of that stock price represented the value of things you couldn’t easily copy, like patents, customer goodwill, employee goodwill, regulator favoritism, and hard to see features of company methods and culture. Today it costs only 1/6 of the stock price to copy all a firm’s visible items and features that you can legally copy. So today the other 5/6 of the stock price represents the value of all those things you can’t copy.

Check out his list of hypotheses.  Scott Sumner reports:

Here are three reasons that others have pointed to:

1. The growing importance of rents in residential real estate.
2. The vast upsurge in the share of corporate assets that are “intangible.”
3. The huge growth in the complexity of regulation, which favors large firms.

It’s easy enough to see how this discrepancy may have evolved for the tech sector, but for the Starbucks sector of the economy I don’t quite get it.  A big boost in monopoly power can create a larger measured role for accounting intangibles, but Starbucks has plenty of competition, just ask Alex.  Our biggest monopoly problems are schools and hospitals, which do not play a significant role in the S&P 500.

Another hypothesis — not cited by Sumner or Hanson —  is that the difference between book and market value of firms is diverging over time.  That increasing residual gets classified as an intangible, but we are underestimating the value of traditional physical capital, and by more as time passes.

Cowen’s second law (“There is a literature on everything”) now enters, and leads us to Beaver and Ryan (pdf), who study biases in book to market value.  Accounting conservatism, historical cost, expected positive value projects, and inflation all can contribute to a widening gap between book and market value.  They also suggest (published 2000) that overestimations of the return to capital have bearish implications for future returns.  It’s an interesting question when the measured and actual means for returns have to catch up with each other, what predictions this eventual catch-up implies, and whether those predictions have come true.  How much of the growing gap is a “bias component” vs. a “lag component”?  Heady stuff, the follow-up literature is here.

Perhaps most generally, there is Hulten and Hao (pdf):

We find that conventional book value alone explains only 31 percent of the market capitalization of these firms in 2006, and that this increases to 75 percent when our estimates of intangible capital are included.

So some of it really is intangibles, but a big part of the change still may be an accounting residual.  Their paper has excellent examples and numbers, but note they focus on R&D intensive corporations, not all corporations, so their results address less of the entire problem than a quick glance might indicate.  By the way, all this means the American economy (and others too?) has less leverage than the published numbers might otherwise indicate.

Here is a 552 pp. NBER book on all of these issues, I have not read it but it is on its way in the mail.  Try also this Robert E. Hall piece (pdf), he notes a “capital catastrophe” occurred in the mid-1970s, furthermore he considers what rates of capital accumulation might be consistent with a high value for intangible assets.  That piece of the puzzle has to fit together too.  This excellent Baruch Lev paper (pdf) considers some of the accounting issues, and also how mismeasured intangible assets often end up having their value captured by insiders; that is a kind of rent-seeking explanation.  See also his book Intangibles.  Don’t forget the papers of Erik Brynjolfsson on intangibles in the tech world, if I recall correctly he shows that the cross-sectoral predictions line up more or less the way you would expect.  Here is a splat of further references from scholar.google.com.

I would sum it up this way: measuring intangible values properly shows much of this change in the composition of American corporate assets has been real.  But a significant gap remains, and accounting conventions, based on an increasing gap between book and market value, are a primary contender for explaining what is going on.  In any case, there remain many underexplored angles to this puzzle.

Addendum: I wish to thank @pmarca for a useful Twitter conversation related to this topic.