Results for “tomas philipson”
6 found

CEA update, Tomas Philipson to join

President Donald Trump named Tomas Philipson, an economist at the University of Chicago who has specialized in health-care policy, to the three-member Council of Economic Advisers on Monday.

Mr. Philipson briefly served as an adviser to the Trump transition team last fall on health-care matters and was a senior economic adviser to the head of the Food and Drug Administration and the Centers for Medicare and Medicaid Services during the George W. Bush administration. Mr. Philipson is the co-founder of Precision Health Economics, a consultancy. He is professor of public policy at the University of Chicago’s Harris School of Public Policy and a director of the Health Economics Program at the university’s Becker Friedman Institute for economic research.

Mr. Trump’s nominee to lead the CEA, Kevin Hassett, hasn’t been confirmed by the Senate. His nomination cleared the Senate Banking Committee with only one lawmaker, Sen. Elizabeth Warren (D., Mass.), voting against him in June.

The two other members of the CEA aren’t subject to Senate confirmation and typically serve for around two years. Mr. Trump hasn’t announced the third member of the council, which has advised presidents for over seven decades on the economic impact of their policies.

That is from the WSJ.

Friday assorted links

1. What makes people dislike their doctors.

2.  Kevin Hassett is now confirmed, and Richard Burkhauser is named as the third CEA member (WSJ), Tomas Philipson is the other.

3. 6 free cop dating sites.

4. New Hampshire was the highest earning state in 2016.

5. The new economy of excrement.

6. Stephon Marbury in China watch.  And training a pitcher to throw a baseball at 95 mph (recommended).


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.

Hedging FDA Risk?

In the words of a recent article, the FDA’s rejection of a recent drug application was a stunning setback. Stunning setbacks are by definition unpredictable and unpredictable risks aren’t correlated with other risks which means that they can be easily priced and bought and sold. The all-star team of Adam Jørring, Andrew W. Lo, Tomas J. Philipson, Manita Singh and Richard T. Thakor propose just this in Sharing R&D Risk in Healthcare via FDA Hedges.

The idea is to create FDA Hedges that pay out a fixed fee if a drug fails to be approved and zero otherwise. Pharmaceutical firms could then buy some of these contracts and reduce their risk exposure which in turn would increase their incentive to invest in R&D.

The idea is clever but firms and even more so firm owners already have many ways to diversify and its not clear what the value of an additional source of diversification is, even one that is more closely tuned to the firm’s profits. It’s also not clear how much additional R&D would be driven by offloading these risks. Pharmaceutical R&D is valuable, however, so even small increases in R&D are welcome even if more fundamental changes would be better. Prices in these markets would also provide useful information.

I also worry that we are asking a lot of FDA reviewers and firm insiders to keep their inside information private. Information about FDA approval decisions is already very valuable and there have been a few cases where insiders trade on their information or leak it to make millions. FDA Hedges might make this problem worse which should be balanced against the possible gains.

Adjusting measures of economic output for health

This is the kind of argument which no one will successfully rebut, but no one really will take on and adopt either.  Does that mean we are defective?  Or is there simply ineffable wisdom in “how things have been done”?  Must we keep closed all Pandora’s boxes?

Here is the abstract from Mark L. Egan, Casey B. Mulligan, and Tomas J. Philipson:

Many national accounts of economic output and prosperity, such as gross domestic product (GDP) or net domestic product (NDP), offer an incomplete picture by ignoring, for example, the value of leisure, home production, and the value of health. Discussed shortcomings have focused on how unobserved dimensions affect GDP levels but not their cyclicality, which affects the measurement of the business cycle. This paper proposes new measures of the business cycle that incorporate monetized changes in health of the population. In particular, we incorporate in GDP the dollar value of mortality, treating it as depreciation in human capital analogous to how NDP measures treat depreciation of physical capital. We examine the macroeconomic fluctuations in the United States and globally during the past 50 years, taking into account how depreciation in health affects the cycle. Because mortality tends to be pro-cyclical, fluctuations in standard GDP measures are offset by monetized changes in health; booms are not as valuable as traditionally measured because of increased mortality, and recessions are not as bad because of reduced mortality. Consequently, we find that U.S. business cycle fluctuations appear milder than commonly measured and may even be reversed for the majority of “recessions” after accounting for the cyclicality of health. We find that adjusting for mortality reduces the measured U.S. business cycle volatility during the past 50 years by about 37% in the United States and 46% internationally. We discuss future research directions for more fully incorporating the cyclicality of unobserved health capital into standard output measurement.

The NBER link is here, does anyone know of an ungated copy?  Of course other forms of depreciation could be included as well (environmental?) and that too may smooth out business cycles, if we are willing to countenance such factors in the first place.