Megan McArdle

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The FDA: Monopoly Medicine

30 May 2008 02:33 am

[Jon Henke]

Via Instapundit, Fight Aging says our regulatory system has perverse incentives...

There is no open marketplace for medical technology in the developed world, however. Instead, we see a very different set of incentives dominating the state of research and development. Regulatory bodies like the FDA have every incentive to stop the release of new medicine: the government employees involved suffer far more from bad press for an approved medical technology than they do from the largely unexamined consequences of heavy regulation.

These consequences go far beyond the obvious and announced disapproval of specific medical technologies: the far greater cost lies in all the research, innovation and development that was never undertaken because regulatory burdens ensure there would be no profit for the developer.


This brings up an interesting point. Many on the Left are outraged when they hear of some medical treatment being declined by a health insurance company or health care provider. But where is the outrage about the overwhelming number of medicines, treatments and devices that are delayed or declined each year by the FDA?

The health insurance companies and health care providers have competition. I can take my business elsewhere. Meanwhile, the FDA is a monopoly. With perverse incentives. Not the sort of thing the Left is usually anxious to defend.

There's a research project in this for some enterprising investigator.

  1. Find out how many medical treatments and procedures have been declined by health insurance companies and health care providers over the past 5 years.
  2. Contrast that with the potential medicines, procedures and devices that have been rejected, delayed or buried in regulatory tape, and the likely treatments and procedures those would have provided.

I would speculate that you'll find the unintended consequences of FDA regulations have had a far larger impact than the cumulative declined treatments of the health care industry.

Comments (13)

aMouseforallSeasons

Your argument is apparently predicated on the idea that if there is any agent interfering with the release of a new drug, "the Left" (whatever that is) should be opposed. Not so; from everything I've seen, "the Left" (as defined by the subset which is very vocal about universal healthcare) favors two things: (1) Government regulation of healthcare areas they perceive the free market to be ineffective at, or incapable of, maintaining and policing; and (2) equality of access. The FDA is reasonably consistent with both of these goals.

And speaking as someone who comes more from a right-leaning perspective, I'm also not convinced that the FDA is a bad thing, in spite of the periodic libertarian carping. The days of snake oil salesmen are not that far behind us and modern chemistry and healthcare electronics have the potential to be the deadliest things mankind ever imagined if there isn't some sort of anal retentive gatekeeper standing between them and the consuming public.

That doesn't mean the FDA couldn't use some streamlining, but that is arguably true of most government agencies, and IMO the FDA is one of the more effective and least offensive occupants of that class.

The devil's avocado

I work for pharma. We'd like all of our drugs to be swiftly approved by the FDA, and we'd like discovery to be faster and cheaper, unburdened by regulation.
Yet, as a citizen, I can only be grateful that there is at least one entity with the power to forbid the sale of a medicine or device until it is convinced by solid science that this medicine or device demonstrably provides efficacy and safety in dealing with the specific indication.
Having been exposed to specifics, in my opinion they do their job quite well, even though there is an element of built-in corruption in the revolving-door situation where 15 years of working for the FDA as the citizens' watchdog can be thought of as a preparation stage for a later career as a regulatory consultant working for pharma.

"I would speculate that you'll find the unintended consequences of FDA regulations have had a far larger impact than the cumulative declined treatments of the health care industry."

So your point is that the substance of your post is correct if someone else does research that has not yet been done and finds what you surmise before having done that research?

I think you need to point out all the life-saving medications and treatments that are being needlessly held up by the FDA because of bureaucratic ass-covering *first* then work forward to your conclusion, even though it's not as satisfying or easy that way. Conclusions typically *follow* evidence.

Like here, "But where is the outrage about the overwhelming number of medicines, treatments and devices that are delayed or declined each year by the FDA?" you need to link to the overwhelming list of medications, treatments and devices that presumably exists, and that details the actual proven utility and efficacy of these for treating actual diseases, free of unintended side effects that might make people a little wary of using them. Otherwise the uninitiated might think you're just waving your hands.

"Yet, as a citizen, I can only be grateful that there is at least one entity with the power to forbid the sale of a medicine or device until it is convinced by solid science that this medicine or device demonstrably provides efficacy and safety in dealing with the specific indication."


I have a brother who works in the Pharma industry. From my discussions with him, one area I find very interesting is off-label uses of medicine. The FDA requires that a drug be proven safe and effective for a particular condition. Once such approval is obtained, however, the drug can be prescribed by medical doctors for other conditions without an FDA finding that the drug is safe and effective for that condition. The only regulation is drug companies are not permitted to directly promote the drugs for off-label uses.

Apparently, for many drugs, the off-label uses account for a large percentages of sales. In some cases, the off-label sales far exceed the sales for the approved use.

Many of the drug companies spend much efforts finding ways to circumvent the ban on off-label marketing. Moreover, many of the drug companies more or less ignore the ban on direct off-label marketing, calculating that the increase profits from off-label sales will more than offset any regulatory fines that might eventually pay for illegal marketing.

As an example, a drug called neurotin was approved for a very limted use; I believe is was an anti-seizure drug. It off-label uses became extensive, resulting in multi-billion annual sales. The drug was prescribed by physicians for conditions as diverse as treatment of mental illnesses to pain relief.

Eventually, a whistle-blower filed a suit regarding off-label marketing. The drug company was required to pay about 800 million in fines, but this was only a fraction of its annual off-label sales.

From what I understand, many drugs have extremely useful and effective off-label uses so banning off-label prescriptions by doctors doesn't seem practical or wise. The current regulatory system, however, does not work very well to prevent off-label marketing by drug companies, some of which can be highly deceptive. As a result many doctors do prescribe drugs for conditions for which the drug is arguably not safe or effective.

I am not sure what should be done. It seems to me that the entire regulatory scheme is ripe for a careful review and overhaul.

Many on the Left are outraged when they hear of some medical treatment being declined by a health insurance company or health care provider. But where is the outrage about the overwhelming number of medicines, treatments and devices that are delayed or declined each year by the FDA?

You are being irrational. There is a reasonable presumption that the bulk of treatments denied by insurers would be helpful. While there are some irrational individuals who want ineffective treatments which are hyped by frauds, people generally want some treatment that would be good for them, but the insurer does not wish to pay - sometimes justifyably, sometimes not.

The treatments denied by the FDA can not be assumed to be helpful. You must consider the totality of the effect of FDA policy. True, some efficacious treatments are delayed. This probably happens even more often than a malign or ineffective treatment is rejected. However, the great majority of ineffective or malign treatments never get submitted for review specifically because of the existance of the FDA.

dantealiegri

The devil's avocado:

What the article in question is speculating is not on work that is being done, but more along the lines of what work has not been even pursued due to the high barrier of entry.

My take on this whole thing is: if we have more informed consumers, we can have a more stratified process. For instance if there is a drug that can be very useful, but might have known side effects, let it pass a 'this won't kill your outright' certification. Make that certification require people that want to use it to .. I don't know, take a class - which they would pay for - prior to getting it. This way there is no way they can possibly avoid thinking about the consequences.

Then people can make a more informed decision, and companies can have a lower target than the multiphase testing they have now.

or, just to be contemporary with today's events, instead of having strict oversight over the manner in which a tall building crane is anchored in New York city, we could station individuals at either end of such blocks who offer a number of "tiered-risk waivers" that allow the pedestrio-consumer an opportunity to weigh the benefits of ambulation on that particular street (increased access; faster routes) with the cons (potential of being crushed; contact with others' deaths), sign off on the ratio of their choice, and either be permitted or denied based on their risk assessment.

dantealiegri

timex,
I'm glad to see you've majored in pointless snark.

Ignoring that, as an example, say I for some reason got premature arthritis really bad, and there was some drug under this scheme being developed.
If I could pay $500 to get a good idea of what I was risking, that could be worth the trade off for me.

ahem, sorry about that - but I wouldn't say it was completely pointless.

just pointing out the fact that your way of thinking, while understandable, I think leads to a tendency for companies to shoot far short of the mark and leave the risk taking up to the consumer.

right now, the company needs to take the risk in offering their product to the general public knowing what the possible dangers of their product are and as vetted by the FDA. just saying that your scheme would shift this risk over to the consumer and potentially leave the company off scott-free with a "you've been warned" defense, as well as have the potential of leading to the release of products that aren't quite ready for primetime. maybe unlikely, but still seemed worth pointing out.

and the more I think about your first comment, the more my feelings are increasingly hurt.

grumpy realist

No one is more clueless about regulatory history than a self-righteous Libertarian.

Go read up on the history of pharmaceuticals in the US and learn WHY the FDA got started, please.

1. We could be fast tracking approval of drugs approved in Europe.

2. We could fast track approval of phage therapy.

Both would reduce mortality.

Preclinical testing of the experimental pseudomonas phage preparation on white mice revealed that the therapeutic efficacy of the phage preparation was higher (80-100%) than that of the antibiotic-ciprinol (50-80%). Noteworthy, 100% therapeutic efficacy was observed after combined application of the antibiotic and the phage preparation.
www ncbi.nlm.nih.gov/sites/entrez?Db=pubmed&Cmd=ShowDetailView&TermToSearch=17660609&ordinalpos=11&itool=EntrezSystem2.PEntrez.Pubmed.Pubmed_ResultsPanel.Pubmed_RVDocSum

Lets not forget, when a treatment is not covered by insurance, that just means you have to pay for it yourself.

When its prohibited by the FDA, that means you can't get it all.

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