October 2011 Archives



President Obama issued an executive order today directing the FDA to resolve and prevent critical shortages of vital medicines. "The president's action is a recognition of the fact that this is a serious problem, and we can and should do more to help solve it," said an administration official who asked to remain anonymous. "We can't wait anymore."

This is bad, but this is also good. This is bad because real Americans are being hurt by these shortages. This is good because it might shed some light on the real problem.

Consider the lesson of 19th century French economist Frederic Bastiat, who taught economists to study what is seen and what is unseen. There are the things we see and the things that are hidden from our view, which might be even more important.

The "seen" in this example is the shortage of vital medicines. The fact that there were 178 shortages reported by the FDA last year and there are confirmed cases of patients dying shows how important these medicines are. Can you see what is unseen? What is unseen is the shortage of vital medicines that never were.

If you'd never been born, well then what would you do?
If you'd never been born, well then what would you be?
Why, you might be a WASN'T!
A Wasn't has no fun at all. No, he doesn't.
A Wasn't just isn't. He just isn't present.
But you...You ARE YOU! And, now isn't that pleasant!

-- Dr. Seuss

"Wasn't drugs" are drugs that flunked the FDA's tests, or were never even explored because patents are too short, risks are too high, costs are prohibitive, marketing is difficult, payers are tougher, government rebates are too high, lawsuits are too expensive, and investors are just plain worried. FDA Commissioner Margaret Hamburg is not oblivious to this and doesn't like these trends, saying just weeks ago, "Timelines are long, costs are high, and rates of failure are distressingly high."



President Obama announced an executive order today designed to reduce the impact of rapidly rising generic drug shortages on the U.S. health care system. Will it work? That depends on whether or not you think we can have a perpetual supply of very cheap, rapidly manufactured, high quality generic drugs. The saying in manufacturing circles is that you can only pick two.

Let's look at the cheap, fast, high quality nature of today's generic drug supply chain:

Cheap. The U.S.'s free market system for drug pricing promotes vigorous generic drug competition, which helps to keep drug prices low. That's generally good for patients (especially the uninsured) and insurers, who pass the savings along to consumers and businesses in the form of lower premiums.

Fast. With the advent of just in time delivery and inventory systems, companies make (and hospitals buy) just enough drugs to meet market demand. This means that there's less waste and inefficiency in the system, with both producers and buyers running lean and mean to keep profits strong.

High Quality. The FDA enforces vigorous quality standards in the manufacturing of both generic and branded drugs. But maintaining those high standards can be expensive for suppliers....and very time consuming, since it makes it very difficult to ramp up manufacturing quickly.

Drug shortages appear to be cyclical, but the number of shortages has tripled from 2005 to 2010. There doesn't appear to be one simple problem, but a mix of several different ones. Demand for some products has gone up, and there are just a few suppliers for some complex generic drugs, like sterile injectables. Problems with raw ingredients - like tainted heparin in China - or manufacturing problems can cause immediate shortages when everyone in the system is working on razor-thin production and inventory schedules.

So we can have a supply of cheap, high quality drugs rapidly flowing into the system, but if there's any "hiccup" in the supply chain, it can reverberate for years because it takes so long for suppliers to build new manufacturing plants to meet increased demand (or the loss of another supplier).

At a glance, it appears President Obama is taking a number of simple, but modest, steps to help alleviate current shortages:

Increasing staffing at the FDA's office of drug shortages

Ramping up communications efforts (both voluntary and mandatory) between FDA and industry when companies expect to experience drug shortages (especially for critical medicines)

Expedite the FDA's review of company applications to bring new manufacturing plants or suppliers online

These are all fine ideas, and will undoubtedly help mitigate the effect of current shortages and prevent others.

Beyond that, we need to think about long term incentives for companies to invest in the complex manufacturing process for products like sterile injectables. Tax credits aren't the solution for every problem...but they might be worth considering for the makers of critical generic medicines who commit to maintaining or updating their facilities. I discuss some other good ideas here.

Government programs, like Medicare or Medicaid, could also commit to larger purchases or slightly higher prices to encourage manufacturers to build in some excess capacity, which would help cushion supply when unexpected problems arise. This may seem counter-intuitive in an age of budget cutting, but if more producers drop out of the market, the government will have to pay in the long run to bring them back in.


In August, I wrote an op-ed for the New York Post called "Running out of Common Drugs."

It seems that little has been done about it since, as judged by today's front page story in The Times, "Obama Tries to Speed Response to Shortages in Vital Medicines."

I didn't really see anything especially new or even encouraging today. Despite all the ancillary issues (like the FDA slowing things down), I think this is mostly an economic issue. Given the proper climate and a good profit margin this mess should eventually take care of itself.

But in the meantime, I still don't see any real solutions, with the possible exception of something like government subsidies and even stockpiling, as was briefly mentioned. As bad as that sounds, I don't know else will ensure constant, rapid production of the cheap generics.

Ideally, the best solution would be to (gasp) actually manufacture the API and formulated drugs here. I have no idea what kind of incentives it would take to get this done, but considering all the money this country has thrown away on useless garbage, this at least deserves a look.

So, I don't see this getting better any time soon. The irony is that if the missing drugs were more expensive brands, this never would be happening in the first place. When you live by generics, you die by generics.


In 1989, hepatitis C, (formerly called non-A, non-B) was first identified. At first it got little attention, but once HIV began to yield to a relentless pharmaceutical assault in the mid- to late-1990s, hepatitis C became the primary target for most antiviral research. And rightly so.

The blood-borne disease, caused by the hepatitis C virus (HCV) infects 3-4% of the world's population, roughly four-times that of HIV. There are almost 5 million people that are infected in the U.S. alone. Hepatitis C infection is characterized by a long asymptomatic period (often 2 decades), during which time the virus gradually destroys the liver. By the time symptoms are present, serious cirrhosis of liver has usually occurred. Further progression to hepatocellular carcinoma, and/or end-stage liver failure and death may also occur.

There was a treatment for the infection, however, it contained the immune booster interferon--notoriously difficult to tolerate, and the therapy was not sufficiently efficacious.

In a rather bizarre coincidence, 22 years after the virus was discovered, the FDA approved the first two specific HCV drugs within a week: Schering's (now Merck's) boceprevir (Victrelis), followed by Vertex's telaprevir (Incivek)-- one week later. Since both drugs are protease inhibitors, they are necessarily competitors, unlike in AIDS therapy, where a number of HIV drugs that work by different mechanisms (often from different companies) are taken together, sometimes in a single pill.

As hepatitis C research developed, telapravir was thought to be the better drug based on its superior potency. As such, it was also expected to be approved first, giving it a market advantage. This turned out to be wrong-- boceprevir, having caught up, erased that advantage, making it unclear which drug would win out. Many gave the edge to Merck, because of its size and superior marketing ability. Either drug had to be taken in addition to interferon, not in place of it.

Merck clearly had this in mind when they immediately announced that they were partnering with Roche, already a major player in the HCV field by virtue of its marketing of Pegasys, their brand of interferon. To make matters worse for Vertex, Merck sold PEG-Intron the only other interferon used for HCV, so the two companies together cornered the interferon market, leaving Vertex, a start-up biotech facing off against an HCV juggernaut. It looked like Goliath might win this one.

Or not. Third quarter sales of the two drugs came out this week, and they were startling. Merck's sales of Victrelis were an embarrassing $31 million. The number for Incivek was $420 million-- a bona fide blockbuster, especially for a small company.

It remains to be seen whether this trend continues, but I would not want to be the person responsible for recommending the takeover of Schering by Merck, especially if Victrelis was part of the equation. Round one goes to David.



The U.S. Preventive Services Task Force unleashed a fire storm of criticism recently when it recommended that "healthy men" should stop receiving a PSA test to screen for prostate cancer.

The problem with recommendations like this is that they'll be obsolete by the time the government manages to implement them (which, given the backlash, is extremely uncertain anyway).

It is true that the PSA test has a high number of "false positives" that can drive men who don't have cancer, or don't have life-threatening cancers, to get biopsies or treatments that may have serious side effects but not actually save lives. But this is like saying that the first generation of cell phones was ridiculously expensive, clunky, and didn't work very well - and so we shouldn't invest in better cellphones since the early ones were so crappy.

Since we don't adhere to that philosophy in technology markets, relatively cheap, fast, and powerful smartphones now rule the world.

Medical technology is benefitting from the same underlying forces that drove the telecommunications and computing industries into producing incredibly rapid, consumer-friendly innovations.

For instance, take a new biomarker test from the San Diego company Gen-Probe, which is under review by the FDA. Unlike PSA, which is produced by inflamed prostate tissue (which may or may not be cancerous), Gen-Probe screens urine for a prostate cancer antigen (PCA3) which is "overproduced in more than 90 percent of patients with prostate cancers."

Depending on how the FDA approves the test, it could be used as a second line screen for patients with unusual PSA readings, allowing doctors and patients to make better decisions about when to seek a biopsy or leave well enough alone.

That's what we really want, right? More confidence that we're seeking treatment when we need it, and it might save lives, and less treatment when we don't. And the PCA3 test isn't the only promising technology in the pipeline.

(BTW, Gen-Probe's PCA3 test was approved in Europe in 2006.)


Twenty-nine years ago tomorrow, the US Food and Drug Administration approved Eli Lilly's and Genentech's Humulin, making it the first ever fully approved product of recombinant DNA -- or what we now call modern molecular biotechnology.

Humulin was the first biosynthetic human insulin. It was produced by splicing the human gene that codes for insulin production into one of the safe variants of E. coli bacteria, essentially turning those harmless microbes into tiny medicine factories. Previously, diabetics who needed supplemental insulin used bovine or porcine insulin that was purified from the pancreases of cows and pigs. They worked reasonably well, but were not perfect analogues of human insulin, so the foreign proteins would sometimes cause allergic reactions in patients. With the introduction of Humulin diabetics could now take actual human insulin, which improved the treatment's safety and efficacy. So, the introduction of rDNA methods into drug and biologics development marked a tremendous leap forward in public health.

According to The New York Times, my friend and colleague "Dr. Henry Miller, the medical officer in charge of Humulin at the F.D.A., said the development was a major step forward in the ''scientific and commercial viability of'' recombinant DNA techniques. ''We have now come of age,'' Dr. Miller said."

Since 1982, biotechnology has revolutionized the practice of medicine and the pharmaceutical industry. The biotechnology industry has delivered extraordinary medical advancements and has helped to create medicines that treat diseases once thought intractable. Biotech medicines are used to treat cancers, stroke, multiple sclerosis, diabetes, cystic fibrosis, and many other diseases. In some cases, such as insulin, rDNA simply replaced more conventional methods for the production of therapeutically-useful protein products, though with vastly superior results. In others, including most of the biotech-derived cancer treatments, rDNA made it possible for the first time to create a safe and effective medicinal product. Many forms of cancer that were invariably fatal a decade or two ago have now become treatable and even curable. Other once-fatal diseases have now become manageable conditions for many sufferers thanks to biotech medicines.

Over the past 29 years, some 200 or so biotech medicines have been approved in the United States, with roughly 900 more now being developed to treat more than 100 diseases ranging from cancers and infectious diseases to autoimmune disorders and cardiovascular diseases. So, this is definitely an anniversary worth celebrating.


Parallel review may improve speed-to-market for some products. Potential side effects include decreased approval volumes, and disincentives for innovation across a broad spectrum of therapeutic areas.

As I pointed out last week, the more cost-containment policy is effective, the more disincentives there are to innovate. We know that government agencies like CMS and HHS are focused on cost-containment, but what happens when this focus spreads to the FDA -- an organization whose mandate has historically been safety and efficacy?

On September 17, 2010, the FDA and CMS jointly announced their intent to institute a process for cooperation and concurrent review of medical products. The proposed approach would give CMS the go-ahead to begin considering a request for a National Coverage Determination (NCD) before the FDA has completed its review of the product's safety and effectiveness. Pilot programs have since begun -- including a pilot for medical devices announced earlier this month.



Today, my colleague Diana Furchtgott-Roth testified on the marriage penalties in the Affordable Care Act:

For a bill that is supposed to make Americans healthier, the disincentives for
marriage and work under the new health care law are truly startling. Beginning
in 2014, when the new law takes effect, Americans at both ends of the income
scale will find it more advantageous to stay single than to marry, even more so
than under the current tax code. And women will face greater incentives to leave
the workforce.

You can find her testimony here.



Politico reports that the Supreme Court could decide as early as Nov. 10 to review the individual mandate in the Patient Protection and Affordable Care Act (aka, Obamacare). The stars are certainly aligning: both the Obama Administration and the plaintiffs in the case (including 26 states, the NFIB, and others) have all asked the justices to hear the case.

If the court takes the case, the earliest we will hear of their decision is Nov. 14, although they could also opt to take the case at a later conference.

Will SCOTUS overturn the individual mandate? I have no idea.

Here's a better question: Politics aside, will the court's decision be the final vindicaton or death knell for the ACA? I think the answer, in both cases, is no.

I think that, no matter what the court rules, the ACA is in for some major changes, for three reasons:

Budget pressures: About 40% of the deficit savings attributed to the ACA went up in a puff of smoke when HHS admitted the CLASS Act would never work as advertised. I'm expecting that other "optimistic" savings included in the law will also never materialize. There are also tremendous incentives in the ACA for employers to dump low- to moderate income employees into the exchanges, exploding subsidy costs to taxpayers. Sooner or later, Congress is going to have to revisit the structure of those subsidies, perhaps as part of a grand deal on deficit reduction.

Republicans' guerilla war on ACA implementation: Because the ACA was passed on a partisan line vote through budget maneuvers in the Senate, expect Republicans to use their oversight and budget control in the House (and perhaps the Senate after 2012) to continue to cause HHS and the president huge headaches. With many states delaying or asking for waivers on exchange implementation, I think HHS is going to face a enormous hurdles to get everything accomplished on time and on budget.

IPAB, and cuts to Medicare reimbursement rates: I think that cost controls in the ACA are too draconian and bureaucratic, and are going to cause a popular backlash as soon as they start to bite. And when they don't bite or are watered down, it will only increase the budget pressures to reform the whole package.

Having said all of the above, if the individual mandate is overturned in court, it won't be the end of the ACA - but it will force Democrats and the Administration to go back to Congress and try and work out a better option, perhaps through a flat tax credit or tax deduction for the purchase of private insurance in tandem with ending the tax deduction for employer provided health insurance. Structured correctly, there'd still be a large increase in insurance coverage, and greatly reduced incentives to remain uninsured.

Other popular elements of the ACA would likely survive a bipartisan reworking of the ACA, like bans on rescissions, or exclusions for pre-existing conditions, along with expanded high risk pools with federal funding. This wouldn't be the full throated "repeal and replace" option that Republicans are calling for, but it would repeal the worst aspects of the law, and push the nation in the direction of more market oriented solutions.

What implications would this have for innovation? Good ones. Mostly, American health care suffers from the absence of pricing signals to consumers. Putting consumers in charge choosing their own insurance would reward providers and insurers who offered better care at less cost - putting a premium on cost and labor reducing innovations.


A Federal Trade Commission report on so-called pay-to-delay drug patent settlements that was released this month has given new life to congressional efforts to ban the deals in which brand manufacturers pay potential generic competitors to drop patent challenges. A CBO analysis suggested that a ban could save federal health programs $2.68 billion over 10 years by getting cheaper generics to market sooner. And Democrats are pushing the deficit reduction super committee to include the ban in its proposals. In practice, though, a ban could actually delay the introduction of more generic drugs than it would accelerate, resulting in higher drug prices.

Current law provides incentives for generic producers to challenge potentially weak drug patents in court. But when faced with the uncertainty of patent litigation, brand manufacturers sometimes offer to settle the lawsuits by paying the challengers to drop the litigation. The patents remain in place that way. But as part of the settlements, the brand manufacturers usually agree to let the generics on the market a few years before the patents in question expire.

The FTC hates these deals and calls them anti-competitive because successful patent challenges would get generics to market sooner still. But that assumes that the majority of patent challenges would actually succeed, which isn't borne out by the data. Just over half of the drug patent cases that make it all the way to a court decision fail. And there is no evidence that settled cases would have been more likely to result in patent invalidation.

The FTC already has authority under existing antitrust laws to block patent settlements where evidence indicates consumers would be harmed by higher prices. But the agency loses many of those cases because the evidence isn't on their side. And, in the handful of cases where the FTC succeeded in blocking a settlement and forcing the litigation to go forward, courts more often upheld the patents than ruled them invalid.

As it turns out, settlements almost always result in a generic product reaching the market before the patent's expiration -- something a ban could not deliver. So, banning settlements altogether and forcing these cases into court would prolong the amount of time the typical brand drug enjoys a monopoly with no generic competition. That's why federal courts have so far refused the FTC's pleas to make these settlements per se illegal. In one decision, U.S. Seventh Circuit Judge Richard Posner wrote that "a ban on reverse-payment settlements would reduce the incentive to challenge patents by reducing the challenger's settlement options." He suggested that it was the proposed ban, not settlements, "that might well be thought anticompetitive."

Collusion between competing firms in any industry often raises red flags that suggest anticompetitive, anti-consumer behavior. But at least in these pay-to-delay cases, cooperation among brand and generic firms does seem to promote overall consumer welfare.


Last Thursday marked the release of the much-anticipated final ACO regulations. Industry organizations like the AMA (American Medical Association), the AHA (American Hospital Association), and AMGA (American Medical Group Association), who had been full-throated in their critiques of the proposed preliminary rules six months earlier, dashed out statements supporting elements of the program almost immediately, praising CMS's willingness to adjust the rules, offer greater incentives for participation and actually listen to those providing the service.

This is interesting, however, as none of the changes addressed the real, fundamental flaws in the ACO model initially conceptualized in PPACA. As I laid out in my policy paper published by the Heritage Foundation, Why Accountable Care Organizations Won't Deliver Better Health Care - and Market Innovation Will, the ACO model simply overlays a new layer of Federal regulation and oversight on the existing system, doing nothing to address its flaws and inefficiencies -- most notably a piecework payment system that defies real accountability for better health outcomes and greater value. Moreover, given the scale requirements, this model stands to exacerbate the trend toward provider consolidation and does nothing to move to a market-based model of healthcare focused on transparency, patients, and accountability for better health outcomes.

In short, the Administration didn't get it before, they still don't get it and it's highly unlikely that they will. The organizations that have been considered models for healthcare delivery -- Geisinger, Kaiser, Mayo, Cleveland Clinic -- weren't mandated by the government; they were mandated by the market. The answer is not more regulation, more government intervention, and more bureaucracy, but rather greater transparency and greater accountability for costs and outcomes.


For twenty years, hepatitis C research mostly followed the HIV cocktail approach, where the gene products of the virus are isolated, and their function determined, thus providing the foundation for a rational drug design or screening-based campaign. But finding a useful inhibitor of the hepatitis C virus (HCV)--the causative pathogen of the disease-- ended up being a more difficult challenge than HIV for a two principle reasons: numerous early clinical failures, and a very tricky binding site on the HCV protease enzyme, making design of protease inhibitors (PIs) more challenging than it was for HIV.

The latter problem was solved by Boehringer Ingelheim. Its highly potent protease inhibitor BILN-2061 showed remarkable efficacy in the clinic, but was withdrawn in 2004 due to cardiac toxicity. It was not until 2011, twenty-two years after the discovery of HCV, that Schering Plough's (now Merck) boceprevir and Vertex's telaprevir received FDA approval within one week of each other.

When added to the standard of care (interferon plus ribavirin), both drugs were extremely effective in reducing viral load; they doubled the cure rate and cut the time for the course of treatment in half. And the reduction in treatment time accomplished more than extra convenience for patients: The former standard of care had been very difficult to tolerate, mostly because of interferon; and the side effects were brutal. Discontinuation of therapy was not uncommon.

Thus, even after the introduction of the two PIs, a major goal in HCV research remained that of eliminating interferon. But doing this requires a cocktail approach--done successfully with HIV, but not yet possible in this case since both approved drugs worked by the same mechanism. It was expected that a combination of one of the PIs with another type of inhibitor (polymerase, most likely) -- again in analogy to HIV--would be the solution. However, over more than a decade, multiple failures of polymerase inhibitors delayed the discovery of the holy grail of HCV--an AIDS-like cocktail of oral drugs.

Now it looks like his may be within reach. Abbott just reported that a four-drug cocktail, including a PI, polymerase inhibitor and ribavirin, yielded spectacular results in a 44 patient trial. It showed a previously unheard of 90% cure rate over a twelve-week treatment period--all in the absence of interferon. Abbott estimates that their product could be launched in 2015. Let's hope that they don't run into any surprises between now and then.



On Friday the U.S. Senate unanimously passed an amendment (SA 890) by Senators Richard Burr (R, NC) and Tom Coburn (R, OK) that requires the Secretary of Health and Human Services to submit a report to Congress for all "drugs, devices, and biological products" approved, cleared or licensed by the FDA in 2011.

The Amendment requires the Secretary to tell Congress how many calendar days elapsed from the date that the drug/device/biologic application was submitted to the agency to the time it was finally approved. Currently, the PDUFA "clock" requires the FDA to complete reviews of (for instance) all drugs within a mandated timeline of 6 months for "priority" applications, and 10 months for "standard" applications.

Why is this important information? As currently structured, the PDUFA "clock" stops when the FDA requests more information from the sponsor. So repeated requests for information from the FDA can significantly draw out the time before a new product reaches the market, even if the agency completes its review within the specified PDUFA timeframe.

Knowing actual calendar days that elapse from between the time that a sponsor submits an application to the time it is approved should give Congress some sense of how efficient the review process is. If the FDA is repeatedly asking for more information and lots of time is added to the approval process, it has important implications for patients (who wait longer for new therapies) and investors (who may perceive the regulatory process as arbitrary and time consuming).

Remember: this is just for approved products. So the FDA is, at the end of the day, saying yes, these products are safe and effective. So if these products are cleared for marketing, are the FDA's requests for more information adding substantial value for patients and physicians? Or is it dragging out the review process unnecessarily? Could these problems have been resolved at an earlier date, perhaps through better communications between the agency and sponsors?

Alternately, the FDA could argue that too many applications came in without critical information, which the agency is then trying to find. But that also suggests a communications breakdown if sponsors don't understand the agency's expectations.

In fairness, FDA Commissioner Margaret Hamburg appears to be aware of this problem, and is trying to do something about it.

You can read the full Amendment here.

Kudos to Senators Burr and Coburn for trying to add more transparency to a convoluted review process - which means taking the first steps towards fixing it. Whether the Amendment actually becomes law depends on how the House and Senate versions of the underlying appropriations bill are ultimately reconciled.


Writing in The New York Review of Books, Freeman Dyson, emeritus professor at Princeton, traces out some of the intellectual origins of the Industrial Revolution, thereby reminding us how we, today, could reboot scientific innovation and medical progress--if we wanted to.

Dyson's essay comes as a review of The Beginning of Infinity: Explanations that Transform the World, published by the Oxford physicist-philosopher David Deutsch. Dyson praises the book, declaring that Deutsch "writes clearly and thinks wisely" about topics ranging from Socrates to the multiverse. Yet as Dyson notes, at the core of Deutsch's work is the historical influence of the English prophet of science Francis Bacon (1561-1626). If Bacon is obscure now--perhaps sometimes confused with the 20th century painter--his obscurity is both undeserved and undesirable. No less than Thomas Jefferson described Bacon, along with Isaac Newton and John Locke, as "my trinity of the three greatest men the world has ever produced."

Jefferson admired Bacon for articulating the scientific method, also for beginning to sketch out a national plan for secular scientific and economic progress. As Dyson puts it, "According to Deutsch, Francis Bacon transformed the world when he took the long view, foreseeing an infinite process of problem solving guided by unpredictable successes or failures."

And it's exactly that long view--coupled with patience and, at the same time, dogged determination--that is missing from our current politics, including our medical politics. Does anybody really think, for example, that TV ads urging viewers to call 1-800-BAD-DRUG to see if they can get tort-liability money is part of a "long view" strategy for developing cures? Of course not. Yet politicians who should know better have held "other priorities," allowing our healthcare system to degenerate into a wasteful spending machine; today, we spends trillions on futile care, in part because we haven't been wise enough to invest mere billions on drugs--such as an effective treatment for Alzheimer's--that could actually help people live healthier and work longer.

Perversely, only now, as millions of people are losing the fight with Alzheimer's-related dementia, Washington DC budget mavens are saying instead that we need to chop away at the entitlement programs that allow them to live out their invalided lives in some modicum of dignity. In other words, by neglecting preemptive curative science, we are now faced with a painful choice between spending vast amounts on longterm care or else making politically suicidal cuts in popular programs. (Note to Washington politicians: Nobody is camping out in public parks in support of deficit reduction.)

Such are the high costs of implacable ideology. As the geriatric health and entitlement crisis has worsened, politicians have chosen other fights, most obviously, Verdun-like battles over ideological--some might say theological--economic disputes that only a fraction of the voting population truly believes in. There's nothing wrong with lawmakers fighting for what they believe in, but it's apparent that the ideas put forth by the various combatants--a flat tax, for example, as favored by the right, or a soak-the-rich tax plan, as favored by the left--are simply not going to happen in our closely divided polity. And yet the record of futility in enacting treasured goals does not seem to have dissuaded either side from launching yet one more ideological charge across the partisan no-man's land.

Bacon's approach, four centuries ago, was different. He thought in terms of cumulative learning, not static belief systems. Bacon was not the first empiricist, but he was the empiricist who most ably described the positive benefits of empiricism in aphoristic books of scientific philosophy and even imaginative flights of fiction.

Yet it could be said that Bacon was more intellectually modest than the ideology warriors of today; yet in the long run, he was much more ambitious. As Bacon observed, "If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts he shall end in certainties." That is, scientific curiosity can produce useful answers that settle questions, while rigid dogma produces mostly pushback and another round of fighting.

Okay, but in our time, are we doomed to endless partisanship and polarization over no-win issues, while the overall economic and political system around us continues to deteriorate? Perhaps, but the historical period in which Bacon lived suggests that there's always hope.

In the late 16th and early 17th century, Bacon was surrounded by certainties--zealous, even murderous, certainties. The newly established Church of England squared off against Catholics as well as Protestant Dissenters, in a cascade of events that led to decades of war with Spain and then, ultimately, to a much bloodier civil war in the 1640s. Yet despite all that strife and conflict, in 1660, less than four decades after Bacon's death, English leaders--most obviously, Charles II, a man not burdened by dogma--came together to establish the Royal Society. The Society was an early think tank, created to institutionalize Baconian ideas about the systematic encouragement of scientific progress, and thereby, too, economic progress. That much, at least, virtually the whole of English society could agree upon.

The Royal Society flourishes to this day, even as the Baconian vision has spread out to other institutions. In 1988, Prime Minister Margaret Thatcher spoke to the Society, asserting, "A nation which does not value trained intelligence is doomed . . . experience has taught us that knowledge and its effective use are vital to national prosperity and international standing."

Here in America, we might ask ourselves: Are any of our leaders thinking in Baconian--or Thatcherian--terms? Thinking that there might be something more important, say, than tax cuts that are proposed, but not enacted? Thinking that there's something more important than tax increases that are proposed, but not enacted? Thinking that scientific problem-solving--a cure for Alzheimer's again leaps to mind as an obvious project--is better than positional point-scoring? Thinking that America will have to invent its way out of its economic crisis--and that such invention should include the medical sector? If such visionary figures seem scarce today, we can at least hope that the Baconian agenda of scientific progress is so obviously a winner that some politician will grasp it and seek to revive it.

As Dyson observers about Bacon, "He told us to ask questions instead of proclaiming answers, to collect evidence instead of rushing to judgment, to listen to the voice of nature rather than to the voice of ancient wisdom. Bacon predicted accurately the growth of modern science. In the centuries since he wrote, modern science transformed the problem of human destiny. Destiny is now no longer an unalterable fate, irreversibly good or evil. Destiny has become a continuing experiment in which we are free to learn from our mistakes."

Yes, destiny is something we can alter, or maybe even reverse, if we have to. But first, before we can do anything, we need to be reminded of a grim lesson of history: As Thatcher said, a nation that "does not value trained intelligence is doomed." With that sobering realization in mind, enlightened Americans can then go about shaping a better national destiny.


I think what Paul describes here is certainly a trend, but it has its limitations.

If each drug takes $1 billion to reach the market and 10 million people use it over its patent protected lifetime, then each patient contributes, on average, $100 to the development of that drug. If we keep shrinking the denominator, then the economics become more difficult. Taken to the extreme of personalized medicine, with one specific drug for each person, we cannot expect that one person to cover the $1 billion development cost. Even if the development cost drops to $1 million per new drug, the economics won't work.

I think the average development cost would need to drop to $10,000 per drug to be reasonable. To reach this price, we would need to exclude the FDA completely--allow drugs to be marketed without prior FDA approval--or allow the FDA to approve the process of drug development instead of each specific drug. With this arrangement, the FDA would evaluate and approve the process of developing personalized medicines, but would then stand aside and let the drug companies deal directly with patients, physicians, and managed care organizations.

Just like drug companies which built their business models on blockbuster medicines, the FDA will need to rethink its approach in the era of micro-market and truly personalized drugs.



I'd like to riff for a little bit on Jim Pinkerton's earlier post on whether we should be bullish about the future of medical innovation, or more cautious for any number of reasons.

The forces he talks about are all very real: green eyeshade accounting that is increasingly skeptical of the economic benefits of medical innovation, trial lawyers and bureaucrats whose job it is to ensure that even good intentions are punished, and a polarized political debate that ensures that even government's capacity to create a hosptiable framework for innovation (which it can do) is paralyzed.

I think there's something to be said for all of those problems, but I'm still bullish - in the medium to long term. As for what country we should be bullish about, that's a good question.

I also don't think that the life-sciences industry is quite where aviation is today - although his point is well taken. Huge gains were made in public health and longevity at the beginning of the 20th century, with the declines tailing off in the last seveal decades.

Still: heart disease mortality has fallen by roughly 50 percent in the last 50 or so years. AIDS, though still incredibly dangerous in poorer nations, has been tamed. The war on cancer has seen some impressive tactical victories, even though much of the field remains enmeshed in the molecular equivalent of trench warfare (slogging through the massive reams of data emerging from cancer genomics, etc).

I think a better description of where we're at now is that the last generation breakthroughs in medicine, for want of a better term, blockbusters targeted at large populations, has run its course. Maybe somebody will come up with a better statin, or better blood pressure drug, but patent expirations for many good drugs have made that hill an awfully big climb at both the FDA and with payers.

That also coincides with wealthy nations in the U.S. and Europe discovering that their current health care and pension entitlements are not sustainable given the graying of the population and slowing economic growth. That gives the upper hand to the green eyeshade types who's first impulse when they see a new drug or a new device is to say "no".

But, as Jim has written elsewhere, no amount of cost-cutting will allow us to grapple with the financial tsunami of caring for Alzheimer's patients; or deal with the inevitable rise in chronic diseases.

We can't continue subsidize the current U.S. health care system. I'd sum that up as socialized medicine at capitalist prices for taxpayers. Until consumers face real price signals in health care, the system will continue to be an expensive and inefficient mess.

Where will the innovation come from? First, I think we need better incentives for the right kinds of innovation. As I understand it, nearly 60% of health care costs are invested in labor. We need to reward innovations that sharply reduce health care labor costs, or substitute less expensive labor (nurses) for more expensive labor (doctors) through better diagnostics and decision support tools.

In a world where consumers drive more of their own health care decisions and are also are financially responsible for more routine care, I think we'll see quantum leaps in care coordination, along with labor saving devices.

Think about it: most of what you want to know from your doctor is driven by what he or she knows from a little bit of blood that is analyzed by the lab. Without the lab, the doctor's utility to you is sharply decreased. The biggest value to the patient is in the prevention and monitoring disease through "biomarkers" like blood pressure, cholesterol, sudden weight gain (or loss), etc. I could easily imagine most of that work done cheaply while you're shopping for groceries, at your local retail clinic staffed by a nurse that sends a report to your Gmail account.

When we become seriously ill, we want information from the best and the brightest, not the middle of the bell curve. That means a service economy in health care information (like Best Doctors) that makes that knowledge available to the average patient, not to only the elite patients. As the costs of whole genome sequencing drop, the kind of personalized cancer care that Steve Jobs sought for his cancer, will become available to all.

When will this disruptive innovation arrive? I think that all of the basic technology is either already here, or will be soon. But the system isn't designed to encourage entrepreneurs to displace the very labor and capital intensive parts of the system, which will fight fiercely to preserve the status quo.

But I think that's a rear guard action that they'll eventually lose. They're just to slow and expensive, and the molecular revolution, moving even faster than Moore's law, will eventually break their monopoly on patient care.

So I'm (relatively) optimistic that we'll see a discontinous leap in health care productivity when we get the incentives right. And that should have other economic benefits, not only by freeing up money for other productive uses, but by allowing us to reconfigure retirement so that turning 65 is more like, say, graduating from college.

Maybe you take a few years off to travel or write your first Great American Novel, but then you'll return to the labor market because you've still got 30+ years of productive work ahead of you.

What country will embrace this vision first? I don't know. I think the U.S. has the best combination of the software skills, social networking, and life-sciences assets to make networked molecular medicine a reality, but we could just as easily get leap-frogged by someone else.


Dx July /05 IDC 3/9 nodes pos.. triple positive..a/c x 4..Taxol/Herceptin x 12 

Does the above make sense to you? Well, it does to thousands of people, mainly women, who log on regularly to the Susan G. Komen breast cancer web site. It's the first line of four lines in which the woman posting identifies her specific situation: when her cancer was diagnosed (July, 2005), what was diagnosed (Intraductal cancer with 3 out of 9 lymph nodes that were checked being positive for cancer), etc.
 
I mention this because one of the ideas that has spread widely among health economists is that people don't know much about their own illnesses and must totally rely on doctors for information. Thousands of people are proving that wrong every day. The people who post about their situation and about each other's often exchange thoughts about what drugs have worked and are available); what doctors should be doing ("Your doctor refused to let you have a copy of your records; that's a red flag."), etc.

In sharing their information, the people who post on Komen are illustrating Friedrich Hayek's point, in his 1945 classic article, "The Use of Knowledge in Society." Hayek, who, in 1974, co-won the Nobel prize in economics, argued that each person has information about his or her own circumstances that, if he or she is not allowed to use it, will not get used. Hayek argued that that is why markets work so well, especially compared to central planning by government.

One of the big problems with FDA regulation of drugs is that the FDA claims to know better than you what is good for you. The FDA does this without knowing as much as you can know about your situation. The people who post on the Komen web site are proving them wrong daily.
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Yesterday, the Senate voted 45-55 to defeat an appropriations amendment that would have permitted U.S. patients to purchase individual-use quantities of FDA-approved prescription drugs from Canadian pharmacies. According to The Hill, Sen. Barbara Milkuski (D-Md.), floor manager for the underlying appropriations legislation, based her argument against reimportation on safety concerns.

"You don't know that what you are taking has been made in Canada or approved from Canada or that that it comes from a real website or from a legitimate pharmacy," she argued. "We could be importing death."

Thanks to Paul Howard for pointing me toward "The Long Term Bullish Case for Pharma," published back in August by biotech VC Bruce Booth.

Booth outlines three solid arguments for bullishness: First, it's a rich world--growing richer, at least in many countries--and rich people want more medicine; second, people are living longer, and the longer we live, the more we consume medicine; and third, drugs are a relative bargain--despite well-publicized episodes of pharmaceutical sticker shock, a pill is usually cheaper than a stay in the hospital.

Good reasons all, but we might immediately note: These three conditions have been in place in the recent past, and yet as we all know, the pipeline of new drugs and devices has been drying up over the last two decades. Indeed, Pharma companies are laying off, and spinning off, their researchers. So what evidence can we point to that tells us that the drying-up/downsizing trend will reverse itself any time soon? Or at all?

One answer, of course, is that things move in cycles. Another answer is that a bad trend can't go on forever, because if it's a bad trend, well, people will intervene to stop the downwardness, and even reverse it--that's another way of saying that things move in cycles.

But of course, things don't always move in cycles--sometimes they "move," if that's the right word, in troughs. That is, there's little or no upward movement at all. In economic terms, we can recognize troughs in the form of "liquidity traps," as seen in the US in the 30s, or in Japan over the last two decades--and maybe in the US, now, too.

In scientific terms, we can think of "punctuated equilibrium," as another kind of trough. Punctuated equilibrium, of course, holds that progress--in the scientific and technological realm as well as in nature--is not a steady upward curve, but rather, a step-like progression, if we're lucky. As an example of punctuated technological equilibrium, we can note, for example, that commercial aviation has shown little increase in jet speed in five decades; indeed, if one factors in the now defunct-Concorde, jetliners move slower today than they did 35 years ago. So we can never know for sure when we are on the horizontal part of the step, or how long we will be stuck on the flatline.

And in historical terms, we can think of the Dark Ages in Europe; more recently, other civilizations have faced similar long troughs of stagnation and even decline, e.g. China, India, and the Arab world. One needn't be Spengler to realize that civilizational advancement is not a given.

Today, it certainly would appear that the domestic forces that have conspired against medical progress in recent decades--including, but no limited to, the usual suspects, namely, trial lawyers and regulators--have their foot firmly on the neck of medical progress and have no intention of letting go. And with apologies to Newton, we can say that a foot at rest tends to remain at rest.

Moreover, mindful of the historical truism that all great historical events have multiple causes, we should also say that other forces stand in sturdy opposition to Pharma bullishness. One such is the static-analysis fiscalist mindset that dominates Washington, which holds that money saved on "healthcare" in the short run is all that matters, ignoring the larger costs of such "savings" to society as a whole. And another negative force is the strange but enduring alliance between libertarians and greens that leaves our politics with a sense of fatalism, even nihilism, about even the idea of advancement stemming from public-private enterprises. NASA has been one victim of this libertarian-green alliance; the medical industrial complex has been another. Until someone figures out how to obviate even the most streamlined FDA, as well as widespread clinical trials and legal liability, medicine will always be a res publica--a public thing. So the libertarian dream of totally privatized medicine is just that--a dream. And in that case, it will be necessary to focus on reinventing the public-sector role in medicine.

In the meantime, in the real world, when will this wide-array phalanx of opposition to medical progress disappear in the US? Good question. Whoever can answer that question will, indeed, also have the answer to the question of when the Pharma bull market starts.

Of course, we should note that while these doleful conditions apply to the US, and also to Europe, there's no law that says that the rest of the world must be so shortsighted. Indeed, the ROW--most obviously, the rising countries of Asia--might well conclude that the self-strangulation of the Pharma sector is one more bad idea not to import from the West.

So the Pharma bulls could be running soon, somewhere.




Yesterday, Abbott announced that it would be spinning off its pharma business and keeping its device business.

What does it tell us about the financial health of the industry? Nothing that you didn't already know, but it's still worth repeating because the repercussions are still being felt.

The business model for the industry is in extreme turbulence and no one seems to know exactly how to navigate the headwinds (patent expirations, high costs and low productivity in drug development).

Derek Lowe puts it best:

But the thinking behind it is common to all the large drug companies, as this Wall Street Journal story details. It's just that various companies are running off in various directions in response. You have some saying "Gosh, we've just got to get back to our core business and do pharma better", while others say "Gosh, we've got to diversify - let's get some consumer products in here, some medical devices, animal health, anything less crazy than drug discovery". And even allowing for the fact that these companies are starting off from different places, with different levels of difficulty, it seems clear that no one really has a strategy that's convincing enough even to themselves. Something Has to Be Done, so everyone's doing Something, and hoping for the best.

In the aggregate, I think that there's plenty of reason to be bullish about the future of medicine. (For the case in depth, see Bruce Booth here.) But in the near term, things are going to get worse before they get better.

But we may also be seeing the development of a diagnostics driven future, where companies that can marry diagnostics to drugs at launch ("companion diagnostics) will get the most favorable treatment by regulators and payers.



Healthcare reform legislation has put intense pressure on medical products manufacturers. What we know about the law has set in motion regulatory changes that already have had far reaching (and costly) impacts. In a nutshell, they include:

• A $2.5B in branded pharmaceuticals excise tax starting in 2011, and increasing to $4.2B in 2018
• 2.3% excise tax on "taxable medical devices" starting in 2013
• Increased access to generics
• 32 million more people gained access to prescription drugs
• Increased transparency around physician payment (each event >$10 or >$100 annually)
• Increased focus on fraud and abuse (compliance program integrity, Anti-kickback Statute, False Claims Act, etc.)

One objective of the legislation that's been generally accepted is that, as a society, we need to achieve better health outcomes at lower cost. How to get there is the subject of great debate. Challengers decry the law and proponents applaud it as the gateway to a single payer system (and therefore the solution to what ails American healthcare). In reality, PPACA is only the tip of the iceberg! The real news is what's less known...



With the $1,000 genome fast approaching, the implications of Charley's post on "Knowing Which Patients Will Benefit First Hand" will become increasingly apparent.

In other words, drug and medical device companies are going to be slicing and dicing common and rare diseases into sub-populations with particular genetic variations that have a greater likelihood of benefiting from targeted therapies. As Charley points out, this is a win-win-win: for regulators, who can approve these drugs faster (and with less fear of being slammed by Congress later), for patients (who get more effective therapies), and companies (who can charge a premium price for even very small patient populations).

For instance, today Vertex Pharmaceuticals announed that it had submitted an application to the FDA for a new drug for cystic fibrosis, a devastating lung disease that kills people in the prime of their lives - their 30s and 40s - by basically drowning them from the inside out.

The drug, Kalydeco, targets the 4 percent of cystic fibrosis sufferers with a genetic mutation - that's 4 percent out of a total patient population of just 30,000 in the U.S. By the FDA's definition of an orphan disease (fewer than 200,000 patients in the U.S.) that's an orphan of an orphan.

Although the drug's benefits are modest (just a 10 percent improvement in lung function) it's still the first disease modifying agent available for CF. It's also expected to cost about $150,000 per year.

Here's a question for Charley (or anybody else). Is this model affordable in the long run? After all, increased efficacy is wonderful, and Kalydeco (assuming it pans out) sounds like a breakthrough innovation.

I think the model must be sustainable, but we're also going to have to revolutionize the process of drug development. It still took Vertex about 13 years to just get this application to the FDA. We've got to get much faster, cheaper, and more efficient in how we test and approve new medicines.

How do we get there? That's the big question.



Malaria kills over 700,000 people annually, particularly in poor, developing nations. (Wealthy countries, like the U.S. and Europe, solved their malaria problems decades ago through agressive spraying of DDT; now that the chemical is banned, poorer countries are left with bed nets and drugs, a decidedly imperfect solution. For terrific commentary on the massive bureaucratic bog involved in fighting Malaria - pun intended - I heartily recommend Africa Fighting Malaria.)

GlaxoSmithKline has, apparently, managed to develop a vaccine that can reduce the risk of malarial infection and severe malaria by about 50 percent.

This is an astonishing technical acheivement, given that malaria - a mosquito borne parasite - is very good at evading the human immune system.

If this study pans out, it will be an incredible achievement for GSK, and the Gates Foundation, which helped fund the research and clinical trials.

How much is this vaccine worth? Much, much more than GSK will ever be able to charge for it.

Of course, if they charge anything for it, they will be decried as greedy.

Why is it, exactly, that tech companies who manipulate software and make billions are lionized, while pharma and biotech companies are vilified for making life saving medicines?

Pop quiz:

Who invented Apple and FaceBook?

Who invented the vaccines for measles, mumps, and rubella, and probably saved more lives than any other human being in history?


In the past I've had discussions with some in the pharma industry about the fact that medicines only work for a percentage of the patients who take them. "Wouldn't it be nice to know beforehand who would benefit?" I would ask. "Not really," they might reply. "If only fifty percent benefit from my drug and we knew which patients would benefit beforehand, my market would be cut in half."

I've always held the opposite view. Look how hard it is to get the FDA to approve a new drug, insurers to reimburse it, physicians to prescribe it, patients to take it and continue taking it, and you can see how each of these hurdles would be lessened with better predictive information.

The FDA would be more likely to approve a drug that helps virtually all patients. The price could be set higher. If the pharmacoeconomics were stronger, reimbursement would be easier. Physicians would be more willing to prescribe a drug they know works. Instead of patients shying away from a 50/50 gamble, they might happily go for a sure thing.

Patient persistence and compliance are atrocious. (I've looked at markets where 75 percent of the patients drop off their "chronic" cardiovascular therapy by the end of the first year.) After all, why keep taking a drug that doesn't work for you?

Knowing beforehand which patients will respond to a drug ameliorates each of these significant impediments. And not surprisingly, this is the new paradigm in the pharma industry and is the reason that some drugs and companion diagnostics are released simultaneously. Consider Pfizer's new NSCLC drug Xalkori and the companion Vysis ALK Break Apart FISH Probe test from Abbott. The FDA approved the two together because Xalkori is indicated for locally advanced or metastatic NSCLC in patients whose tumors are ALK-positive. They go together naturally and symbiotically.


In September, AstraZeneca announced that Crestor failed to achieve the primary endpoint of a head-to-head clinical trail against Lipitor to prevent the progression of atherosclerosis. The full results of the SATURN trial haven't been released, but we do know that Crestor produced a numerically greater reduction in plaque volume, but the difference was not statistically significant.

Many of us act as if we are in a court of law and we want to know whether the results were objectively proved (they were statistically significant) or disproved (not significant). It's not that straightforward. Here are just two weaknesses of statistical significance: the threshold used to show significance and the sample size.

The use of statistical significance requires that the odds of being wrong--in other words, the results were due to bad luck--are less than five percent. However, sometimes the threshold is ten percent, one percent, 0.5 percent, or even 0.1 percent. The five-percent level is the conventional choice.

It is well known that statistical significance is a function of the sample size. For instance, if the SATURN trial had enrolled many more then its 1,385 patients, perhaps the results would have been significant and the headlines would have said, "Crestor better than Lipitor," instead of "Crestor miss vs Lipitor."

If the lack of statistical significance shown in the SATURN trial was due to the arbitrary reason that not enough patients were enrolled, and the very level used to test significance was arbitrarily selected, why do so many people uphold statistical significance as a measure of objective, rational truth?



Generic drug shortages continue to perplex hospitals, policymakers, and regulators.

New vaccine for meningitis faces delays after FDA approval.

Innovation: Is the U.S. slipping, or is the rest of the world catching up?

Where the cuts will come from if the deficit "Super Committee" can't come up with a deal.

HHS closes CLASS early, and (apparently) permanently.


From Family Practice News on October 6: "PPI Use Linked to Incidence of C. Difficile Illness". Seems logical enough. One of the risk factors in taking acid-reducing drugs is the increased risk of certain gastrointestinal and respiratory infections. This is thought to be due to decreased acidity in the stomach, making it possible for otherwise-sensitive pathogens to survive. Numerous studies have demonstrated links between the use of proton pump inhibitors (PPIs) and Clostridium Difficile-Associated Disease (CDAD), a really nasty bacterial infection of the gut that is usually seen in people who have been on prolonged courses of antibiotics.

Since most clinical trials on this topic have been conducted in Western countries, a Japanese group wanted to see if this trend held true in Japan. They evaluated the hospital records of 793 patients admitted in the spring of 2009 and compared the rate of CDAD in patients who had, and had not taken PPIs. They found a three-fold increase in CDAD in the PPI patients (P=0.04). Reasonable enough. But this is where it gets interesting.


Their concluding paragraph is:


"On multivariate analysis controlling for age; sex; use of antibiotics and H2 receptor agonists [sic]; and long hospital and ICU stay, the researchers noted no significant differences in the incidence of CDAD between PPI users and non-PPI users because of missing data."


I don't mean to be a stickler for details, but they made some teensy mistakes. First, they didn't control for antibiotic use, the main cause of the infection. Second, They didn't control for H2 antagonists, like Zantac, which do pretty much the same thing that PPIs do--reduce stomach acid. When these variables were taken into account all differences went away. Finally, the concluding paragraph not only misrepresented the entire study, but actually contradicted it. Thus, the real title should be: "PPI Use NOT Linked to Incidence of C. Difficile Illness". Oy. Someone really got this one wrong.


Although this study is absurd enough to be amusing and won't do any harm, it points out something that we all encounter that really does do us harm--bad headlines in the press. They are omnipresent, especially pertaining to health issues. My favorite is "Diet Soda Linked to Obesity," which came out recently, and probably had people hurling Coke Zero bottles out their windows. Of course, diet soda does not cause obesity. Obese people drink more diet soda--that is the link. Playing basketball does not make you tall. Tall people play basketball. But even some of my highly educated friends took away only the information from the headline.


In our fast-paced lives, headlines may be the only part of an article that is actually read. Poorly worded or incorrect headlines can do real damage by causing people to make wrong, possibly harmful choices. This is not especially funny.


One of the hotly debated issues that continues to surface and resurface is the question about conflict-of-interest concerns when it comes to physicians and their relationship to manufacturers and specific products. In a nutshell, critics argue that physicians should have no monetary relationship to the products they use, recommend or prescribe in the treatment of their patients. Their only concern should be their patient's well-being, and a financial tie to testing or products puts that focus at risk. Taken on face value this seems like a reasonable position. But is it?

Imagine an experienced orthopedic surgeon who decides he has a better idea for a surgical implant in the treatment of lower back pain, especially degenerative disk disorder than what's on the market. He builds a prototype, gets a patent, takes it to a manufacturer who likes the concept, agrees to invest in clinical trials and successfully commercializes the product. The manufacturer has a royalty agreement with the physician-inventor and both parties make a lot of money as the market realizes the superior value of the product based on legitimate, objective outcome data. So what's the problem? If the inventor believes in his product line, thinks it's in the best interest of his patients to use it, why should he be penalized from using it... and since he invented it, why shouldn't he be compensated for it? Based on some policy positions this isn't a good thing.



Who says bipartisanship is dead?

U.S. Senators Michael Bennet (D, CO), Richard Burr (R, NC), and Amy Klobuchar (D, MN) have proposed legislation that would (among other things) rescind onerous conflict of interest rules for FDA advisory committees enacted in 2007.

FDA Commissioner Margaret Hamburg, among others at the FDA, have admitted that the current COI regime makes it difficult for the agency to recruit the most qualified experts for its advisory committees.

Kudos to Senators Bennet, Burr, and Klobuchar, for working across partisan lines to fix a serious problem that prevents the FDA from getting access to the best scientific advice available. The new legislation would merely require the FDA to be subject to the "same conflicts of interest requirements as the rest of the federal government."

For more on how excessive conflict of interest regulations are impeding innovation, see this paper by noted NYU law professor Richard Epstein, and this post I wrote for National Review.


As part of his deficit reduction plan, President Obama recently announced two proposals that would reduce innovation and employment in the biomedical industry.

First, the president has proposed lowering data exclusivity protections for biotech medicines from 12 years to 7, which would allow "biosimilars" to come to market much faster than under current law (the Affordable Care Act, signed by the president in March 2010).  This would sharply reduce incentives to invest in biotech medicines, as discussed in this recent AEI paper by Henry Grabowski:

Data exclusivity periods of twelve years or more provide an "insurance policy" to stimulate innovation in cases in which effective patent protection is limited in scope or time, or uncertain in nature. If the data exclusivity period is only a nominal five to seven years, many products with limited patent protection, regardless of clinical value and importance to patients, will not enjoy sufficient exclusivity time to recover R&D costs and earn positive returns.

President Obama also wants to expand Medicaid price controls for "dual eligibles" in Medicare's Part D prescription drug program, which may deter innovation and likely raise premiums or reduce prescription drug plans avaialble to many seniors. For more on this perspective, see this paper, from Douglas Holtz-Eakin and Michael Ramlet.

While controlling health care costs and lowering the deficit are critical national priorities, they should not come at the expense of the most innovative medical therapies.  Cost shifting through price controls or reducing market exclusivity for biotech medicines would impact all innovative therapies, regardless of their overall impact on health or health care costs.

A better approach is to focus on Medicare (and Medicaid) reforms that encourage recipients chose health plans that coordinate care or use the most effective therapies (new or old) to improve health outcomes at lower cost.   

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BioCentury has an excellent article leading this week's issue on the many forces dragging down venture capital investment in biotech. Sure it's a tough economy all around, but adding to the stress is the "effects of regulatory and health care reform", which "drive up costs for portfolio companies on the one hand and diminish returns on the other."

VC funding for biotech is certainly down substantially, from $4.6 billion in 2006, to $1.8 billion (so far) in 2011. In general, VC funding is also pulling back from biotech and medical devices, and switching to health care services and IT.

Sapping investor enthusiasm is the ever rising costs of clinical trials, and "FDA conservatism for many different programs." Ironically, for all of the talk in Washington about tackling the costs of chronic diseases, the tougher regulatory environment is actually pushing companies out of investments in better therapies for diabetes, cardiovascular disease, and obesity.




The New England Journal of Medicine has a thoughtful article on labor productivity problems in health care:

Of the $2.6 trillion spent in 2010 on health care in the United States, 56% consisted of wages for health care workers. Labor is by far the largest category of expense: health care, as it is designed and delivered today, is very labor intensive. The 16.4 million U.S. health care employees represented 11.8% of the total employed labor force in 2010. Yet unlike virtually all other sectors of the U.S. economy, health care has exprienced no gains over the past 20 years in labor productivity, defined as output per worker...

Zero. Zilch. Nada. No productivity growth in the past 20 years, even as health care employment has surged and the rest of the economy has benefited from enormous productivity gains. (Arnold Kling and Nick Schulz also discuss the productivity problem in depth in a recent National Affairs article.)

Why is labor productivity in health care so appalling? Lots of good reasons, but here's the fundamental one: Our health care system, as its constituted today, has no incentive to ask whether the adoption of any new good or service is actually "worth it".

In other sectors of the economy, if a business makes a bad capital investment, or hires too many workers, they will go belly up as prices rise beyond the tolerance of consumers. Consumers will refuse to buy their services, and switch to more efficient competitors. Third party payment systems (especially Medicare) have so insulated consumers from prices that there's no reason for health care providers to become more efficient. In fact, they usually lose revenue if, for instance, they do a better job of reducing hospital readmissions.

In health care, if a hospital makes a bad decision to add a new wing, or buy some fancy piece of technology they don't need...there'll be a ribbon cutting ceremony and policymakers will cheer them on.

Until we find a way to drive real competition - and thus real productivity gains - in the health sector, health care spending will sap resources from other, more productive sectors of the economy.



The interim report from the President's Council on Jobs and Competitiveness is out, and one of its key recommendations (in the section on simplifying regulatory reviews) is to improve the FDA's approval process. Here's the key takeaway:

...our medical innovation ecosystem is in jeopardy. Investment in the life sciences area is declning at an alarming rate, because of the escalating cost, time, and risk of developing new drugs and devices. While many factors have contributed to this decline--including challenges around reimbursement and the general state of the economy--an important factor is the uncertain FDA regulatory enviornment. These concerns come at a time when Europe, China, and India continue to entice companies to take their medical research and development enterprises abroad, putting at risk our ability to keep private investment and jobs here at home.

To underscore its recommendation, the report notes that in 2010, while the U.S. venture capital invested in biotechnology companies fell by 3%, European investment increased by 30%.

The Council's recommendations are relatively mainstream - in fact, several are already included in the recent PDUFA V technical agreement, like developing a better framework for weighing the risks and benefits of new therapies and diagnostics with input from stakeholders, patients, and consumers. The report also recommends the adoption of a progressive approval framework, based on its current accelerated approval pathway.

These are all good ideas. They aren't radical, but they move the ball in the right direction. Kudos to the Council for focusing on medical innovation, and recognizing the role that regulations can play in advancing innovation and entrepreneurship, or strangling it on the vine.


Germany has embraced a new comparative effectiveness pricing scheme that allows companies to set drug prices at launch, but then requires them to submit additional evidence to support that price to the German Federal Joint Committee (G-BA). 

Within six months, the G-BA and the office for health technology assessment (IQWig) conduct a cost-benefit assessment to a comparative therapy that the office chooses.  If the new product doesn't outperform the "comparator" it will be "reference priced", means it will have the same priace as all comparable drugs in the therapeutic class. 

This is a bad idea, and it will hamstring patient access to new medicines in Germany - the birthplace of the global pharmaceutical industry.

The new pricing scheme forces companies to go through two separate processes, one for drug approval (to the EMA), and a second for market access, to the G-BA and IQWiG. And because it can take years for companies to develop comparative effectiveness data, it will delay patient access to new therapies.

It also raises a myriad of other questions: What's the right comparator drug? What happens if a new drug comes on the market just before a new product launches, but is then held to be the new "standard of care" that new products must compare themselves to?

Already two companies, Eli Lilly and Novartis, have pulled drugs from the German market rather than risk reference pricing to generic levels that would have been used as a benchmark for other national price control schemes.

Less innovation, and less patient access to new therapies. Hardly a recipe for improved health in Germany or any other country.

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You can read the full article here, by Luke Timmerman. But his core point is this:

The FDA is one of the easiest punching bags in American politics. Depending on your point of view, it's either too hard on business with its unreasonable demands, or too soft on those predatory drug companies seeking to profit off Grandma's illness regardless of whether the products are safe.

When it does its job well, the FDA is like an umpire in baseball. Nobody notices. When it screws up, it's screaming headline news. The polls show various scandals have taken a toll: About half of the U.S. public thinks the FDA is doing a bad job, and the perceptions are that drug companies put profits ahead of patients.

Timmerman worries that industry critics may be taking their toll on the "umps" and that

...the FDA could get distracted from its main job of ensuring product safety and effectiveness, if it cares too much about industry's wishes. And there are plenty of companies willing to cut corners and do the quick-and-dirty thing whenever they can slip it by the FDA, so there has to be a well-resourced, tough watchdog on alert.

I think the consensus that the FDA has fallen behind on some critical science issues extends well beyond industry, including the agency's top leadership (as evidenced in its recent reports), and President Obama's Jobs Council. The Council recently released a report noting that there was an alarming decline in investment in the life sciences, and that "an important factor is the uncertain FDA regulatory environment."

Other things that Timmerman thinks the industry should embrace - like a voluntary ban on direct to consumer advertising - are perennial complaints (from inside and outside the industry) that I don't think hold water. Sure, some industry ads push the boundaries of good taste, and no one should tinker with their body's chemistry needlessly. But, on other hand, we've had millions fewer heart attacks, and thousands of fewer suicides, because the industry destigmatized the treatment of chronic illness through direct-to-consumer advertising.

And, if the industry is such a marketing behemoth, why is it that 75% of all drugs prescribed in the U.S. are for generics?

I also couldn't disagree more with his suggestion that the FDA ban all experts on FDA advisory committees with any ties to industry. In point of fact, I don't know of any evidence that working for industry has biased the advisory committtee system, while restrictive COI regulations have certainly prevented qualified experts from serving on committees.

Finally, though, I do agree that the FDA is long overdue for an increase of funding for its regulatory science initiatives, and that industry should be trying to create an pipeline for advancing regulatory science. The Reagan-Udall Foundation was supposed to do this, but Congress has refused to fund it.

At the end of the day, the FDA is a punching bag because no drug is ever safe and effective for everyone, and, conversely today's poster child of a dangerous drug (thalidomide) will turn out to be tomorrow's life-saving medicine (as thalidomide later turned out to be for some cancers and treating AIDS complications).

The FDA is supposed to generate binary answers about the drugs it accepts or rejects. Those black/white answers obscure an awful lot of gray area by simple virtue of the complexity of the underlying science. By inviting more input from stakeholders - patients groups, industry, and academics - and creating a regulatory framework that focused on empowering physicians and consumers with better information about the risks and benefits of new therapies - the agency could improve its own reputation because it wouldn't have to pretend it was just calling balls and strikes.


I agree wholeheartedly with Alex Tabarrok's analysis of personalized medicine. He has said it well and succinctly. The only point I would add to the analysis is that Alex is operationalizing the late economist Friedrich Hayek's insight about decentralized information, something I addressed here.

I also agree with Alex's key policy proposal, although I would put it more starkly: abolish the FDA's monopoly power to prevent drugs from appearing on the market and, instead, have it be a government-run version of Consumer Reports. That way, we could have the upside of the FDA's expertise without the downside of its having coercive power over our health choices. I have used Consumer Reports to guide my purchase decisions. I would be incensed, though, if the organization that publishes Consumer Reports prevented me from buying something simply because its employees thought that purchase to be a bad idea. The FDA could even be given somewhat more power than Consumer Reports has, namely the power to require any drug not approved by the FDA to contain a warning label saying, in big letters, that is has not been so approved.

On Alex's idea of "universal medical records," however, I demur. Giving the government the power to know our health histories would be an extreme violation of our right to privacy and an extreme violation of the Fourth Amendment to boot.


Multi-million dollar atheletes like Peyton Manning are willing to try anything to get, and keep, their competititve edge and heal faster for the next game. The next frontier in high-tech sports medicine: stem cells.

But since atheletes access to stem cell therapies is restricted in the U.S. outside of carefully controlled clinical trials, players are increasingly traveling abroad to access cutting edge treatments. Notes ESPN:

Thanks to a mix of politics, bureaucratic foot-dragging and scientific caution, American doctors are prohibited from culturing stem cells, let alone culturing them into stages as advanced as their foreign counterparts. Hence Manning's trip abroad. Bradley, a former Penn State defensive back, doesn't mince words. "We're at least 10 years behind the rest of the world," he says.

The 57-year-old doctor should know. In January 2009, after Hines Ward left the AFC championship game with a torn MCL, Bradley administered a form of platelet-rich plasma (PRP) therapy, a strange and novel procedure at the time. Placing a sample of Ward's blood in a centrifuge, Bradley isolated the plasma and platelets, which contain natural repair engines, then reinjected the serum into the receiver's injured knee. Ward returned to the field two weeks later for Super Bowl XLIII, a remarkable recovery he and Bradley credit to the procedure. Had the Steeler opted for rest and physical therapy instead, the two say Ward likely would have watched the big game from the sideline.

Whether or not these stem cell procedures are working as advertised - beyond a placebo effect - is open to question. But one thing that seems clear is that the technology will, in fact, pan out sooner or later. And it might be sooner if, instead of banning the process, we worked on collecting more information on what, exactly, these small clinics are doing and whether or not it's working.

That way, rich atheletes would basically be paying - very handsomely - to become the earliest adopters testing cutting-edge medicine, and advancing science at the same time.


Having written pieces on the issue of regulation and innovation... one of which appeared in Medical Progress Today... (Regulation's Impact on Innovation: A Two-Edged Sword) I was struck today by a blinding flash of the obvious.

The Senate Finance Committee has gone on the war path against three of the nation's largest home health agencies, potentially setting in motion a fraud and abuse case. At the heart of the attack is mounting 'evidence' that alleges these companies changed clinical practice to maximize reimbursement based on guidelines set by Medicare, their largest customer. Really?

The goal of business is to maximize shareholder value, and value is realized when products and services meet a need for a defined market segment. In this situation, Medicare was concerned that eligible patients wouldn't get the required visits they needed, so it created bonus payments for companies to provide more services. Clinical practice was allegedly modified to maximize the new incentives that CMS instituted to drive certain behavior.

Assuming this is true, why the Senate Finance Committee should find this surprising is the real surprise here! If CMS was really interested in the quality and appropriateness of service delivery, it should focus on outcomes and audit the quality and appropriateness of the services delivered and the outcomes achieved.

Unfortunately, not trusting the industry to deliver appropriate services based on clinical judgment, it chose to create payment incentives instead. It wanted to ensure more services would be performed; it got what it wanted -- more services -- and now it's spending taxpayer dollars looking for evidence of abuse. Reward volume, and you get volume. It's that simple. The government should see providers' behavior here as a consequence of its own actions.

CMS has a role and right as payer to demand accountability for the quality and effectiveness of what it's paying for. Better yet, the consumer should be expected to drive accountability, since they're the ones receiving the services, and they do this in the purchase of goods and services in other parts of their lives.


Imagine you're a 50-year-old male in good shape, with a normal weight, with decent blood pressure, but with a family history of cardiovascular disease. You are considering taking cardiovascular Drug X. You look at the clinical trial results and find that 50 percent of patients taking Drug X improved while only 25 percent improved with a placebo. You look at the patient segmentation (results by characteristic) to see what someone with your characteristics can expect. Unfortunately, the patient stratification isn't perfect, but you believe that 60 percent of patients who are similar to you improved. However, you remember that you take an aspirin a day, exercise vigorously, are Asian, and eat a fatty diet. The results don't cover these finer breakdowns.

One way to get to the goal of personalized medicine would be to increase the number of patients in each clinical trial by a factor of 10 or 100 or 1,000 and clearly specify every attribute of every patient. At some point, perhaps, there would be enough stratification so that you could view the results for someone like yourself. But the clinical trial costs would go through the roof and, with such high costs, fewer new drugs would be developed. There might not be enough qualified patients willing to enroll in these big clinical trials, which is a problem drug companies face today, even with smaller trials.

Even with larger clinical trials, two huge problems still remain: (1) Those clinical trial results apply to you (Asian, male, 50-years-old, etc.) only if you are like those tested. However, you may never know if some key attribute is different (e.g., triglyceride or creatinine levels or genetic differences or diet). (2) Even with such a fine level of segmentation, perhaps only 70 percent of the patients in your group improved. You still don't know if Drug X will help you or not. You could get lucky and end up in the 70-percent group or be unlucky and end up in the 30-percent group.


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If you say PDUFA (that's Prescription Drug User Fee Act) in front of people who don't know what it is, their first reaction just might be...to think that you just sneezed.

Actually, PDUFA is a critical source of funding for the FDA, enabling it to hire hundreds of staffers to review new drug and medical device applications in a (relatively) timely manner.

From the perspective of patients, industry, and even the FDA, PDUFA has been a huge success. Since it was created in 1992, the time it takes for the FDA to review new drug applications has plummeted from over 30 months to about 16 - a tremendous acheivement.

And, from what we can tell, the increase in speed (not approval - just the time it takes the agency to review of new drug applications) has not resulted in patients being exposed to any more unsafe new drugs than before PDUFA passed. In fact, some research suggests that the FDA could speed things up quite and still offer significant net benefits to patients.

However, PDUFA is only renewed once every five years - with the latest iteration falling in September 2012. The PDUFA technical agreement between industry and the FDA was made public last month. More about that soon, but in the meantime, here's some media background on the agreement:

Campaign for Modern Medicines

http://modernmedicines.com/entries/pdufa_v_reauthorization_technical_letter

PDUFA V agreement

http://www.fda.gov/downloads/forindustry/userfees/prescriptiondruguserfee/ucm270412.pdf

Pharma Times

http://www.fda.gov/downloads/forindustry/userfees/prescriptiondruguserfee/ucm270412.pdf

Blog #7: New FDA strategic plan to advance regulatory science

http://www.fda.gov/downloads/ScienceResearch/SpecialTopics/RegulatoryScience/UCM268225.pdf

For a completely different - and much darker view of PDUFA - see this article by Marcia Angell.


I applaud Alex Tabarrok's vision of the future, and in various venues have pointed to a more visible role for Consumer Reports in healthcare. In fact, Consumer Reports has recognized this role as well... In the last several years the organization has published a series of excellent articles shining a spotlight on serious safety problems in our nation's healthcare delivery institutions. It has also invested in additional capability to meet demands in this area.

The idea that Consumer Reports could play a role in highlighting the relative effectiveness of drugs and devices on the market is also a subject I discussed in a keynote presentation at the 4th Annual Orphan Drug Conference earlier this month. So the value of the venue, or for that matter, the model of Consumer Reports, in providing trusted information is not at issue. In fact, there are many other reliable sources of information that target either the consumer or the professional audience -- for instance The Cochrane Collaboration or The Berkley Wellness Newsletter to name just two. Having said that, the availability of multiple voices in the interpretation of safety and efficacy is a good thing. Such interpretation shouldn't be left to any one organization. Neither the FDA nor any other body should have a monopoly on such important matters.

But if we're expecting that the self-policing model or consumer awareness alone will replace the legitimate sanctions of the FDA (assuming a dramatically improved process), then we just need to look at approximately 100,000 fatalities occurring in U.S. hospitals annually... because doctors and staff don't wash their hands often enough.

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Peter Thiel's powerful essay on the End of the Future is eminently worth reading. (Hat tip: Jim Pinkerton.) Sixty-five years or so ago, technological pessimism was nearly inconceivable and science seemed like an endless frontier.

The FDA recently announced a pilot program for CMS and FDA to conduct parallel reviews of new medical devices - shortening the time (hopefully) it requires for CMS to reimburse for new FDA approved products.

Craig Venter wants to use microbes to churn out new drugs, fuels, and food.

Shortages of old generic drugs is slowing research into new medicines.

Europe: Spending on orphan drugs is affordable. At least until 2020.

The Economist discusses America's two tier health care system, but without discussing the perverse tax treatment of health insurance.


Prostate cancer survivor (and former "Junk Bond King") Michael Milken has an op-ed in today's Washington Post, discussing the recent U.S. Preventive Services Task Force recommendation that otherwise healthy men should not routinely get a PSA test to check for prostate cancer. Although high levels of prostate-specific antigen (PSA) may signal the presence of prostate cancer, the test yields many more false-positive than true-positive results, which in turn leads to unnecessary treatment that is itself often dangerous--sometimes leading to incontinence or impotence.

Milken acknowledges the risks of over-treatment. But he instead calls for more, rather than less, testing because it can "raise a red flag calling for a doctor-patient dialogue on medical options, risks, benefits and costs. We need to make better use of it, not ban it, and, as the American Cancer Society recommends, better inform patients of overtreatment risks." He then argues that the Task Force "recommendation could produce a cruel form of rationing in which the well-off and well-informed would get PSA tests while many of the poor wouldn't."


Alex Tabarrok's contribution highlights one of the main difficulties the health care industry and patients will have to confront over the coming decades as we move in the direction of more personalized treatments.  Ordinarily, innovation tends to drive prices down. But if drug firms continue to face very high fixed costs associated with the FDA approval process--even for products that treat increasingly smaller patient populations--third party payers will naturally balk at paying prices high enough to compensate for R&D expenditures. 

Alex suggests moving "away from pre-market gatekeeping and towards post-market surveillance and information provision." But critics argue that a market for drug safety and efficacy information, a la the Consumer Reports model Alex suggests, just isn't feasible. Fortunately, we don't have to wait to see whether such a market might or might not develop. It already has - in the form of guidance for physicians on off label uses.

Briefly, off label use occurs when a doctor prescribes a drug for a condition for which the FDA has not approved it. It's not only legal, but often constitutes the medically recognized standard of care. And because they're not FDA approved, off label uses provide some pretty good insights into how the market can and does provide usable information even in an industry characterized by substantial information asymmetries.

Doctors learn about off label uses in a variety of ways, but one of the most important is their inclusion in practice guidelines and treatment compendia published by physician professional associations, non-profit organizations, and even the federal government. An off label use doesn't end up in a treatment compendium just because a drug manufacturer says it's safe and effective; there has to be some pretty strong evidence to support the use. Nevertheless, a study by Howard Beales that looked at off-label drug uses eventually approved by the FDA found that these uses appeared in official treatment compendia an average of two and a half years before FDA approval. Thus, arguments that a Consumer Reports model for pharmaceuticals could never work have already been proven wrong. In fact, in some regards, it seems to work even better than the FDA.

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Alex Tabarrok's vision of a "Consumer Reports" FDA depends on the widespread use of biomarkers and diagnostics - not just in the labs of pharmaceutical and biotech companies, but in your doctor's office or local pharmacy. Widespread consumer access to those tests - and confidence on what the tests are telling us - is still several years away.

What's slowing the field down?

On the industry side companies are investing heavily in using biomarkers to help guide new drug development, and are clearly shifting to an R&D strategy built around personalized medicines, but so far (outside of cancer treatments) those investments haven't found their way into many drug labels or companion diagnostics.

A 2010 report from the Tufts Center for the Study of Drug Discovery noted that while many companies are submitting data for the FDA's program for Voluntary Exploratory/Genomic Data Submissions, they also said that "they cannot use pharmacogenomic data in an approval package due to a variety of regulatory concerns."


Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation. This is a quote from "The Use of Knowledge in Society," an article by the late Friedrich Hayek in the September 1945 American Economic Review. This article, with many others, led to Hayek being co-winner of the 1974 Nobel prize in economic science.

In future posts, I will lay out the connection between Hayek's insight quoted above and centralized control of drugs by the Food and Drug Administration. I'll show that the FDA is in the role of the central planner and cannot do as good a job as other more-decentralized organizations--and individuals themselves, depending on these decentralized organizations--can do.

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I think my credentials as a hardcore Steve Jobs fan and all-around Mac fanboy are in good order. Indeed, it's because of my reverence for the late Apple mogul that I feel all the more inspired to say that it would have been, as Jobs liked to say, "insanely great"--not only for him, but or all of us--if he had invested more political and policy effort into preserving his own life.

If Jobs had sought to use his own affliction, pancreatic cancer, as an argument for broader medical reform, he would have had a tectonic impact on the healthcare debate. And perhaps he would have helped himself--as he also would have helped all the rest of us, including his own descendants.

In 2010, after the ominous details of Jobs' multi-year illness became known--specifically, the news that he had received a liver transplant in Memphis--Jobs joined with then-California Governor Arnold Schwarzenegger to make a public pitch in favor of increased organ donation. We might never know, to be sure, what else Jobs might have quietly done on behalf of cancer research, but at the same time, we do know that he didn't make any great public effort--because if he had, Jobs being Jobs, we all would have heard about it.


In a new NVCA survey of over 150 U.S. venture capital firms, VC investors "identified FDA regulatory challenges as the most significant factor driving away investment from startup companies that are bringing critical therapies to market."

You can download the press release and survey here.  Overall, 61 percent of firms surveyed cited "regulatory challenges" as having the greatest impact on VC investment. 

U.S. Senator Michael Bennet (D, CO) commented on the survey: "As a driver of our global economy, the FDA should constantly examine its regulatory framework with a 21st century lens...This is an urgent issue both for giving our patients the greatest access to lifesaving therapies and for our national economic competitiveness. We must strive to provide our nation's drug, biotechnology, and medical device startup companies with regulatory clarity and predictability in a way that is safe for patients but also meets their expectations regarding innovation."

Senator Bennet's comments are rapidly becoming a bipartisan refrain in Congress - which is good news for patients, industry and even the FDA.


One of the reasons I work in the pharmaceutical industry is the hope that in some small way, I'll prevent people like Steve Jobs, my friend's daughter, and my father from dying before their time.

I know the companies I work for have the same objective, but the FDA seems more concerned about preventing the next Vioxx debacle. The net result is long approval times and fewer new drugs. Note how one new drug, an intranasal formulation of a pain medicine which has been on the market in both oral and IV/IM formulations for over two decades, still took a decade to receive FDA approval. And this drug (Sprix, intranasal ketorolac) will be used by most patients for only two to three days and by no patients for more than five days. Does it cause local problems in the nose? No. Do we get blood levels comparable to the other formulations? Yes. Is it quick and easy? Yes. Would Steve Jobs have taken ten years to make such a decision at Apple? No.

Of course, it's bad when drugs hurt the very patients they are supposed to help, but we can't forget that one single disease, lung cancer, kills more Americans each year than the combined U.S. casualties from battle in the Revolutionary War, the War of 1812, the Mexican War, the Spanish-American War, World War I, the Korean War, the Vietnam War, and the Persian Gulf War. The cost of being so cautious, with lung cancer alone, is a dead American every few minutes.

[Disclosure: I have financial interests in Sprix, Merck, and Apple.]

The premise of our current pharmaceutical regulatory environment is to test new drugs for safety and efficacy and only allow on the market those drugs that pass the hurdle. By understanding the characteristics of a new drug before it is marketed, we won't be surprised after it is marketed.

Let's apply this logic to the granddaddy of all drugs: aspirin (acetylsalicylic acid).

Aspirin has been available since 1899 and has been used over one trillion times. If we are going to know about anything, it will be aspirin. Yet it is humbling to realize how little scientists really know about aspirin. A recent news report said that seniors who take aspirin daily are twice as likely as non-users to have late-stage macular degeneration, an age-related loss of vision.

The FDA has been given the job of ensuring that the medicines available to Americans are safe and effective and the FDA usually makes its assessments after a new medicine has been tested for about a decade and in thousands of patients. Even if the FDA were to wait until 112 years and a trillion doses had elapsed to approve any new drug, we'd still have surprises.


I've got a new op-ed in today's Washington Examiner explaining what President Obama and Congress can do to revive American innovation. 

It's very easy to complain about what policymakers get wrong.  After all, it's a target rich environment.   

But it's even more important to point out what they get right.  In this case, U.S. dominance of the global biopharmaceutical and medical technology industries is the result of smart policy decisions made over the last 30+ years. 

Better market incentives = more innovation.


Steve Jobs' death is a tragedy for his friends and family, and his loss will be felt across the Silicon Valley industry he did so much to found and lead into uncharted territory. As the user of an iPod and iPad, I can't help but feel that I knew something of the man through his products - the creation of his singular vision.

But it's also an opportunity for reflecting on how little we know about diseases like pancreatic cancer, and the particular neuroendocrine tumor that he was treated for back in 2004.  While 95 percent of pancreatic cancers are rapidly fatal, neuroendocrine tumors are apparently much more variable, so much so that "if you have 50 patients, you have 50 different tumors with 50 different prognoses."

The rate limiting factor in Steve Jobs' industry was, for the most part, only his imagination and the underlying technology.  In health care - and particular for drug innovation, which requires FDA approval - the technology that might lead to new treatments for pancreatic cancer often leaps ahead of the regulators, limiting the pace at which companies can bring new products to market. 

There is no telling whether a different system for regulating medicines might have made a difference in Steve Jobs prognosis - or if it was even pancreatic cancer that killed him.  But we can see how much more rapidly other industries, that aren't burdened by extensive pre-market restrictions, innovate.    

David Henderson, one of our contributors, put it this way on EconLog

Steve Jobs's career was an extreme illustration of Friedrich Hayek's point about people using their own "local knowledge" to make good economic decisions. Imagine how Jobs would have fared if he had born in the Soviet Union. Or, closer to home, there are probably a few people who are the equivalent of Steve Jobs or, at least, one quarter of a Steve Jobs, who could develop "insanely great" or, at least, great drugs. But they have to get the permission of the Food and Drug Administration to sell such drugs. So imagine that Steve Jobs had had to get a federal agency's permission to sell the Mac, or the iPod, or the iPhone, or the iPad, or, or, or. We might not have had these things or, if we did, we would have had them much later--and they probably would have been much more expensive.

David is right: and we need an FDA (and an industry) that helps produce "insanely great" treatments as a matter of course, not after years of expensive testing.


Rapidly rising costs - mainly attributed to new technologies and new medicines - have been a major concern in the United States for decades, resulting in several attempts to emphasize value over pure clinical efficacy. These can be traced back to the birth and growth of HMOs, even the name of which ("Health Maintenance Organizations") pointed toward the concern with value - "we won't just treat ill health, we'll prevent it", which is generally agreed to be the more cost-effective approach.

More recently, Consumer Directed Health Plans have been billed as a way to get people to weigh the costs and benefits of different treatments, putting the onus on them to make rational economic decisions about which products to use (or not use), and promoting activities that prevent or mitigate disease (out with the hot dog, in with the gym membership, salad, and statins).

Some have derided these plans as a way to shift risk and cost away from insurers and employers and onto the insured, and that is one of their effects. But critics also ignore the potential for these plans to challenge companies to design and market higher value products at lower costs. Shifting of costs and risks - if done well - will create better incentives for value-conscious consumption of health care than trying to set directives from the top town via restrictive national reimbursement policies. (This is the more popular approach in Europe, although the U.S. has avoided this route, so far.)

In a truly consumer-directed marketplace, caveat venditor: Let the seller beware. Demonstrating clinical effectiveness simply won't be enough for today's savvy consumer who can compare treatments on Web MD and buy $4 generics at Wal-Mart.

Building consumer value is something that Apple, Target, Amazon have mastered. If they want to avoid sclerotic, price-controlled markets, pharmaceutical and device manufacturers are going to have to master the same consumer value equations. For some thoughts on how to do this, see here.


It's not a pretty picture for investors or companies across much of the economy, at least not since the financial crisis in 2008.  So we would expect one of the riskiest class of investments, venture capital funding for medical device and biotech start-ups, to be down - and it is. 

But what we're also hearing from the VC community is that excessive regulatory risk from the FDA in the wake of Vioxx has sharply impacted investors willingness to invest in very early stage companies, which represent the riskiest but also potentially most innovative parts of the health care "ecosystem".  As result, we're seeing a shift out of investment in these sectors and into other less risky investments (like IT or social media platforms) with faster and more reliable "exits" - and no regulatory barriers to entry for new companies.


In Roll Call, Reps. Erik Paulsen and Jim Gerlach make the case that the $20 billion medical device tax slated to take effect in 2013 as part of the Affordable Care Act (an offset, btw, that helped the CBO score the ACA as reducing the deficit; see also the Class Act) will kill thousands of Americans jobs. Paulsen and Gerlach write that: 

A new study by two noted economists...has found that, under reasonable assumptions, the medical device excise tax will result in 43,000 lost jobs and $3.5 billion in vanished wages and benefits. ...

This may be the most anti-innovation piece of legislation to come along in some time. The tax hits well-established companies and startup businesses that are suffering losses in their initial years while they invest heavily in the research and development of their first innovation for patients.

Thanks to this tax, companies could be forced to close factories in this country and look overseas where foreign governments are extremely eager to jump-start their high-tech sectors. 

That seems right to me.  Small companies are unlikely to be able to pass the costs of the tax along to their customers, while larger companies will simply have another incentive to shift manufacturing overseas, in an effort to cut costs while maintaining profits.


Under Commissioner Hamburg, the FDA is doing its best to respond to criticisms that the agency is slowing the development of more innovative drugs and medical devices.  Indeed, she seems determined to change the perception that the agency is too slow to embrace new technologies like biomarkers and adaptive clinical trial designs, perhaps with an eye towards upcoming Congressional hearings slated to take up PDUFA reauthorization - and possibly revamping the agency's regulatory powers along the way.

Today, for instance, the FDA released a new report, Driving Biomedical Innovation: Initiatives for Improving Products for Patients, which is meant to address "concerns about the sustainability of the medical product development pipeline, which is slowing down despite record investments in research and development." (For more quick detail on the report, go here.)

Vicki Seyfert-Margolis, a senior science advisor to Commissioner Hamburg, even took to the White House blog to tout the FDA's innovation efforts:

[The report] is the result of months of thoughtful internal analysis as to how the FDA can facilitate innovation. But, perhaps more importantly, it is a direct response to an orchestrated campaign of engagement with all of our stakeholders.  

(On Monday the FDA also released a new report on improving its science base for the regulation of medical devices.  This isn't surprising given the amount of criticism the agency has received for medical device regulation from the pages of the Wall Street Journal to the Institute of Medicine.)

It's a good sign that the agency is turning from internal dialogue to seeking input and advice from patient groups and companies that are struggling to bring life saving new innovations to market.

Let's see how much, and how well, the FDA actually listened to what they heard. More on this in a future post.


After Peyton Manning, the star quarterback for the Indianapolis Colts, had his third neck surgery in 19 months, he's still not ready to play football. Willing to try something else, he went to Europe to receive stem cell therapy to further his recovery. Why couldn't he just stay in Indianapolis, near his family and friends, or perhaps travel to a top hospital in another American city? Simple: The FDA hasn't approved such a treatment for humans.


The FDA doesn't regulate therapies for animals, and so racehorses, which are valuable and prone to injuries, have been the lucky recipients of stem cell therapies. "Orthopedically, the horse is a disaster waiting to happen," says veterinarian Bob Harman. "They're so big--a 1,000-pound animal on little toothpick legs--and they're working at high capacity." Harman has more than a passing interest in racehorses--he is the CEO of Vet-Stem, a California company that treats racehorses with stem cell therapy. Since 2003, Vet-Stem has treated 4,141 horses for soft-tissue injuries such as tendinitis and muscle contusions. He claims that 70 to 80 percent have healed completely.

The clinical benefits of stem cell therapy in horses are impressive. In a study of 170 horses, researchers found that nearly 80 percent of them could return to racing, compared with previously published data showing a 30-percent success rate for horses given traditional therapies. After three years, the re-injury rate was 23 percent versus 56 percent.

If Mr. Manning were a horse, he could get the therapy here in this country. Unfortunately, he's a human. So that therapy is off limits to him.

To summarize: The government "cares" too much about Peyton Manning to let him have this new therapy. It doesn't "care" as much about racehorses, so they get the green light. Make sense?


Generic drugmakers warn that rising costs of FDA manufacturing inspections are causing shortages of critical generic drugs.

Larry Kotlikoff explains why corporate income taxes are regressive.

President Obama's proposal to slash market exclusivity for biotech medicines - and industry's angry response.

Hypermutations enable deadly prostate cancers to resist treatment. (More evidence that "genomic chaos" underpins cancer's lethal power.)

CLASS program is closed, erasing $70 billion in deficit reduction - that may never have existed anyway.

House Budget Chairman Paul Ryan delivers his vision for health care reform.

Surprise, surprise: employer health insurance premiums are up. (You can find the full study here.) 

Fight intensifies over proposed Medicare drug rebates.  (For more detail on what's at stake, see this recent report from the American Action Forum.)

FDA scrutinizes potentially higher risk of blood clots for certain birth control pills. 

The new issue of National Affairs is out.


Bruce Booth, blogger and partner at Boston's VC fund Atlas Venture, suggests two ways that Congress could inject much needed investments into start-up biotech companies: first, allow biotech companies to sell their tax deductible Net Operating Losses (NOLs) to profitable companies as tax shields. 

Since most start-ups fail before they ever become profitable, they never get to utilize these assets.  Making them tradeable would "would allow these high risk startups to reap the benefits of these NOLs while accessing scarce capital."

Second, create "create a 3rd tier for very low capital gains taxes (<10%) that would be applied to "ultra long term" holding periods of 5-7 years would reward "patient capital" that is so scarce today."

They sound like smart, market-based ideas for encouraging investment and leveraging existing tax policy. Booth doesn't expect Congress or the White House to pay much attention to these proposals. 

But I can think of one or two U.S. Senators who might be interested.


Resistance is Futile: It's a simultaneously depressing and enlightening article on how the trench warfare between humanity and harmful bacteria is turning steadily in favor of the microbes, as they develop resistance to more antibiotics. 

There are also fewer new antibiotics coming to market, since development costs are high and profits for antibiotics are much less than those of drugs used for chronic diseases.   

Megan captures the problem well:

"When a new antibiotic comes out," Pfizer's Utt says, "physicians don't necessarily use it--they tend to hold it in reserve. So by the time it's being used, it's already used up part of its marketable patent life." As a result, fewer large firms may want to spend the time and money to get these drugs approved--according to the IDSA, only two major drug companies (GlaxoSmithKline and AstraZeneca) still have strong active research programs, down from nearly 20 in 1990. Antibiotics are not big moneymakers: Every time a doctor writes a prescription for Lipitor, Pfizer may gain a customer for decades. But short-course drugs like antibiotics sell perhaps a dozen doses.

More on the problems facing antibiotics drug development in a later post.


Bruce Booth wonders if a "leaner, meaner" market for biotech VC, might not also be better for innovation.

The new chancellor at UCSF - who used to lead drug development at Genentech - is shaping the future of biotech through creative partnerships with leading biotech and pharma companies.

High-priced genomic test that can predict colon cancer recurrence wins Medicare reimbursement. (The test may help patients at low risk of cancer recurrence skip expensive and potentially dangerous chemotherapy.)

Whole genome sequencing keeps dropping in price - at $5,000 or less, it's not just for the wealthy worried anymore. But the limiting factor now is the dearth of biostatisticians who can crunch the massive influx of genomic data and transform it into meaningful information for companies, patients, and physicians.


(This post first appeared on OpenMarket.org) 

An interesting article in the Journal of Clinical Oncology (via yesterday's Jerusalem Post) argues that the U.S. Food and Drug Administration practice of approving many oral cancer drugs for use only after patients have fasted is putting patients at increased risk of overdosing, and causes them to "flush costly medicines down the toilet."

According to the article by Mark Ratain, a professor of medicine at the University of Chicago Medical Center, many oral drugs are absorbed more effectively when taken with food -- particularly fat-soluble drugs. But at the FDA's insistence, dosage levels for most oral cancer drugs are "based on data from patients who take their pills on an empty stomach" because of the variability in diets among cancer patients. When going through chemotherapy, patients' appetites will vary substantially, as will the amount and types of food they'll eat. Ratain argues that patients who eat too soon after taking their medicines will therefore be put at a substantial risk of overdose because too much of the drug will then be absorbed. And, because most cancer drugs are fairly toxic, he argues that "risk of overdose is clearly more compelling" than the risk arising from dietary variability, and suggests that the FDA change its policies accordingly.


A few years ago I purchased a new vehicle. I had narrowed down my choice to the Toyota FJ Cruiser, the Toyota 4Runner, and the Honda Ridgeline. In decision-making parlance, these were my decision alternatives. I ended up choosing the FJ Cruiser because I found it to be the best alternative for me. In other words, based on my preferences and the available information, the FJ Cruiser was superior to the 4Runner and Ridgeline. Here's a question. What role did statistical significance play in my decision? As a reminder, statistical significance looks at some measured results and requires that the odds of being wrong--in other words, the results were due to luck--are less than five percent.  

Did I rely on statistical significance to "prove" that one vehicle was more efficient with gas? Did I rely on statistical significance for safety results or acceleration or reliability or off-road ability? No. To see which vehicle was best in each important attribute, I relied on numerical test results, expert opinions, anecdotes, and personal experience, without any statistical significance whatsoever. Was I remiss?


There's been a resurgence in news reports about the drug shortage problem we've been experiencing this year. NPR's "Morning Edition," for example, had a lengthy segment on the topic yesterday explaining that there has been a shortage in 213 drugs this year -- mostly generics -- up from 70 in 2006. Most news accounts blame the shortages on industry practices, specifically consolidation in the generics industry and a decision to cease manufacturing unprofitable product lines. But last week, the Food and Drug Administration implicitly acknowledged that its own policies are part of the problem.

According to the NPR story:

"Most drugs in short supply have been older generic drugs, which are generally less profitable. ... The problem today is there are fewer companies making essential drugs. So when one manufacturer stops producing, there may be only one other supplier - and it can't keep up with demand."

Business practices and consolidation have, of course, played a role. But as John Goodman explained back in June, that's not the whole story. Much of the blame can be laid at the feet of the FDA. Over the past few years, the FDA has been ramping up its enforcement efforts and cracking down on manufacturing facilities for minor technical infractions -- "forcing manufacturers to abide by rules that are rigid, inflexible and unforgiving" in Goodman's words. And when one facility is shut down, increased production by competitors can't come online quickly because FDA must approve the quantity manufacturers churn out.

There is also a problem with price controls, as former Obama Administration health policy advisor explains in this New York Times op-ed.

Most news reports in the mainstream press have paid scant attention to the role government regulation has played in this mess. But at an FDA workshop on drug shortages held last week, the FDA implicitly acknowledged its role in the problem by trying to claim credit for preventing shortages. According to the RPM Report, the FDA is now claiming credit for preventing 99 drug shortages this year alone because it used regulatory discretion to keep certain manufacturing facilities open and expedited various product or facility reviews. No one seemed to ask why, if the agency has that kind of discretion, it continues to shut down facilities for minor infractions and requires manufacturers to seek approval just to increase production.

That's a long way from the FDA explicitly admitting that its enforcement programs have become too burdensome and its reviews too lengthy. But it's a start. 

Well actually, it's more depressing data about the shrinking biopharma "ecosystem" and the shrinking number of biotech start ups that eventually feed promising drug candidates into the pipeline of Big Pharma.  (Wouldn't that actually make start-ups more like a "farm team system", to borrow a baseball analogy?  And without a good farm system, you wind up with lots of overpaid aging superstars, i.e. blockbusters facing patent cliffs.)

Booth thinks the news isn't completely apocalyptic, but concedes that current trends

...can't go on much longer..without hollowing out the small- and mid-cap universe of biopharma companies that make up a critical and dynamic part of our ecosystem. [emphasis in original]

There's no quick solution in terms of replenishing the biotech pipeline at the moment, but he suggests that "calming [public investors] nerves around the FDA through rapid reforms, improving tax policy, and wringing more uncertainty out of the payor market are all important."

Those are all great policy ideas - and ones that should have bipartisan support.


The Medical Progress Today blog provides a forum for economists, scientists, and policy experts to explore the scientific, regulatory, and market frameworks that will best support 21st century medical innovation.  We will focus especially on the U.S. Food and Drug Administration, the agency responsible for overseeing the nearly half-trillion dollar drug and medical device markets in the United States.

The blog will range widely in terms of topics and POV.  But, at its heart, MPT is about harnassing the power of science, market incentives, and (prudent) regulation to create the kind of health care system that we all want - more effective, efficient, and affordable.

We live in a time of breathtaking advances in the capacity to treat--and cure--illness. The translation of the human genome and an explosion of information from new sciences like metabolomics and proteomics have given researchers powerful new tools for understanding, treating and (eventually) curing deadly diseases like cancer and Alzheimer's. The old medical paradigm treated illnesses symptomatically with one-size-fits all medicines; the new paradigm will analyze disease at its molecular roots and to develop personalized therapies that match a patient's own unique biochemistry.

The question is not whether personalized medicine will become a reality, but when. Innovation is currently struggling in the face of regulatory, reimbursement, and insurance frameworks built around public health assumptions that fit the middle of the last century, rather than the first decades of the 21st century.

Turning personalized medicine from an aspiration into a reality will require regulators, companies, and researchers to breakdown binary regulatory frameworks; develop collaborative approaches to rapidly validate new technological standards; and embrace clinical tools that allow patients and physicians to become full partners in the innovation process.

Through both this blog site and the original essays it will commission, MPT will provide a forum to explore the most current ideas--and emerging challenges--in the field of personalized medicine.

We hope that you will find MPT a vital and provocative resource for building a health care system ready to embrace the full potential of personalized medicine and sustain U.S. leadership in biomedical innovation.


One of the lead editorials today in the WSJ discusses a Lancet article decrying the high cost of cancer treatments, and advocating increased use of cost-effectiveness research to ration access to pricey new therapies.  Scott Gottlieb, in a near by editorial, decries the FDA's increasingly burdensome approach to medical device approvals, which appears to be driving investment and innovation out of the US.  What goes unsaid in both Journal pieces is how much of the high cost of innovation is driven by extensive and lengthy FDA required trials.

Lowering the bar for market entry, combined with better postmarked surveillance, would likely spur competition and lower prices - and the country that offered the most innovative regulatory environment for entrepreneurs would reap the health and economic benefits.  Alex Tabarrok, in his post today, offers one way to do this: eliminate the FDA's efficacy requirement.


(This is reposted from Marginal Revolution, 10-1-11.)


In an important editorial in Science, Andy Grove, former Chief Executive Officer of Intel Corporation, advocates restricting the FDA to safety-only trials. Instead of FDA required efficacy trials patients would be tracked using a very large, open database.

The biomedical industry spends over $50 billion per year on research and development and produces some 20 new drugs....A breakthrough in regulation is needed to create a system that does more with fewer patients.

 

While safety-focused Phase I trials would continue under their [FDA] jurisdiction, establishing efficacy would no longer be under their purview. Once safety is proven, patients could access the medicine in question through qualified physicians. Patients' responses to a drug would be stored in a database, along with their medical histories. Patient identity would be protected by biometric identifiers, and the database would be open to qualified medical researchers as a "commons." The response of any patient or group of patients to a drug or treatment would be tracked and compared to those of others in the database who were treated in a different manner or not at all. These comparisons would provide insights into the factors that determine real-life efficacy: how individuals or subgroups respond to the drug. This would liberate drugs from the tyranny of the averages that characterize trial information today. The technology would facilitate such comparisons at incredible speeds and could quickly highlight negative results. As the patient population in the database grows and time passes, analysis of the data would also provide the information needed to conduct postmarketing studies and comparative effectiveness research.


Public health is one of the oldest--and best--functions of the federal government. The Public Health Service was founded in 1798; the Vaccine Act was enacted a few years later, in 1813, providing for free smallpox vaccine; by the end of the 19th century, smallpox had virtually disappeared in the US. So count that as a mission accomplished for Uncle Sam.

In the years since, of course, Uncle Sam has ventured into many new areas; those newer efforts, shall we say, have not always been as successful. Champions of those newer efforts are thus put in awkward position: they generally defend the newer functions of government by invoking the older functions.


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