Obama's Directive to the FDA

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."

These drugs and the victims due to their "shortage" (their supply is exactly zero--they don't exist) are hard to visualize and no one is running to Congress or President Obama to complain that their new miracle drug isn't available. Why? It is hard for a particular patient to follow the industry and then connect the dots to see how a new drug would have treated his/her condition, say HIV/AIDS or breast cancer. This becomes even more difficult for a drug that prevents conditions, such as strokes or heart attacks. "That drug the FDA rejected in 2003, or was abandoned by Company ABC in 1997 due to economics, would have prevented my father's heart attack in 2011."

Many of us are still mourning the passing of Steve Jobs. What drugs that could have treated his pancreatic cancer were rejected by the FDA or discontinued by drug companies long before they reached the FDA because of the hurdles imposed by the FDA? We'll never know.

If you haven't "unseen" something yet, you'll really be able to "unseen" something soon. We will soon be witnessing the severe wounding of an industry, as drug companies are looking at the loss of about a third of their revenues due to the expiration of patents on key medicines. Over the next few years, of the top 20 branded drugs, 18 will lose patent protection. New drugs simply aren't being developed to replace the drugs that are going off patent. Buckle your seat belts, folks. Get ready for the real drug shortage--the unseen drug shortage.

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