December 2011 Archives



One of the provisions of the Patient Protection and Affordable Care Act, AKA Obamacare, is "free" preventive care. (Fact check: This care still costs money, but is paid for by someone else.) The thought is a good one, to pay a little now to avoid a larger payment later. (Fact check: The health care data don't support this assertion.)

The same logic, than an ounce of prevention is worth a pound of cure, can also be applied to the administration of health insurance. It should be self-evident that insurance companies don't spend money on administration just to waste resources. One reason insurance companies spend money on administration is to prevent fraud and abuse. Contrast this with Medicare. And we shouldn't forget that Medicare is the primary factor driving U.S. government debt to a percentage of GDP that will, in 15 short years, equal Greece's disastrous level today. Anyway, Medicare's apparent administrative costs are only about 2 percent, compared to 10-15 percent for private insurers. (Fact check: Medicare's own data show that when all true costs are included, its administrative expenses per life covered are actually higher than those for private insurers.)

What is important here is that health insurance organizations, be they Medicare or Humana, need to decide how much to pay upfront to prevent erroneous and fraudulent claims. If that amount is close to zero, as it is with Medicare, fraud and abuse will be rampant. By the government's own estimate, Medicare makes $50 billion in bad payments each year.

In what economists refer to as an unintended consequence, Obamacare's rule stating that health insurers must pay 85 percent or more of premiums on health care--leaving only 15 percent for administrative costs, marketing, and profits--may actually increase costs by limiting the ability of health insurers to catch and prevent erroneous and fraudulent claims. Pay me now or pay me later.



Recently it has become common in my consulting practice for one of my clients to say, "I can't believe that so-and-so wasn't a member of that recent FDA advisory committee." So-and-so being a renowned expert in the field. The reason for this person's absence was his or her ties to the pharmaceutical industry coupled with the FDA's emphasis on preventing potential conflicts of interest in advisory committees.

The FDA is supposedly a scientific organization that makes decisions based on empirical data. A drug company can't simply approach the FDA and say, "Theoretically, this should work," and expect FDA approval for a new drug. The FDA wants to see empirical evidence. Unfortunately, the FDA applies this standard to other groups, like drug companies, but not to itself. When it comes to potential conflicts of interest among advisory committee members, the FDA has simply rounded up the usual suspects and declared them guilty without so much as a trial. Why would the FDA need empirical evidence when the problems with conflicts of interest are so obvious?

Well, I do happen to have some empirical evidence in this arena and it comes from Sidney Wolfe, one of the pharmaceutical industry's most vehement critics. David R. Henderson and I wrote an article about it in early 2009.

In a 2006 study to look at potential conflicts of interest, where outside FDA advisors had ties to industry, Wolfe and four other authors published an article in the Journal of the American Medical Association that drew on 76 product-specific meetings of FDA advisory committees that involved yes or no votes on individual drugs.


In the past year, much has been written about the shortage of critical generic drugs in this country. This has been accompanied by a whole lot of talk, including an executive order from President Obama, basically repeating the same message that previously came from the FDA and congress: That the government can require that companies report an impending shortage or planned cessation of the manufacture of a drug, but cannot force them to make any drug.  One effective way of gaining partial control of this mess would be to lure genetic production back to this country. Not a word about this.

Not surprisingly, since my August op-ed in the New York Post, and a brief update here  in October, I  cannot find any indication that anything concrete has been done. In fact, it may be getting worse.

This can be illustrated by yesterday's rather ghoulish story from Reuter's, pointing out that we are not only out of many life-saving drugs, we are also out of life-ending drugs. Yes--in a rather twisted spin-off of the original problem, the United States cannot execute prisoners because we can no longer buy sodium thiopental--one of the three drugs used in lethal injections. Manufacturers in Europe have decided to refuse to sell thiopental (used to induce unconsciousness), pancuronium bromide (to paralyze muscles and stop breathing) and potassium chloride (to induce heart failure) to the US in protest of the use of the death penalty in this country. Other barbiturates--legitimate anesthetics--are also included in the ban, because they can be used as substitutes for thiopental.

Now, I won't even go anywhere near the ethical or legal merits of execution, or lack therof. But the metaphorical aspect of this story is hard to miss. Not only have we ceded control of our lives to foreign generic companies, but now also our deaths. We have grown so helpless and dependent on others that a few impurities in an IV bag made in China or a social policy in Denmark can determine life and death in America. 

Is this really the way we want to live?



Happy Holidays


Blogging on MPT will be intermittant for the holidays as we desperately search for last minute Christmas gifts. We'll be back in operation with new blogs, podcasts, and Spotlight articles beginning the week of January 2nd.

In the interim, best wishes for a happy holiday and joyous New Year from our MPT bloggers and staff.



China appears to be taking the art of corporate espionage to a who new level of sophistication and outright brazenness. (Hat tip: Derek Lowe) From Bloomberg Businessweek:

"They are stealing everything that isn't bolted down, and it's getting exponentially worse," said Representative Mike Rogers, a Michigan Republican who is chairman of the Permanent Select Committee on Intelligence.

China has made industrial espionage an integral part of its economic policy, stealing company secrets to help it leapfrog over U.S. and other foreign competitors to further its goal of becoming the world's largest economy, U.S. intelligence officials have concluded in a report released last month.

"What has been happening over the course of the last five years is that China -- let's call it for what it is -- has been hacking its way into every corporation it can find listed in Dun & Bradstreet," said Richard Clarke, former special adviser on cybersecurity to U.S. President George W. Bush, at an October conference on network security. "Every corporation in the U.S., every corporation in Asia, every corporation in Germany. And using a vacuum cleaner to suck data out in terabytes and petabytes. I don't think you can overstate the damage to this country that has already been done."

Experts estimate that U.S. losses from economic espionage in the last year alone - to China, Russia, and other IP hungry countries - may total as much as $500 billion.

High tech industries - like pharmaceuticals and biotechnology - appear to be among the most frequent targets.



As I noted yesterday, the Wyden-Ryan plan on Medicare reform has elicited quite a bit of commentary, which continues today. The reaction from Dems in Congress and the White House is fairly predictable: they see Medicare as the third rail of American politics and are happy to electrocute any Republicans who try to reform it, no matter that Medicare begins going bankrupt in 2020.

The response on the right has been more nuanced. There, analysts are wondering if the plan compromises too much, and how much of an effect it will really have on Medicare spending.

Peter Suderman, writing at Reason notes that:

...the option [Wyden-Ryan] describe as "traditional" Medicare wouldn't quite be Medicare as-we-know-it. Seniors would have to buy in using capped premium support payments (similar to vouchers, but with the federal government serving as a go-between for seniors and insurers). If "traditional" Medicare couldn't hold down costs and premiums, seniors might have to spend some of their own money in order to stay in the program. The idea is to create savings through competition, on the assumption that seniors will pick plans that represent the best value for their own health needs. And, at least in theory, that's how this plan restrains the growth of Medicare: The value of the premium support payments is capped at GDP plus 1 percent, meaning that spending on the program grows only a little faster than the economy.

The political advantages of a plan like this should be obvious: Leaving a government-run Medicare option in the mix insulates the proposal from the sort of you're-killing-granny! criticism that Ryan's earlier reform plans drew. Cosponsoring the plan with a popular, health-policy focused Democrat (Wyden offered a health policy overhaul during the late Bush years that Obama mostly ignored) further insulates the plan from partisan criticism, and may even help make it politically plausible--which even the most compromised version of Ryan's plan never was--at some point in the future. More importantly, it isolates President Obama, who can be accused of ignoring a genuine bipartisan reform option if he doesn't support the joint proposal.

Peter also picks up on the same issue that I noted yesterday. Politically, the Wyden-Ryan plan muddies the water by creating a frawework for seniors that mirrors Obamacare's state based exchanges:

But there are political complications as well, for both Republicans and Democrats. The Ryan-Wyden plan looks a lot like ObamaCare with the addition of a public option. That makes it somewhat harder for Republicans to oppose last year's health care overhaul, but it also makes it more difficult for Democrats to oppose, given that they passed a law essentially doing for the middle class what Ryan-Wyden would do for seniors.

In a follow on post, Peter qualifies that even more:

Passing legislation usually requires compromise, but this one gave up a lot of ground in hopes of sparking bipartisan support for reform. And after making the sacrifice play, Ryan may not even end up with much to show for it. Senior Democratic staffers are already issuing anonymous sneers at the plan. And despite Wyden's assurances, House Minority Leader Nancy Pelosi has taken to warning her Twitter followers that the plan is just a sneaky attempt to kill traditional Medicare completely.

Over at NRO's the Corner, my colleague Josh Barro weighs in as well:

House Budget Committee Chairman Paul Ryan (R) and Senator Ron Wyden (D) are out today with a joint proposal on Medicare reform, and structurally, the plan makes a lot of sense. The plan is built much like the "premium support" plan that Ryan has been advancing for the last year.

However, there are two key differences from Ryan's original proposal. One is that traditional fee-for-service Medicare would be retained as a "public option" that seniors could choose, using their premium support payments to buy insurance from the government instead of from a private insurer. The other is that the plan does not include Ryan's aggressive cap that would have held the growth in the value of Medicare benefits to CPI. As I wrote at the time, this was an implausibly low target, especially because the plan lacked accompanying cost-control measures. Wyden-Ryan aims to hold overall Medicare cost growth to GDP growth plus 1 percent, which is still ambitious but plausible.

I like this proposal structurally. What I don't like about it is another feature it keeps from Ryan's original plan-it wouldn't be effective until 2022, and then only for new retirees. That means, like Ryan's proposal before it, it saves no money this decade and almost no money in the next decade. I understand the political impulse-it avoids impacting anybody now, so maybe Ryan and Wyden won't get beaten up for taking away Granny's benefits. But this delay is still a serious mistake-reforms should be effective immediately, and for current participants as well as new ones.

Finally, Reihan Salam, notes that:

It happens that the Wyden-Ryan proposal does two things: it sets a global budget and it creates a plausible mechanism, though obviously not an assured mechanism, for introducing constructive competition that can restrain cost growth.

At its heart, Wyden-Ryan is a version of the defined benefit proposal first advanced by a (bipartisan) group of health economists, Robert F. Coulam, Roger Feldman, and Bryan E. Dowd. This post from August offers some background on the concept. Like Yuval Levin's Medicare reform proposal, however, it matches premium support to the second-cheapest plan in a market area, so that Medicare beneficiaries will have at least one cheaper plan that will offer cash back. ...

To be clear, Wyden-Ryan is a gamble that competition in urban markets will reduce costs with a global budget as a backstop. As for quality, Wyden-Ryan guarantees a certain benefit and then allows Medicare beneficiaries to pay an additional amount if they seek services of higher quality. If the gamble succeeds and the new premium support structure is able to hold down the cost of today's benefit, it seems plausible that many Medicare beneficiaries will be willing to pay top-up fees for plans that offer richer benefits.

The response to Wyden-Ryan seems to parallel the earlier response to the Simpson-Bowles deficit recommendations. From the right, a cautious embrace; on the left, lots of consternation.

The theme on the left is that any significant changes to Medicare will "end the program as we know it". Well, Medicare is unsustainable in its current format, and so ending it "as we know it" will be the only way to save it.

The right is edging towards compromise. The left doesn't see any need for compromise, at least not until after November 2012.


(Cross-posted from The Apothecary on Forbes.com.)

This morning, Democratic Sen. Ron Wyden (Ore.) and Republican Rep. Paul Ryan (Wis.) have shaken up Capitol Hill with an intriguing, bipartisan plan for reforming Medicare, and also the private-sector employer-sponsored insurance system. Politically, the plan is a huge boost to Mitt Romney, whose own remarks on Medicare reform hew closely to Wyden-Ryan; and also to House Republicans, who now have an easy retort to Democrats who were planning to attack Medicare reformers in the 2012 campaign. Substantively, the plan has many encouraging qualities, but there are also some important blanks that Wyden and Ryan will need to fill in.

Premium support with competitive bidding

The heart of the Wyden-Ryan plan is to use competitive bidding to allow private insurers to compete with traditional, 1965-vintage fee-for-service Medicare. If you want to learn more about competitive bidding, see this piece I wrote about Mitt Romney's proposal for Medicare reform. If that doesn't quench your thirst, you can read the definitive book on competitive bidding: Bring Market Prices to Medicare, by Robert Coulam, Roger Feldman, and Bryan Dowd.

The basic idea behind competitive bidding is that, say, on a county-by-county basis, you let private plans and traditional Medicare offer plans with the same actuarial value compete, to see who can offer the same package of benefits the most efficiently. Each plan in a given county will name a price for which they are willing to offer these services, and seniors are free to pick whichever plan they want. However, the government will only subsidize an amount equal to the bid proposed by the second-cheapest plan. If you want a more expensive plan, you have to pay the difference yourself.

As I mentioned in the Romney post linked to above, competitive bidding has some left-of-center fans; indeed, a form of competitive bidding was part of the Senate version of Obamacare. It also has fans on the Right, most notably Yuval Levin, dean of the conservative entitlement-reform wonk set. A key concern I mentioned in the Romney post is that competitive bidding, if not structured correctly, puts private insurers at a disadvantage to the government plan. It would be important to ensure that there is a level playing field between the public and private options under such a system.

The plan would only go into effect for people aged 55 or younger today. These future seniors would buy insurance on a "Medicare Exchange," which would require plans to guarantee coverage regardless of pre-existing conditions, and require plans to charge similar premiums to those who are healthier or sicker.

An unenforceable cap on Medicare spending growth

In the event that competitive bidding failed to bring down spending growth, Wyden-Ryan would cap the growth of Medicare spending to nominal GDP plus one percent (a calculation that includes inflation). How it would enforce this cap is largely unclear. Every Congress is sovereign; one Congress can't bind future Congresses to due its bidding. Hence, if competitive bidding fails to bring costs down (though it should), the Wyden-Ryan approach of requiring Congress to find ways to cut spending is, effectively, toothless.

Implicitly, the Wyden-Ryan approach would repeal IPAB, Medicare's rationing board, without putting any credible mechanism in place for future Congresses to keep costs down.

Means-testing for the wealthy, and protections for low-income retirees

Wyden-Ryan would expand means-testing throughout the Medicare system. Currently, higher-income individuals pay more for Medicare under the program's traditional benefit for outpatient physician services (Part B), and also for the newer prescription-drug benefit (Part D). Under Wyden-Ryan, means-testing would also apply to the premium support payments offered through the Medicare Exchange.

Lower-income individuals who are eligible for both Medicaid and Medicare (the so-called "dual eligibles") would be protected from the GDP+1 spending growth cap.

Medicare Advantage reform

Wyden-Ryan seeks to reform Medicare Advantage in order to drive further spending growth reductions. They note that Medicare Advantage is currently prevented by law from passing on cost savings. "If a private Medicare Advantage plan has lower costs than traditional Medicare, then by law, the plan may not offer a rebate to the senior. Instead, the plan must compete by offering additional benefits, which in some circumstances increases the use of services--and therefore costs."

They're right. And this is why Medicare Advantage has not been able to lower federal Medicare spending. Medicare Advantage plans cost about 14 percent more per person than traditional Medicare plans do, but they typically offer richer benefits than traditional plans. This drives incentives in the wrong direction, and it would appear that Wyden and Ryan aim to change that.

Cost-sharing reform

As I wrote in my big National Affairs piece on Medicare reform, the fundamental problem with Medicare is that seniors are not really required to share in the cost of their care, leading them to spend far more than they need to. Wyden-Ryan urges cost-sharing reforms, though it doesn't make any specific suggestions. Last March, Sens. Tom Coburn (R., Okla.) and Joe Lieberman (I., Conn.) proposed cost-sharing reforms that Wyden and Ryan would do well to consider.

Employer-sponsored insurance reform

One of the most intriguing aspects of the Wyden-Ryan plan is its drive to gradually migrate our inefficient, employer-sponsored private insurance system to a true individual market where people buy health insurance on their own.

Here, Wyden and Ryan are borrowing from Wyden's proposed Free Choice Act, in which employees could choose to opt out of their employer-sponsored plan, and take the money to buy a plan of their own choosing on the private market. The opt-out only applies to workers at firms with 100 or fewer employees. If these workers buy a plan on the open market that costs less than what their employers would have paid for, they can pocket the difference as taxable income.

In the absence of Obamacare, this is a very attractive idea. Instead of simply ending the $300 billion-a-year employer tax exclusion, creating a massive disruption of the private insurance market, the opt-out idea allows for a voluntary, gradual transition to an individual health-insurance market. When people buy insurance for themselves, they are more likely to shop for value, instead of overspending on overly comprehensive benefit packages. That, in turn, brings down costs for the overall system.

Likely what would happen is that healthier individuals would opt out of the system and choose cheaper, consumer-driven health plans that pair high-deductible insurance with health savings accounts. Sicker individuals would stay in the conventional employer-sponsored system. This could, in theory, drive a form of adverse selection, driving up costs for the shrinking pool of sicker beneficiaries. However, the savings from the opt-outs might be worth it.

If Obamacare stays on the books, the opt-out idea could actually cause problems if it wasn't structured the right way. A poorly conceived opt-out, combined with Obamacare's exchanges, could increase the incentives for employers to dump workers onto the subsidized Obamacare exchanges.

Some liberals and conservatives dislike the compromise

As I mentioned in the opening paragraph, Wyden-Ryan means that premium support has now been embraced by a prominent Democrat. This helps inoculate Republicans from the fact-free, demagogic criticism that they are trying to throw granny off of a cliff.

This fact already has Democrats grumbling. "Why in the world [Wyden] agreed to help Ryan get out of the rock he was under is beyond me," a former senior Democratic staffer told Kaiser Health News. "This is a bad move on a couple different levels, and has the potential to take away a key argument for Democrats that are trying to retake the House."

Rep. Pete Stark (D., Calif.) sent out a statement insisting that that the demagoguery would continue. "Despite Wyden's claims otherwise, the Wyden-Ryan plan ends Medicare as we know it, plain and simple."

Some conservatives are unhappy with Paul Ryan, too. Ben Domenech says that Ryan "gave up a lot more to do this [compromise]...My concern is that Ryan's timing and the nature of this plan will be viewed as a walkback, one that weakens the hand of Republicans going into the presidential [election], and creates conflict for his fellow House and Senate members who stuck their necks out to support his budget and now will be confronted by more questions."

Ben is right to raise the concern, but I think it's unlikely to play out that way. Left-wing Democrats are far more likely to take the Pete Stark approach of arguing that there isn't much difference between Ryan's old Path to Prosperity plan and the new Wyden-Ryan one. From the Left's standpoint, anything that moves away from single-payer Medicare is anathema.

Bottom line: A promising plan, but more specifics are needed

While I continue to favor the old Ryan plan (indeed, I'd rather see a true Swiss-style voucher system), I do agree that competitive bidding has certain advantages. Most importantly, it has support on the other side of the aisle. In addition, competitive bidding could drive costs lower in areas where hospital monopolies currently hold sway. This makes it the most plausible, bipartisan approach to Medicare reform that's out there.

On the other hand, it will be important for Wyden and Ryan to help us understand how they will enforce the global spending growth cap. In addition, they will need to explain how their employer insurance opt-out won't explode the Obamacare exchanges (more than they already will be).

One other deficiency in the plan is that it takes too long to work. In order to honor the promise that there will be no Medicare changes for those older than 55, the plan kicks in in 2023. However, Medicare is slated to go bankrupt in 2020 (if you believe the Congressional Budget Office) or 2016 (if you believe the Medicare actuary).

Overall, I'm very encouraged by this plan. It appears that between Ron Wyden, Paul Ryan, and Mitt Romney, a group of prominent political figures is coalescing around a bipartisan approach to Medicare reform. No doubt that the hard-core will find fault with it. And there are technical problems with the proposal that need to be worked out. But we can say that Wyden and Ryan have moved us forward, on the long road to bringing our runaway fiscal problems under control.

UPDATE: There's a lot of commentary on Wyden-Ryan around the web. Ezra Klein speaks for many progressives in arguing that Obamacare's exchanges are similar to Medicare premium support. But what Ezra keeps failing to note is that the direction of reform is different in each case, and also that Obamacare consists of more than just the exchanges.

White House Communications Director Dan Pfeiffer released this statement, bashing the plan, and making an allusion to Newt Gingrich's 1995 comment that competition would make Medicare "wither on the vine."

We are concerned that Wyden-Ryan, like Congressman Ryan's earlier proposal, would undermine, rather than strengthen, Medicare. The Wyden-Ryan scheme could, over time, cause the traditional Medicare program to "wither on the vine" because it would raise premiums, forcing many seniors to leave traditional Medicare and join private plans. And it would shift costs from the government to seniors. At the end of the day, this plan would end Medicare as we know it for millions of seniors. Wyden-Ryan is the wrong way to reform Medicare.

Paul Ryan responds that Obama is "increasingly isolated" from the "growing bipartisan consensus."

I am grateful to have a partner in my friend Senator Wyden, as we work together to create space for bipartisan solutions to address our nation's most pressing challenges. It is disappointing to find the President of the United States increasingly isolated from this growing bipartisan consensus on efforts to save and strengthen our critical health and retirement security programs. The President's failure to offer credible solutions to the challenges facing Medicare is a disservice to seniors, a disservice to hardworking families, and a disservice to the next generation. A more glaring disappointment is the President's failure to recognize a sincere effort by a Democrat and a Republican to come together and offer solutions, betraying his own rhetoric and his own commitment to those we have the privilege to serve. America deserves better.



I'm still digesting the Wyden-Ryan plan, but since the blogosphere is exploding over the plan, and the White House is attacking it, I think it's appropriate to offer some early thoughts. (For the record, former CBO Director Douglas Holtz-Eakin and I proposed something similar back in July.)

First, the politics of the plan: this is clearly a "win" for conservatives, since it reduces Democrats ability to play the Mediscare card in the general election next November. Although Democrats have done their utmost to cast the Ryan plan as nothing short of feeding granny to the lions, momentum has been growing among policy wonks on both the left and the right to experiment with some sort of premium support plan, beginning with the Congressional "Super Committee" discussions in November, as the New York Times noted not too long ago:

Members of both parties told the panel that Medicare should offer a fixed amount of money to each beneficiary to buy coverage from competing private plans, whose costs and benefits would be tightly regulated by the government. ...

Alice M. Rivlin, who was budget director for President Bill Clinton, had urged the deficit panel to establish an insurance exchange for Medicare beneficiaries. Private plans would compete with the traditional Medicare program and would have to provide at least the same benefits. The federal contribution in each region would be based on the cost of the second-cheapest option, whether that was a private plan or traditional Medicare.

That a well respected senator like Ron Wyden has officially embraced the model of Medicare "premium support" makes it a legitimate topic for debate and dicussion - and takes much of the Fear Factor out of the proposal.

But since Medicare bipartisanship of any kind breaking out is bad news for the White House, the Obama Administration wasted no time attacking it:

"We are concerned that Wyden-Ryan, like Congressman Ryan's earlier proposal, would undermine, rather than strengthen, Medicare," said White House Communications Director Dan Pfeiffer. "The Wyden-Ryan scheme could, over time, cause the traditional Medicare program to "wither on the vine" because it would raise premiums, forcing many seniors to leave traditional Medicare and join private plans. And it would shift costs from the government to seniors. At the end of the day, this plan would end Medicare as we know it for millions of seniors. Wyden-Ryan is the wrong way to reform Medicare."

What then is the right way to reform Medicare? Presumably, it's the massive provider cuts included in the Patient Protection and Affordable Care Act, which Medicare's own actuary has concluded are unsustainable since 40% of Medicare providers would become unprofitable by 2040. But even if the cuts were sustainable the CBO says they don't do enough to slow the growth in federal health care expenditures:

Rising health care costs will put tremendous pressure on the federal budget during the next few decades and beyond. In CBO's judgment, the health legislation enacted earlier this year does not substantially diminish that pressure.

- Douglas Elmendorf, Director, Congressional Budget Office, Presentation to the Institute of Medicine, Health Costs and the Federal Budget, May 26 2010

The President's only "solution" has been to offer the prospect of more cuts to provider rates through IPAB, which will only lead to the prospect of more providers dropping out of the program, and the rationing of care for seniors.

Wyden-Ryan actually advances several important new ideas. First, it would institute a new regional competitive bidding system, where plans would agree offer the same coverage as traditional Medicare. Federal premium support would be pegged to the second least expensive plan. This means that seniors who chose lower cost plans could keep the savings, and seniors who chose the benchmark wouldn't pay any more out of pocket than they do for Medicare now. Seniors who wanted richer plans could pay more for additional services.

Plans would be chosen from an insurance exchange, and insurers would have to take seniors without regards for their age or health status. Sicker seniors would get more money to buy affordable coverage.

As in Medicare's current Part D prescription drug program, competitive bidding would help to keep costs down. And insurers - unlike traditional fee for service Medicare - would have powerful incentives to create efficient networks of providers to offer high quality, affordable care.

Medicare has never been able to achieve this kind of efficiency because seniors have always been able to go anywhere they want, to any provider, and Medicare has paid for services on a piecemeal basis, which has led to the fiscal train wreck we're in today.

Ideally, competitive bidding and consumer choice would slow the rate of Medicare spending without impeding access or hurting quality. With a nod to the need for some kind of hard cap on Medicare spending, the Wyden-Ryan plan would limit growth in overall Medicare spending at GDP+1 percent - about where spending is capped currently under PPACA's Independent Payment Advisory Board.

(Some courageous journalist should actually have the temerity to ask President Obama why Wyden-Ryan would be any worse than his even more draconian IPAB proposal, or, for that matter, the premium support system that President Obama has created for everyone under 65 on the state exchanges.)

But this is where the bipartisanship rubber really hits the asphalt of election politics. The Wyden-Ryan plan protects Republicans from the charge that they want to kill Medicare...but it's resemblance (both in structure and regulation) to "Obamacare's" state exchanges also limits conservatives ability simply lambaste the Affordable Care Act.

The debate would then shift to the details: How quickly should premium support grow? How much should wealthier seniors (or the middle class on the state exchanges) pay for their own care? How much do state and federal regulations actually drive up insurance costs and limit provider competition?

Some liberal commentators see Wyden-Ryan as crumbling conservative opposition to universal coverage. But it's equally possible to see Wyden-Ryan as crumbling liberal opposition to more market forces in health care generally, and Medicare in particular.

Wherein lies the truth? Health care spending is driving the U.S. toward fiscal ruin. Reforms must be serious to be sustainable, and sustainable reforms require bipartisan support. They will also require uncomfortable compromises from both parties that shatter long held caricatures.

Senator Wyden and Representative Ryan have begun a serious dialogue about what that compromise would look like. It would be nice if we had a president who could embrace that opportunity, rather than reflexively vilify it.


Way back in September 2009, the Food and Drug Administration announced that it would begin using the social media site Twitter to share news and other information about drug safety and regulation. "Messages on Twitter provide consumers, healthcare professionals, the pharmaceutical industry, and others with timely information on new drug approvals, safety alerts, compliance actions, and consumer information," the announcement said. It was nice for FDA to mention the pharmaceutical industry. But, unfortunately, the drug and device industries have been feeling their way around the Internet and other new media, including Twitter, for several years without substantive guidance from the FDA on what is and is not permitted.

As Ed Silverman at Pharmalot explains in an op-ed posted today, the agency has been promising for years that it would develop of a formal policy on the matter. As early as 1996, the FDA held a public meeting (see reference here) to discuss issues related to the advertising and promotion of medical products on the Internet. Then, in November 2009, the agency held another public meeting, with the promise that it would soon thereafter develop guidance or other policies that addressed Internet promotion and social media. But, as Silverman notes, "the guidelines didn't appear in the wake of the meeting. And they didn't appear by the end of 2010, despite an unofficial FDA deadline to push something out by New Year's Day. And then the agency missed another deadline, this one on March 31. By mid-year, FDA officials said they would stop setting deadlines."

Unfortunately, this is not a case of benign neglect. On April 2, 2009, FDA's Division of Drug Marketing, Advertising, and Communications (DDMAC) issued 14 Notices of Violation to drug manufacturers for their use of sponsored links on web search engines that included the name of a drug and a brief statement about the disease it treats, while directing users to a separate website that contained complete benefit and risk information. Under existing FDA rules, if an ad contains the name of a drug or device and any affirmative statement about the product or the disease it treats, then all of the mandatory risk information must also appear in the ad. According to DDMAC, that means that a sponsored link or other web ad may not read something like, "Learn How Spiriva May Help You Manage Your COPD" or "Online Resource for Women with Breast Cancer. www.Femara.com," unless the full risk disclosure also appears in the sponsored link. Having the risk disclosure "one click" away via the hyperlink is not enough.

Since sponsored links resulting from key word searches are generally limited to a total of 70 individual characters, this policy effectively precludes the use of sponsored link drug ads. But the policy has far broader implications for other Internet and social media fora. Is it legal for a drug manufacturer to host a Facebook page or web discussion group in which patients and doctors discuss medicines they're taking or prescribing if every single page does not also include the complete risk disclosure? What about user generated tweets aggregated in a Twitter stream that's embedded on a company-sponsored website? No one really knows for sure how the FDA would treat those issues. And that's a problem.

Again, Silverman points out that, "With the advent of patient-centered 'participatory medicine' poised to become one of the century's great trends in health care, it's more vital than ever that consumers have access [to] well-vetted health information, available via where they live, online. The biopharma industry has recognized this, which is why so many companies have opted to take the risk to push ahead despite the lack of guidance."

As attorney Arnold Friede and I discussed in a short paper two years ago, "The FDA's approach to hyperlinked disclosures is particularly frustrating in light of the Federal Trade Commission's (FTC) more nuanced approach for advertising in other industries. The FTC does not categorically reject hyperlinked disclosures in determining whether an advertisement is misleading or not. Instead, when considering the adequacy of a required information disclosure, it examines the conspicuousness of the hyperlink, whether it signals the availability of risk information, and other contextual factors. Rather than ticking off arbitrary boxes, the FTC looks at an entire presentation and considers the 'net impression' that a 'reasonable man' would form when viewing the information aggregated on linked web pages."

Until April 2009, the pharmaceutical industry had assumed FDA would adopt this so-called "one click" rule for its own purposes. After all, the purpose of a sponsored link is to drive traffic to the web page where the reader can learn more information. But the agency seems to have rejected that common sense approach -- at least so far. Once the agency does settle on a formal policy for Internet and social media advertising, however, adopting the one click rule or some other policy that recognizes the unique limitations and added functionality of the Internet would not be unprecedented. After all, the FDA did something similar with television advertising.

In its "major statement" guidance for risk disclosures in television advertising, FDA acknowledges the inability of TV to carry contemporaneous and instantaneous disclosure of all risk information. Because TV ads are limited to just 30 or 60 seconds, the agency permits drug manufacturers to include just a brief description of the product's "most important risk information," while providing the full risk disclosure through alternative means, such as a toll-free telephone number, in print advertisements that appear concurrently in publications reaching the same audience likely to see the TV ad, or on the Internet.

What's that again? It's an important point, so let me repeat it: FDA's television advertising policy allows viewers of a TV ad to be directed to a drug or device's full risk disclosure on a website not intrinsically connected to the commercial. Under its current interpretation of the statute, however, drug and device manufacturers cannot direct readers of an Internet ad to another, hyperlinked, web page to see the full risk disclosure. It would be ironic -- not to mention downright absurd -- if the agency failed to establish an Internet and social media policy that recognizes the ease with which Internet users can navigate from one web page to another, and to access information linked directly from the one they're currently reading.



Today, U.S. Senator Ron Wyden and Representative Paul Ryan released a new Medicare reform plan that focuses on competition between private plans and traditional Medicare, built around competitive regional bidding and an insurance exchange for seniors.

Here's a link to the Wall Street Journal op-ed explaining the plan, along with links to additional commentary from around the Web:

A Bipartisan Way Forward on Medicare
Ron Wyden and Paul Ryan, Wall Street Journal

Our plan would strengthen traditional Medicare by permanently maintaining it as a guaranteed and viable option for all of our nation's retirees. At the same time, our plan would expand choice for seniors by allowing the private sector to compete with Medicare in an effort to offer seniors better-quality and more affordable health-care choices.

Under our plan, Americans currently over the age of 55 would see no changes to the Medicare system. For future retirees, starting in 2022, our plan would introduce a "premium support" system that would empower Medicare beneficiaries to choose either a traditional Medicare plan or a Medicare-approved private plan. Unlike Medicare Advantage, these private plans would compete head-to-head with traditional, fee-for-service Medicare on a federally regulated Medicare exchange.

Wyden: Medicare proposal doesn't erase GOP votes for earlier Ryan plan
The Hill

Wyden said he and Ryan (R-Wis.) want to move past the divisive politics of healthcare. But he said Republicans can't walk away from their support for Ryan's proposal to end the existing Medicare program.

 The Medicare proposal that Wyden and Ryan released Thursday would give seniors a choice between Medicare and private insurance, a departure from Ryan's earlier proposal to privatize the entire program. 



"Traditional Medicare will always be part of this program," Wyden said.

 The two lawmakers said both parties have been on the receiving end of intense healthcare attacks -- over President Obama's healthcare law and Ryan's Medicare proposal -- and cast their proposal an effort to start a new conversation.



What Wyden-Ryan hath wrought
Matt Miller, Washington Post

In this new plan, Wyden gets Ryan to sign onto a key component of that earlier reform. Though it has nothing to do with Medicare, Wyden-Ryan would allow firms with fewer than 100 employees the option of giving their workers (on a tax-advantaged basis) the cash the firms would have spent on their health coverage to buy, voucher-style, other policies. Since most small firms offer just one health plan, this is a huge victory for choice. It means that as many as a third of American workers could use the new health-care exchanges -- a fantastic expansion of access to the exchanges that was perversely killed by both big business and big labor in the Affordable Care Act endgame.

Ryan, Wyden Lay Out Medicare Reform Plan
National Journal

Rep. Paul Ryan, R-Wis., and Sen. Ron Wyden, D-Ore., laid out a bipartisan plan for Medicare reform on Thursday that would give seniors a choice of using their premium dollars to purchase private plans, or stay in traditional Medicare. Ryan proposed a simpler voucher system as part of his budget plan last year. He and Wyden said the key to success in the program will be the power of choice and the market to drive down health care costs by transitioning one large government payer into a series of smaller plans.

"Traditional Medicare will always be part of this program, not something that's going to be shrouded in ambiguity," Wyden said at a breakfast event hosted by the Bipartisan Policy Center. "It will also offer a menu of private sector choices." People 55 and over now would be unaffected by the proposal. But starting in 2022, it would introduce a "premium support" system that would allow seniors to choose between enrolling in traditional Medicare or in a Medicare-approved private plan.

Ryan, Wyden back a new Medicare option
Politico

Wyden is the first Democrat on Capitol Hill to so strongly embrace a variant of Ryan's approach. And Ryan has accepted more flexibility than the Medicare approach in the House budget. Wyden insists the plan would be designed in ways that would preserve the safety net for the elderly.

"I will never do anything to shred that or weaken it or harm [Medicare] in any way," the Oregon Democrat said. "I simply believe that there is now an opportunity for progressives and conservatives to come together and to strengthen the program for the long term and particularly, deal with the costs and demographic challenges."

The Ryan budget plan would have moved seniors in the future into private health plans, with government subsidies known as premium support or -- to his critics, vouchers. Ryan and Wyden plan to release a white paper with more details Thursday at an event sponsored by the Bipartisan Policy Center.



There's an outstanding piece in Science Careers (Hat tip: Derek Lowe) discussing declining employment in the pharmaceutical industry. It's not a pretty picture:

Over the last several years, Pfizer, GlaxoSmithKline, and Novartis -- and most other pharmaceutical giants, which once seemed unassailable -- have announced huge layoffs. Drug discovery jobs have disappeared by the thousands in the United States and by the hundreds in Europe as the industry has cut costs in order to adjust to what is widely perceived as the end of the blockbuster-drug era.

"It's a whole big mess the pharmaceutical industry is in," says industry journalist Ed Silverman, who edits the Pharmalot blog. "It's an unfortunate set of circumstances. ... The companies have had fewer new drugs in their product pipelines and ... at the same time they're facing expiring patents on the biggest sellers."

pharma-job-cuts.jpg

The problem is fairly easy to define: the industry is just not producing enough new medicines to sustain revenues in the face of massive patent expirations set to occur over the next several years. And, to add insult to injury, drug development costs are going up even as R&D productivity is basically flat or declining. By one estimate, per-patient clinical trials costs have gone up by a stunning 70% in just the past three years, with the largest increases coming in the pivotal Phase III trials required by the FDA. There, costs were up by over 85%.

Clinical-Operations-Chart.jpg

With development costs rising sharply and revenues plummeting, companies basically have two choices: cut costs or rapidly increase productivity. The popular approach has been to cut costs, particularly through attrition. But no one - at least not yet - seems to have found a magic bullet to improving R&D productivity. And without improving productivity, the current industry model isn't sustainable in the long run.

As the global leader in biomedical innovation, the U.S. has the biggest economic incentive to find ways to improve industry efficiency. The U.S. biopharmaceutical industry employs 675,000 people directly, and another 4 million indirectly. It also contributed $382 billion to U.S. GDP (in 2009), and is among the top five U.S. exporters - and is the largest exporter among R&D intensive U.S. industries.

But helping the industry retool is not only about saving jobs and tax revenues, but increasing the pipeline of innovative new medicines that can save lives and help people live longer and healthier lives. Reducing the burden of diseases like Parkinson's and Alzheimer's will also reduce pressure on government health care programs like Medicare and Medicaid, and help us rethink our other retirement and pension obligations.

Unfortunately, "big thinking" on streamlining drug development doesn't seem to be on order at the Obama Administration at the moment. The FDA is making all the right gestures, and saying all the right things, but the changes proposed seem incremental compared to the enormity of the challenges involved.

Contrast that to the recently announced U.K. Strategy for Life Sciences announced by British Prime Minister David Cameron. Cameron proposes to spend £180 million (about $280 million dollars) helping companies and academics bring promising new therapies to market, and wants to give companies and researchers access to de-identified patient data from the NHS to use to in clinical trial recruitment and observational studies. He also proposes creating a new Health Research Authority to help streamline regulations.

Cameron's motive isn't a state secret: he wants to keep more biotech jobs in the U.K., and to attract more jobs from the U.S. and Asia. And the U.K. isn't the only U.S. competitor looking to become more attractive to companies and investors.

The E.U. has launched a $2.7 billion Innovative Medicines Initiative to remove bottlenecks in drug development. China has committed $1.36 billion to funding drug R&D. In 2009, Singapore, another rising biotech powerhouse, was ranked #1 in innovation leadership by Boston Consulting, thanks to "business-friendly policies, a commitment to public-private collaborations, strong IP protections, and outstanding science education." The U.S. was ranked a distant eighth.

Make no mistake, the U.S. is still far and away the global leader in biomedical innovation. But, as the Milken Institute noted in a recent report, the U.S. is more in danger of slipping behind than it is of pulling ahead:

Multiple factors leave the U.S. vulnerable to falling behind: increasing complexity, rigidity, and uncertainties in the Food and Drug Administration's regulatory approval process; funding cuts at the National Institutes of Health and at the state level; a corporate tax rate and R&D tax credit that are not globally competitive; unfavorable coverage and payment policies that limit access to new medical advances; and public policies that hamper the nation's ability to develop and retain human capital.

The dominance enjoyed by the U.S. biomedical industry does not come with a long-term guarantee. The U.S. assumed the mantle of leadership by being the first to commercialize recombinant DNA research--and that achievement was made possible only because it had built an environment and infrastructure that allowed innovation to flourish. But if another nation duplicates or improves upon this formula by building a similar ecosystem and subsequently makes a pivotal scientific breakthrough in nanotechnology, personalized medicine, embryonic stem cell research, or some other cutting-edge field, it could tip the scales in the other direction.

The pharmaceutical industry is in a midst of a crisis, but this crisis presents an attractive opportunity for the U.S.'s foreign competitors. Cost cutting pressures will increasingly force U.S. firms to outsource clinical trials and R&D operations to lower cost countries like China and India. Regulatory competition will also encourage companies to outsource R&D to countries where they can reach market without enduring the FDA's onerous and costly requirements, as well as develop closer relationships with regulatory authorities in emerging markets.

The industry will, sooner or later, reinvent itself and emerge from its current malaise. Where it will reinvent itself is the real question.



There's an interesting discussion of prostate specific antigen (PSA) tests in the latest UC Berkeley Wellness Letter. The article critiques the U.S. Preventive Services Task Force's recommendation in October that all men skip PSA tests for prostate cancer screening. The Task Force had never actually recommended PSA screening and was prepared to recommend against it three years ago, but was afraid of the backlash.

The article clearly lays out the strengths and weaknesses of the PSA test. In an editorial postscript, the chairman of the editorial board admits that the male members of the board are split about future testing. "Two won't, several are considering stopping, while the rest will continue to be tested, though with some ambivalence."

Most medicine is ambiguous and the current PSA discussion merely underscores that fact. Even the informed editorial board of Wellness Letter is split on what to do. The final recommendation in the article is: "The decision is a personal one, and men should discuss the pros and cons of PSA testing with their doctors starting at about age 50, earlier if they are high risk."

Let's be honest. This is the recommendation for more than just PSA testing; it is the recommendation for all medical cases. All cases are personal.

Imagine the editorial board's uproar if the chairman decreed that the other members follow his decision, effectively forcing his preferences on them and eliminating the role of individualized treatment and experimentation.

Now imagine that he dictated his preferences to 313 million people and you get a good picture of the FDA. The FDA will never understand the specific circumstances and preferences of 313 million people. The FDA's autocratic approach denies Americans the opportunity to make personalized treatment decisions.


I didn't have a chance to write about it then, but a few weeks back the Food and Drug Administration denied a citizen petition submitted by environmental activists asking the agency to forbid the "sub-therapeutic" use of certain antibiotics in food animals. The petition -- initially filed in 2005, and fundamentally identical to one submitted in 1999 and rejected in 2001 -- argued that using antibiotics for growth promotion, rather than to treat infected animals, contributes to the development of antibiotic-resistant bacteria that threaten human health.

The issue is a complicated one, with serious implications for medical treatment and consumer well-being more broadly. We know that development by human pathogens of resistance to medically important antibiotics poses serious public health concerns. And, although a clear link between animal antibiotics use and human disease has not been proven, there are good theoretical reasons to believe and some real world evidence suggesting that it does -- or at least could -- occur.

Nevertheless, I would still argue that FDA made the right call, but for an incomplete reason. In response to both the 1999 and 2005 petitions, the agency essentially said that going through the formal legal process to revoke the approvals for a drug is intensive, time consuming, and a poor use of FDA resources. And because the agency already monitors the development of resistance and has both voluntary and mandatory plans in place to restrict uses that may pose realistic threats to human health, FDA argued that beginning the revocation process isn't worth it.

I would further argue, though, that the agency simply does not have sufficient information on which to base a decision to revoke the approvals in question, but that it should begin a less formal investigation to shed some light on the matter. The agency has never before compared the risks that arise from animal antibiotics uses to those that would arise from restricting them. But doing so should be mandatory before any bans or further restrictions are put in place.


LigoCyte, a small biotech based in Montana has been working for years on a vaccine for norovirus (the so-called stomach flu, or cruise ship virus). And it looks like they may really have something.

Originally called Norwalk Virus (from Norwalk, Ohio, where it was first isolated in 1968), this little devil is possibly the most infectious pathogen on earth. Estimates of the number of virions necessary for infection range from 10-100, which is minuscule, and the virus is resistant to alcohol, heat and detergents. It is thus no surprise that it is so widespread, with 23 million people in the US catching it each year, second only to the common cold. There are an estimated 1,000 outbreaks every winter.

In the absence of medical support, its impact can be severe. In the developing world norovirus kills about 200,000 children under the age of 5 every year, mostly from dehydration brought about by severe vomiting and diarrhea, making it a serious global health concern.

But even where the best medical treatments are available norovirus can cause quite a bit of trouble. Although it is usually self-limiting, the bug nonetheless causes 800 deaths per year in the US, and hospitalizes 100,000 people (some of whom probably wished they were dead at the time). In large cities, there are about 500 ER visits daily during the winter months, and it is estimated that on average, it costs hospitals $1 million each per year.

It spreads like crazy when it hits, due to its innate infectivity, stability and multiple means of transmission. Outbreaks are common in schools, nursing homes, hospitals, camps and day care centers. And there is no way to prevent it or to treat it (with the possible exception of Zofran, which is being studied).

Until now. The LigoCyte scientists used a virus-like particle (VLP) approach, where a viral capsid minus the RNA (to prevent infection) is given, and this elicits a hopefully protective immune response. The question of whether this would work in humans was answered today. In a small study of about 80 adult volunteers, half received two doses (intranasally) of the vaccine, while the control group did not. All were exposed to the virus (you do not want to know where it came from) and significant protection was found.

In the control group, 82 percent of the volunteers were infected, with 69 percent developing the symptoms. But in the inoculated group, these figures were 69 and 37 percent, respectively, and those who did get sick had milder symptoms. Not a bad start. I suspect they will need to generate a stronger immune response, and probably deal with the genotype issue, but for a first study it is very promising.

I hope they succeed, and do so quickly. It would be really nice to be able to stop one more infectious epidemic, especially such a messy one.



The media frenzy over the Obama Administration's decision to overrule FDA Commissioner Margaret Hamburg and the scientific staff at the FDA isn't going to die down any time soon - especially because President Obama has made it a point of pride to say that science, not politics, drives decisions in his administration.

Now, this is never entirely true. Pure science isn't the same as science-based public policy. The speed of light isn't open to serious argument. But the relative risks and benefits of individual drugs - or whether the you should allow a pipeline to trasport natural gas from Canada to the U.S. - depends on whether or not you believe that the benefits and risks of Policy A outweigh the benefits and risks of Policy B. That decision is dependent on unscientific judgements and values that simply can never be divorced from the policy making process.

But having said that, it's all the more important for stakeholders at agencies like the FDA to at least understand what that process is, and have some confidence that agency decision making is at least going to be relatively transparent and predictable.

The Plan B decision from HHS wasn't predictable or transparent, and seems to be purely political. This is likely bad news for anyone who wants FDA to become more innovative and open minded. If the FDA staff believes that it's decisions on contentious issues are going to be overruled by their political minders in HHS, they are much more likely to hunker down and become more risk averse than they already are.

Matthew Herper makes this exact point at Forbes:

The question is whether this decision is a one-off, or a change in the way medicines are regulated. Could future negotiations with drug companies be weakened by the fear that the FDA commissioner would be overruled? And even if Sebelius is always going to back up Hamburg on every other regulatory decision, what about future administrations?

To get another perspective on the decision, I spoke to Tevi Troy, who served as Deputy Secretary at HHS under Secretary Leavitt during the previous administration. While he supported Secretary Sebelius' decision, he was also concerned about the long term effects on the FDA:

Regardless of the merits of the Plan B decision, this kind of disconnect between HHS and FDA should never happen. I find it hard to believe that FDA would move to make Plan B available without a prescription for young teens unless it had some sense that Secretary Sebelius -- and by extension, President Obama --would have been supportive.

While I believe that Secretary Sebelius made the right policy decision, she seems to have done so for political reasons. The messy process and the very public undercutting of the FDA's decision making is extremely problematic, and makes it appear as if politics governs decisions, not science. This not only damages the administration's reputation, but it undercuts the integrity of the FDA.

Whether there really was a breakdown in communications between the FDA and HHS, or whether - cynically - the high profile disagreement was actually meant to boost President Obama's election prospects, it may lead to a demoralized FDA. And if the FDA does become demoralized, I fear that medical innovation and regulatory reforms may be among the unintended casualties.


This entry is cross-posted from OpenMarket.org.

Back in March 2009, President Obama issued a memorandum on scientific integrity to the heads of executive branch agencies and departments. It announced that "[s]cience and the scientific process must inform and guide decisions of [his] Administration on a wide range of issues." And in a statement to the press, Obama insisted that "Our government has forced what I believe is a false choice between sound science and moral values." Previous administrations (and one in particular - nudge nudge, wink wink ... Know what I mean?) had let politics interfere with what should have been purely science-driven decisions by expert agencies. But that just wasn't going to happen in the Obama administration.

I guess Kathleen Sebelius didn't get the memo.

On Wednesday, HHS Secretary Sebelius publicly overruled a decision by the Food and Drug Administration to make the Plan B emergency contraceptive available to girls under age 17 without a prescription. According to The New York Times, "Dr. Margaret Hamburg, the F.D.A.'s commissioner, issued a lengthy statement saying it was safe to sell Plan B over the counter, while Ms. Sebelius countered that the drug's manufacturer had failed to study whether girls as young as 11 years old could safely use Plan B." Commissioner Hamburg's public letter on the decision explains that:

"Our decision-making reflects a body of scientific findings, input from external scientific advisory committees, and data contained in the application that included studies designed specifically to address the regulatory standards for nonprescription drugs. [FDA's Center for Drug Evaluation and Research] experts, including obstetrician/gynecologists and pediatricians, reviewed the totality of the data and agreed that it met the regulatory standard for a nonprescription drug and that Plan B One-Step should be approved for all females of child-bearing potential."

Prometheus gave man fire, thankfully he didn't charge every time man lit a match. Prometheus Labs in contrast wants to charge patients for a rule that says when to increase or decrease a drug in response to a blood test. Quoting Tim Lee:

The patent does not cover the drug itself--that patent expired years ago--nor does it cover any specific machine or procedure for measuring the metabolite level. Rather, it covers the idea that particular levels of the chemical "indicate a need" to raise or lower the drug dosage.

Even this is not quite right for suppose a physician notes that the patient's metabolites are within the range where a change in dosage is not necessary; although the physician takes no action she still has used the patent and thus must pay Prometheus Lab a fee or infringe.

We already have significant incentives for producing pharmaceuticals (and thus the instructions required to best use those pharmaceuticals), we support medical research through universities and non-profit hospitals, and there is plenty of opportunity to profit from the manufacture of tests. Will we really get enough additional innovation to justify the monopoly prices and deadweight losses when we enforce patents on medical rules? Remember, we have to pay the higher prices on all the rules not just the ones brought into being by the patent.

And if medical patents why not economic patents? Will Scott Sumner now patent a rule for adjusting the money supply in response to metabolites the futures market?

Patents like this are a logical consequence of the extension of patentable matter to software and business methods but extending patents to software and business methods has created huge legal costs without any increase in innovation.metabolism1.jpg

Most importantly, patents can reduce innovation and are especially likely to do so in fields where innovations build on innovations. In fields of cumulative innovation, previous patents owners become veto players who can threaten to holdup the new innovation unless they are granted a share of the proceeds. In theory, bargaining can result in an efficient outcome. In practice, it means lawsuits, delay, waste and reduced innovation.

Since a smartphone may rely on many thousands of previous patents, the smartphone industry has heretofore been considered a classic case of how too many veto players can impede innovation. But now consider human metabolism, one of the most complicated systems known to man (just a tiny fraction of that system is shown at right), and note that if Prometheus is successful in this lawsuit that any correlation in that system can be patented. This is a recipe for disaster.

Addendum: Scotus Blog has a roundup of links. See Launching the Innovation Renaissance (Amazon link, B&N for Nook, also iTunes) for more on patents and their problems. Hat tip also to E.D. Kain who writes:

The world, it appears, is determined to turn me into a full-fledged libertarian. What with SOPA, PIPA, the NDAA, software patent trolling, police violence, and now patents on how doctors provide treatment to their patients, it's becoming more and more clear how pernicious the law can be when it's designed for powerful special interests, national security hawks, and big corporations.

Cross Posted from Marginal Revolution.



The United Kingdom's National Institute for Clinical Excellence (NICE) reviews applications to market new drugs in the U.K. based on their cost-effectiveness, and routinely recommends that Britain's National Health Service not pay for (i.e., refuse to cover) medicines that it thinks are too expensive - like Avastin for metastatic colorectal cancer. So NICE Chairman Michael Rawlins (who's led the institute since its foundation in 1999) is certainly no friend of the drug industry.

This made it all the more surprising this week when Rawlins told D.C. based BioCentury TV that the way that drugs are developed today creates "pervese incentives for companies to charge high prices."

"The first perverse incentive is the way that over the last 15 years the regulatory requirements for both the FDA and the EMA have increased hugely," he said.

Rawlins noted that during the early 1990s when he headed the U.K.'s Committee on Safety of Medicines...the median number of patients exposed to a new drug in clinical trials was about 1,500. That has now grown to 12,000, he said.

"It is a huge increase with not much gain, not much benefit from these increased numbers. And of course, it puts up the cost of drug development hugely," he said. By Rawlins' reckoning, clinical trials drive well over half of the cost of new drugs."

This is a point that industry, patients' groups, and even the FDA is beginning to recognize: that the enormous costs and delays associated with drug development has not just financial consequences for the health care system, but needlessly delays patient access to important new therapies.

And much of the information captured in lengthy and expensive pivotal Phase III clinical trials required for FDA approval could just as easily be captured in the post-market environment through electronic health records or patient registries that could confirm efficacy, monitor drugs for rare safety problems, and help make off-label use of drugs much more scientific.

One approach for speeding drug development while still minimizing safety risks is called progressive approval, an idea recently proposed by the Biotechnology Industry Organization, and in a bill from U.S. Senator Kay Hagan (D, NC).

I'll be writing much more about this in future posts, but the basic idea is fundamentally sound, and has been advocated by various groups for years. Indeed, the FDA already does something like this through it's accelarated approval process (for cancer, AIDs, and orphan drugs), and the BIO and Hagan progressive approvals pathway would merely build on this experience.

The rebuttle, of course, is that many drugs that look good in early stage testing fail in Phase III trials, so progressive approvals would merely expose patients to more "placebos". However, it is also true that many good drugs are never developed because of the enormous costs and time required to bring them to market. And many patients die or suffer waiting for effective drugs to be approved.

Even if some drugs wind up being withdrawn under a progressive approvals process - like Avastin for metastatic breast cancer - many more patients would benefit from early access to more effective therapies. And, in a plus for health care payers, as drug development costs decline drug prices should too. Wouldn't that be really NICE?


Our sister site, PointofLaw.com is hosting a friendly debate on medical malpractice damages. MI's own Ted Frank is debating Professor Shirley Svorny of the Cato Institute on whether med-mal damages hurt consumers. Svorny authored a report released by Cato earlier this fall arguing that existing empirical evidence suggests that "medical malpractice awards do track actual damages" and that noneconomic damage caps and other "policies that reduce liability or shield physicians from oversight by carriers may harm consumers." Frank finds her paper not only contradictory but counterproductive.

Read more on Frank and Svorney's featured discussion and be sure to follow the debate on Twitter at #POLdiscussion!



Merck announced this week that it's opening a new R&D center in Beijing, with 47,000 square feet of labs and 600 employees. And this isn't just for pre-clinical research, but for everything from drug discovery to clinical trials. Reuters reports that Merck isn't the only company ramping up investment in China:

Aiming to take advantage of China's lower costs and supply of scientists, global drug makers, including Pfizer, Abbott and Novartis, have made big investments in Chinese R&D operations in recent years.

Merck, known as MSD outside the U.S. and Canada, will also team up with biotech companies and academic institutions to develop new drugs...

Beijing is home to several of China's top universities as well as the country's food and drug regulator, whose approval is needed for medications to be sold in the country.

Now, on the one hand, this is all to the good. As China and other developing nations like India become more wealthy, and modernize their own R&D base, drug regulations, and improve patent protection, they naturally become more attractive markets for drug and biotech companies.

But this should also be a warning to U.S. policymakers and regulators: the R&D and manufacturing base of the biopharmaceutical industry doesn't have to stay in the U.S. It can - and will - move to other markets that offer a more attractive "ecosystem" for life sciences innovation.

To the extent that U.S. becomes less competitive in the biopharmaceutical sector, we'll lose those high paying jobs and tax revenues. And, to add insult to injury, because the U.S. taxes global profits of U.S.-based companies, American multinational firms are much less likely to repatriate profits generated abroad and reinvest them at home. In short, money and jobs that flow abroad are more likely to stay abroad.

This is exactly the point that former CBO Director Douglas Hotlz-Eakin and I make in our recent City Journal article, Liberating Medicine's New Frontier.

America is, and will likely remain for some time, the global leader in biomedical innovation. Of course, Detroit used to be the automobile capital of the world too.



Dr. Donald Berwick, now departed from his 17-month recess appointment as Administrator of the Centers for Medicare and Medicaid (CMS)--he was unable to win confirmation by the US Senate--took some parting shots at "waste" in the system in a New York Times interview. Berwick, who oversaw the spending of more than $800 billion in outlays, declared that as much as 30 percent of health spending is wasted. OK, we're all against waste, but who defines it? The federal government? Has Uncle Sam earned the credibility to make judgments about waste?

His valedictory interview notwithstanding, Berwick is probably best known, to admirers and detractors alike, as America's leading fan of Britain's National Health Service (NHS). As he said to an NHS audience in July 2008, "I am romantic about the NHS; I love it." And he went on to flatter the NHS in rapturous terms: "You are unified, movingly and most nobly, by your nation's promise to make good on an idea: the idea that health care is a human right.  The NHS is a bridge--a towering bridge--between the rhetoric of justice and the fact of justice."

The NHS does, indeed, represent a kind of pinnacle. It is the culmination of a belief system that originated in 19th century Germany. In the early part of that century, G.W.F. Hegel lyricized about the wondrous justice-giving powers of the "universal" bureaucratic state, not so different from the government of his Prussian homeland. Later in that century, another Prussian, Bismarck, reified and solidified Hegel's idealism into the practical reality of a bureaucratic welfare state; neo-Hegelians finally had achieved their utopian vision. For them, the welfare state became a secularized godhead, boasting the power to transubstantiate mere tax money into glorious and ennobling political structures. In the US, neo-Hegelians called themselves Progressives; the English word "Progressive" was inspired by the German Deutsche Fortschrittpartei, the German Progress Party, founded in 1861.

Of course, American progressives, yearning to enact their vision of modernization and uplift, were not inspired only by Bismarck, they were inspired also by the humming factories that improved productivity and generated prosperity. So Henry Ford, having mastered the assembly line, became a hero, as did Frederick Winslow Taylor, the pioneering "efficiency expert." Across the political spectrum, right to left, from the US to the USSR, "Fordism" and "Taylorism" were admired for their industrializing powers. For their part, American progressives reasoned that if factories were efficient thanks to Ford and Taylor, they could be made even more efficient without the "waste" of capitalist competition. And they further reasoned that people like themselves could make the whole nation more efficient. As John Dewey wrote in his 1935 book, Liberalism and Social Action, "Organized social planning . . . is now the sole method of social action."

So it made sense that healthcare, too, should be planned, modernized, and socialized. The Beveridge Report, produced by the British government in 1942 as the blueprint for the NHS, asserted that national healthcare should be seen as part of a "comprehensive policy of social progress."

Later in the 20th century, Dr. Berwick was swept up by the same progressive idea: planners would improve social welfare and, at the same time, eliminate waste. Berwick founded the Cambridge, Massachusetts-based Institute for Healthcare Improvement (IHI), which self-described itself as follows:

IHI was founded in the late 1980s by Don Berwick and a group of visionary individuals committed to redesigning health care into a system no longer plagued by errors, waste, delay, and unsustainable social and economic costs.

Berwick has been open in his admiration of such contemporary efficiency experts as W. Edwards Deming and of companies that have streamlined "just in time" techniques, such as Toyota. And the progressive healthcare dream has stayed steady now for a century; Berwick's declaration that 30 percent of healthcare spending is "wasted," for example, is perfectly congruent with Barack Obama's 2008 promise to eliminate waste and so cut a family's healthcare spending by $2500, or one-third. The promise still stands, of course, even if we are still waiting for the facts to catch up. Indeed, the lag time might lead some to conclude that perhaps the government is not the efficiency machine that Berwick and Obama might wish it to be. The progressive dream of enlightened management, it seems, will never die.

Some things have changed, to be sure, in the 100 years since Teddy Roosevelt ran for president on the Progressive ticket, promising, among other platform planks, national health insurance. For one thing, progressives have figured out how to profit from their progressivism; Berwick's IHI paid him more than $2.3 million in 2008. Indeed, such a fat paycheck is perfectly in keeping with the spirit of an age in which policy experts become rich as well as powerful. White House healthcare czarina Nancy-Ann DeParle, to name another, received $5.8 million as a consultant to health insurance companies in the three years prior to her entry into the Obama administration.

Yet at the same time, there can be no doubt that Berwick has full faith in the transcendence of what he has been doing. As he told the Times, "We are a nation headed for justice, for fairness and justice in access to care." Indeed, he continued, putting the cause of providing universal health insurance in grandiose terms: "There is a moon shot here." By "moon shot," Berwick meant a project that can grip the popular imagination the way it has gripped the imagination of so many Democratic Party intellectuals. Yet if most Americans don't see health insurance in such lustrous terms, well, that is indeed a problem for the latest generation of Hegelians.

In fact, Berwick lamented that the public hadn't yet grasped the greatness of the vision: "Somehow we have not put together that story in a way that's compelling."

One problem, perhaps, lies in Berwick's zeal for health rationing, seen as a necessary component of health justice. Yet zeal is not shared by most Americans. So when Berwick declared in 2009, "The decision is not whether or not we will ration care--the decision is whether we will ration with our eyes open," those words were widely used against him. But Berwick has, in fact gone even further, past the political point of no return:

Any healthcare funding plan that is just, equitable, civilized and humane must, must redistribute wealth from the richer among us to the poorer and the less fortunate. Excellent healthcare is by definition redistributional.

Alas, poor Berwick--we knew him too well. Whereas he saw government-run healthcare as taking us toward the light, others saw darkness. The NHS, for example, looks bad to most Americans with access to Google. Even the briefest search yields up headlines such as this, from the December 1 edition of The Telegraph, the UK newspaper: "Loved ones not always told their relative is on controversial 'death pathway'/ NHS doctors are failing to inform up to half of families that their loved ones have been put on a scheme to help end their lives, the Royal College of Physicians has found." It seems that tens of thousands of NHS patients are being put on what the Telegraph called the "death pathway," as a play on what the NHS calls--using a euphemism for euthanasia--the "care pathway." According to NHS rules caregivers [sic] are allowed to withhold care from terminal patients after receiving consent from the family. Yet a government audit found that some 2500 families, in the city of Liverpool alone, were not so consulted.

It's from reports such as this that some in the US get the idea that eliminating "waste" is code-talk for eliminating patients. So maybe "death panels" in the US aren't such a stretch, after all. That's why most American advocates of national health insurance tend to shy away from any comparison to the NHS. But not, as we have seen, Dr. Berwick, who has always been forthright in his NHS-philia. Most likely that's why he wasn't confirmed by the Senate; when his recess appointment to CMS expired, he had to go back to Cambridge.

No doubt Berwick will soon find a way to pass his vision on to a new generation, but after a century of progressive activism on healthcare, perhaps he--and all of us--might think about a new course of action. It seems that US healthcare advocates have hit the point of diminishing returns; after all, we have had mostly universal healthcare coverage for decades now. Medicaid and Medicare were created in the 60s, and EMTALA gave everyone the right to emergency-room treatment, without regard for ability to pay. Yet such piecemeal approaches did not meet Berwickian efficiency standards, it would seem, and so the Obama administration charged ahead with the Affordable Care Act, signed into law in 2010. And later that same year, the Democrats, of course, were clobbered in the midterm, and now "Obamacare" is still deeply under water politically.

So maybe the Hegelian-Bismarckian-Berwickian vision has played itself out. Maybe it's in the nature of the health-and-welfare state these days that it a) can't keep up with fast-fluxing market forces, b) can't keep up with the even faster changes in social networking and computerized transparency and publicity, c) can't withstand the onslaught of special interests, who honeycomb any kind of legislation with baroque and unpopular mandates and set-asides, d) can't come to grips with the reality that lawyers and judges end up running any public system these days, and e) can't comprehend the fact that the real problem with a disease such as Alzheimer's is not the financing of the disease but, rather, the disease itself. And therefore the whole idea of securing additional healthcare finance for the population is less important than the idea of securing the medicine to keep people healthy in the first place. The best way to eliminate "waste" in the healthcare system is to eliminate the need for so many people to be processed through the system.

We shouldn't be surprised if Berwick writes a book about his experiences in Washington. Here's a suggested title, although he probably won't use it: All Things Must Pass.



With Dr. Donald Berwick's recess appointment ending last week, the media is full of praise for his common sense approach to Medicare reform, and how his reform of the program was stymied by evil Republicans who refused to confirm him.

Writing today in the New York Times, Joe Nocera repeats the meme in his column today:

Dr. Berwick, I'm here to tell you, was the most qualified person in the country to run Medicare at this critical juncture, and the fact that he is no longer in the job is the country's loss. ...

But there's one more thing about Berwick: He believes that President Obama's health care reform is "an important moral step toward universal health care." As he put it when we spoke: "Because of it, our country is, at last, making health care a basic human right. It is a majestic thing."

Naturally, this view made him anathema to Republicans, who blocked his nomination in the usual way. They pored through his old speeches and articles, plucked out a few comments they objected to -- he once praised the British health care system! -- and announced that they would never confirm him.

Well, this is a story line guaranteed to evoke outrage among liberals...except that it's probably untrue.

While it is likely that most Senate Republicans would not have voted to confirm Dr. Berwick, it is also irrelevant since the President had 59 Democratic votes in the Senate up until November 2010. That means they would only have needed one lone Republican vote to have him confirmed.

And, in fact, Democrats did not even hold a confirmation hearing for him, which would have allowed him to confront and (potentially) persuade his Republican critics.

Instead, it was Democrats' tactical (read political) decision not to hold a confirmation hearing for Dr. Berwick, since the American people might have found his many past statements in favor of rationing or his praise for the British NHS health system (which actively rations access to, among other things, new cancer drugs) deeply problematic in the run up to the November 2010 elections. In fact, that record might have made it very difficult for Senate Democrats in swing states to vote for him - creating a bipartisan vote against his confirmation and a huge embarassment for the Obama Administration.

In other words, revisionist history notwithstanding, Democrats found it inconvenient to actually schedule a hearing and vote for the man who they now say is indispensable for Medicare reform.

This is not to say that much of what Berwick advocates - bringing private sector quality control and managment techniques to Medicare - is at all objectionable. It isn't. What is objectionable to conservatives is his unabashed faith in central planning, a faith that would make any Soviet era bureaucrat blush. My colleague Avik Roy makes this exact point in a recent Forbes column.

What Berwick ignored in his work - and continues to ignore - is that systems that strangle consumer choice and competition are doomed to failure, as David Gratzer and I wrote after he was nominated:

Across the economy, companies thrive by becoming more and more responsive to consumers. Innovation is driven by competition and feedback from the bottom up - the iPhone (and its smartphone competitors) is the result of decades of us demanding better and faster machines.

In contrast, Dr. Berwick (who has professed his love for Britain's government-run National Health Service) thinks that the secret to improving American health care is having experts in Washington dictate prices and force process reforms on thousands of hospitals, hundreds of thousands of physicians, and tens of millions of patients, by sheer dint of ambition and will. Alas, he has fallen victim to the Harvard Disease: the idea that having experts peer through reams of data will lead to system wide improvements.

A record tempered with more humility about the power of top-down managment and more openness to market-based reforms would've not only made Dr. Berwick more politically palatable to his critics on the right, but it would've made him a better reformer.


Dr. Donald Berwick has left the Centers for Medicare and Medicaid Services (CMS). Admittedly a controversial figure, he has nailed several key points in the healthcare reform debate that rages on. In a parting interview in the New York Times, he noted that there is enormous waste in spending on healthcare delivery. He's right in concept, conservative on the estimate. While he suggested the number was 20-30%, research that we've done puts the number at 30-40% (approximately $500 billion annually) - more than enough to cover the uninsured without a reform law - and this was before taking into account savings from addressing fraud and abuse.

Yet CMS, the agency that could have changed this situation without what Dr. Berwick aptly described as, "a complex, complicated law," didn't. Berwick's ideals and vision - more healing, safer care and more access - are all noteworthy, reasonable, and aspirational.


The announcement of a $950 million settlement between Merck and the FDA for off-label promotion and false statements about risks for heart attacks and strokes should come as little surprise to anyone, particularly given the upcoming $3 billion dollar settlement by GlaxoSmithKline publicized in early November (and other recent large settlements). Unfortunately, drug companies do not seem too keen on avoiding behavior that results in massive financial penalties for illegal activities.

But wait! Aren't companies doing more and more to stay compliant these days? Haven't corporate integrity agreements included stricter and more detailed requirements? While Merck's settlement dates back to incidents occurring prior to the 2004 withdrawal of Vioxx from the market, the question still remains: Why then are these companies willing to risk massive fines for something that can be done as a normal part of business? My firm outlines specific guidance on this in our article "The Need for Compliance as Business Strategy."



I was talking to a reporter recently and, after I explained my background, she snidely replied, "Oh, you work for the pharmaceutical industry." In her mind, I was tainted.

The facts are clear. I did work for Merck & Co. and later Syntex Labs, and have spent the last 17 years consulting for biotech and pharma companies ranging in size from two-person startups to the largest of companies. It's still strange to hear someone disparage the industry I voluntarily selected. Other than the disagreeable business of animal testing, I'm proud to work in the pharmaceutical industry, which, by the way, has done more for the betterment of mankind than perhaps any other industry.

Here's just one example. Maurice Hilleman, a fellow Merck employee, might have saved more lives than any other person in history. You see, Hilleman almost singlehandedly developed 40 vaccines over his 60-year career. Of the fourteen vaccines routinely recommended in current vaccine schedules, he developed eight. What's more, his vaccines save primarily children--healthy people with a long life in front of them.

In 1963, when his oldest daughter developed the telltale fever and swollen glands of mumps, he made a late-night trip to his laboratory to retrieve some equipment to culture her virus.

Using the isolate from his daughter, Hilleman attenuated the virus and shepherded it through testing and production in his typical forceful fashion. His younger daughter was a subject in early clinical trials. Both daughters survived and his ubiquitous mumps vaccine has since brought a classic childhood disease to the verge of extinction.

Yes, I work for the pharmaceutical industry.



Last week Merck & Co. agreed to pay $950 million to settle government allegations that it illegally promoted Vioxx (rofecoxib). Merck voluntarily removed Vioxx from the market in 2004, but it is still resolving legal claims.

Vioxx was approved in 1999 for the treatment of pain. In 2002, the FDA added a claim for rheumatoid arthritis (RA). However, the Justice Department claims that Merck promoted Vioxx for RA prior to 2002, which would mean Merck violated the FDA's off-label promotion rules.

Never mind that the FDA later agreed that Vioxx was safe and effective for RA and this assessment was based on a Phase III clinical trial of 1,100 RA patients. Is it any wonder that Vioxx was used off-label for RA when it had been approved for acute pain, osteoarthritis, dysmenorrhea, and migraine and was also shown to work in RA? This is a clear example of evidence-based medicine--there's no snake oil being sold here.

Let's examine a hypothetical snake oil situation and see just how unlikely it is. What if Merck had promoted Vioxx for something crazy, like breast cancer?

Step 1, Merck sales representatives call on oncologists and recommend that they try Vioxx for breast cancer patients. These physicians would say, "You're kidding, right? What data do you have? What's the mechanism of action? Is this a joke? What other doctors have used it that way and can I talk to them?" To this, the Merck sales reps would have no good response.

Step 2, an oncologist makes a huge mistake and prescribes Vioxx for breast cancer anyway.



Industry critics like Marcia Angell have created an entire cottage industry of conferences and books devoted to decrying the "conflicts of interest" that for-profit drug and medical device industries supposedly inject into the otherwise "hallowed" halls of pure academic research. Get the dirty money out, or so the argument goes, and the angels of academia (pun intended) will be returned to rightful control of the academy.

Not so fast. A fascinating article in the Wall Street Journal today airs some the "dirty" laundry of academic medicine: many of the attention grabbing results published in top-flight medical journals, sans industry influence, can't be reproduced independently by "greedy" pharmaceutical companies.

From the Journal:

This is one of medicine's dirty secrets: Most results, including those that appear in top-flight peer-reviewed journals, can't be reproduced. "It's a very serious and disturbing issue because it obviously misleads people" who implicitly trust findings published in a respected peer-reviewed journal, says Bruce Alberts, editor of Science. On Friday, the U.S. journal is devoting a large chunk of its Dec. 2 issue to the problem of scientific replication.

Reproducibility is the foundation of all modern research, the standard by which scientific claims are evaluated. In the U.S. alone, biomedical research is a $100-billion-year enterprise. So when published medical findings can't be validated by others, there are major consequences. Drug manufacturers rely heavily on early-stage academic research and can waste millions of dollars on products if the original results are later shown to be unreliable. Patients may enroll in clinical trials based on conflicting data, and sometimes see no benefits or suffer harmful side effects. There is also a more insidious and pervasive problem: a preference for positive results.

Eliminating financial conflicts of interest from medicine is the new gospel of pure science. Not so fast: Who watches the watchmen? All human beings are fundamentally self-interested, and declaring freedom from an obvious financial conflict can merely mask other, equally problematic (but more subtle and thus dangerous) conflicts.

As anyone who's spent time in grad school knows, academia is a really a jungle red in tooth and claw. In academic medicine the spoils of high profile publications include tenure, lucrative lab assignments and government grants, and the accolades from your peers that come with the New York Times picking up the headline from your latest Lancet or New England Journal of Medicine article.

Ironically, medical journals - often at the forefront of decrying industry bias - are part of the problem, since they too compete fiercely for subscriptions and ad revenues, and seek out "splashy" headlines with big health implications that they then peddle to major media publications. From a scientific standpoint, studies that disprove their hypotheses are at least as valuable as positive ones, but they just don't get published. Or as Atlas' Venture's Bruce Booth told the Journal, "nobody gets a promotion from publishing a negative study."

In fact, there's a good case to be made that market incentives and government regulations enforce a much higher standard of scientific credibility on firms than on individual academics. Companies have to submit all of their studies and data (positive or negative) to the FDA, and must usually complete two successful "blinded" and placebo-controlled studies for FDA approval.

Academic researchers, on the other hand "rarely conduct experiments in a 'blinded manner' [which] makes it easier to cherry-pick statistical findings that support a positive result." Bayer has reported that it has "halted nearly two-thirds of its early drug target projects because in-house experiments failed to match claims in the literature," including those from the "most prestigious journals."

Bayer's approach is unsurprising: companies have powerful incentives to weed out bad science quickly, since the pivotal clinical trials for FDA approval (called Phase III trials) can cost hundreds of millions of dollars and take years to complete. So you'd much rather kill a bad idea quickly, and cheaply, than let it get too far along in development (although, sadly, this happens all too often in the industry anyway just by virtue of the underlying scientific uncertainty).

So where does this leave us? Companies might be biased, academic scientists might be biased, and the system is rife with incentives to promote you career or your product at the expense of good science.

Should we just close up the whole enterprise? Go back to bloodletting and herbal tea?

Not at all. We don't need men to become angels to produce good science or good government. Demanding disclosure of appropriate potential conflicts, seeking peer review from a wide-range of experts with varying opinions, and keeping a healthy skepticism about the latest scientific fads (even if they're published in leading journals) are all good checks on the spread of bad data.

And despite all hand wringing about conflicts of interest, the system has worked well for decades - producing incredible new treatments for AIDS, heart disease, and cancer. We cannot eliminate conflicts - and shouldn't even try to - but they can be managed appropriately. Indeed, self-interest, harnessed through market competition, can be an immensely powerful tool for good:

The principle of self-interest rightly understood is not a lofty one, but it is clear and sure. It does not aim at mighty objects, but it attains without excessive exertion all those at which it aims. As it lies within the reach of all capacities, everyone can without difficulty learn and retain it. By its admirable conformity to human weaknesses it easily obtains great dominion; nor is that dominion precarious, since the principle checks one personal interest by another, and uses, to direct the passions, the very same instrument that excites them.

The principle of self-interest rightly understood produces no great acts of self-sacrifice, but it suggests daily small acts of self-denial. By itself it cannot suffice to make a man virtuous; but it disciplines a number of persons in habits of regularity, temperance, moderation, foresight, self- command; and if it does not lead men straight to virtue by the will, it gradually draws them in that direction by their habits. If the principle of interest rightly understood were to sway the whole moral world, extraordinary virtues would doubtless be more rare; but I think that gross depravity would then also be less common. The principle of interest rightly understood perhaps prevents men from rising far above the level of mankind, but a great number of other men, who were falling far below it, are caught and restrained by it. Observe some few individuals, they are lowered by it; survey mankind, they are raised.

Obamacare oops II

From PointofLaw.com:

A couple of weeks ago, we discussed how the poorly-drafted PPACA will end up being unworkable, a function of it being passed in a hurry through parliamentary tricks to get the skin-of-the-teeth votes it needed. The next step of that dance is occurring, with the Obama administration blithely claiming that it can ignore the statutory language, and Senator Hatch warning the administration not to act so lawlessly. . .


Lipitor's domination of the cholesterol market ended when the blockbuster drug fell off the patent cliff on Wednesday. Less-expensive generics will eventually begin to flood the market, all but eliminating Pfizer's monopolistic share. But what would happen if Pfizer now made Lipitor available at a price differential so great that no one could afford not to continue to take it?

Let's start with the challenge of the patent cliff, the value of the Lipitor brand and the impact that Lipitor has had on the people who have been able to manage their cholesterol because of it. During the days Pfizer continued to support the patent-protected drug from a sales perspective, savvy insiders knew that "even a monkey could sell Lipitor." So why let Lipitor be substituted by a generic alternative? Why not let loyal Lipitor customers (patients and prescribing physicians) continue to take advantage of its enormous clinical value...and at a price point that can't be resisted?


The FDA filed an appeal yesterday regarding the implementation of their controversial graphic warning labels for cigarette packets. Cigarette cartons would feature images of cigarette-induced diseases and death by smoking on the top half of the pack. Our sister site, PointofLaw.com, cites the constitutional ramifications of the FDA's efforts and why they may not win this appeal.


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Rhetoric and Reality—The Obamacare Evaluation Project: Cost
by Paul Howard, Yevgeniy Feyman, March 2013


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