April 2012 Archives


Last week, the FDA held a public hearing on "Modernizing the Regulation of Clinical Trials and Approaches to Good Clinical Practice." That's important because FDA's clinical trial regulations have not been substantially updated in over two decades. And though additional hurdles have been added to the clinical trial process over the past few years -- in order to more fully explore things like cardiovascular risk and hepatotoxicity issues, for example -- not much has changed in the way of basic clinical trial design.

Increasingly, though, new computational tools and other technological advances are enabling the use of innovative methods that could improve clinical trial quality. Better use of adaptive trial design and biomarkers, for example, should help trial sponsors collect better, more robust data from fewer patients and in a shorter amount of time. But FDA is only now beginning to test the waters with these new methods.

On the other hand, over the past two decades, FDA has increasingly been demanding more of the same -- more data from more individual tests within trials with more patients. The average number of patients supporting each NDA rose by 19 percent from 1995 to 2001. This trend, on average, appears to have leveled off in recent years, according to PAREXEL's Bio/Pharma R&D Statistical Sourcebook 2010/2011. But the number of patients in trials for many conditions continues to rise. And difficulty in recruiting a sufficient number of participants now often leads to termination of clinical trials before usable data can be generated. The escalating cost of recruiting, retaining, and testing so many participants caused the editors of the journal Nature Biotechnology to recommended that the FDA "put[] an upper limit on the number of people who could be included in a trial."

In addition, the length and complexity of trials continues to increase, according to the Tufts Center for the Study of Drug Development. The length of trials grew by 70 percent from 1999 to 2005, and the median number of tests conducted per patient (such as routine exams, blood tests, and x-rays) rose by 49 percent from 2000 to 2007. These new hurdles have also made it more difficult to enroll patients in trials and to keep them in the trials until completion. And the problem is most acute for drugs that treat chronic conditions such as diabetes and cardiovascular disease, where many thousands of patients must be enrolled in especially lengthy trials to satisfy FDA's innate risk aversion.

All of this has had a predictable effect on drug research and development. As Avik Roy concluded in his recent Manhattan Institute paper, "The enormous cost and risk of Phase III trials create incentives for researchers and investors to avoid work on medications for the chronic conditions and illnesses that pose the greatest threat to Americans, in terms of health spending and in terms of the number of people affected."

It appears at least that FDA has begun to take this seriously. But as one might expect, the agency is moving only very cautiously to embrace the innovative clinical trial approaches that might help to alleviate the problem. The agency has, for example, been receptive to adaptive trial design proposals, but it insists that adaptive trials be designed more carefully than conventional ones in order to prevent biases from being introduced into the statistical analysis. If the rules for adaptive trials are too rigid, it could prevent firms from reaping the full benefits of the innovative methodologies. Many firms have therefore been reluctant to experiment with these innovations until more is known about how the agency will evaluate them after the fact.

The agency has to do more and faster because, as science journalist Malorye Allison explained in a January Nature Biotechnology article, "The expanding timelines, size, failure rate and cost of trials have finally reached a point where, like the towering US debt, nobody can pretend it is viable." As I wrote a few months ago, "there is no doubt that [a] radical reinvention of the standard, 20th Century clinical trial design will be necessary if the research-intensive pharmaceutical industry is going to remain sustainable in the 21st Century."

At last week's hearing, representatives from the Association of Clinical Research Organizations (ACRO) argued that FDA "should not be yoked to any political agenda, like 'saving' the current U.S. research enterprises," according to the Pharma Times. Instead, "its goal should be to facilitate a new model that can generate more medical products in less time at less cost." I couldn't agree more. But since we're talking about an extraordinarily conservative regulatory agency that abhors risk -- not just patient risk, but political risk to itself -- implementing the kind of radical re-thinking that will be necessary is easier said than done.


Last week, Sens. Tom Coburn (R, Okla.) and Richard Burr (R, N.C.) introduced their proposed Promoting Accountability, Transparency, Innovation, Efficiency, and Timeliness at FDA Act (or PATIENTS' FDA Act). On these pages, Paul Howard described the basic theme underlying the bill as "What gets measured gets done." To a great extent, I'd say Paul hits the nail on the head with that description.

The legislation provides for a lot of measurement of FDA's activities, with regular reporting to the public and to congressional oversight committees. It would require FDA to lay out a plan to improve its performance and to identify outcomes-based metrics for Congress to assess the agency's progress in meeting them. In short, the idea is to promote improved FDA performance by "ensuring greater transparency and accountability," according to Sens. Coburn and Burr.

Paul's discussion captures that spirit nicely. Still, I think there are two especially important features of the legislation that Paul did not address -- ones that would not only improve transparency, but also subtly change at a more fundamental level the way FDA goes about its work.

Section 105 of the bill, for example, would require FDA to report the "scientific and regulatory rationale for any significant decision," such as the rejection of New Drug Application, Biological License Application, or a medical device Pre-Market Approval application or 510(k) notice. According to Coburn and Burr, drug and device manufacturers "have noted that some FDA reviewers request reams of additional information about a drug or device that is beyond the scope of data needed to meet the FDA's approval standard." In such cases, sponsors would have the right to request a scientific justification for such decisions, forcing the agency to provide a rational, scientifically-grounded explanation for its request. The hope is that, just by requiring the agency to explain its scientific rationale for its decisions, the provision will actually work to streamline and rationalize decision-making.

The provision does not, in any way, change the FDA's standards for judging safety or efficacy. It merely would provide an opportunity for sponsors, patient groups, and congressional overseers to judge whether or not the FDA is meeting those standards. "Such documentation will provide important transparency into the FDA's regulatory decision-making. Documentation will also help to address concerns about evolving goalposts, and increase regulatory predictability, consistency, and accountability," say the Senators.

While Section 105's "scientific rationale" provision would not change existing standards in any way, Sections 201 and 202, on the other hand, are intended to "recalibrate" the FDA approval process "to better ensure patients have the opportunity themselves to weigh possible risks against the probable benefit of a particular drug or device."

Coburn and Burr note that "many patients accept the risks of a product because of the potential benefit it may afford them. However, too often well-intended decisions at the FDA may result in review decisions that prevent innovative products from being available to certain patients willing to accept greater risks than others." That seems like radical stuff -- an express recognition that patients differ in their tolerance for risk and a belief that patients should have the right to choose for themselves. Unfortunately, the actual statutory language offered up in Sections 201 and 202 is not nearly as revolutionary as the Senators' description. Still, these provisions, while quite modest in scope, represent a far bigger breakthrough in FDA transparency than perhaps any other proposal being offered this year.

For all intents and purposes, the FDA currently has sole authority to decide whether the potential benefits of a new drug or device outweigh its potential risks, and thus be offered on the market to patients and physicians. Patients and physicians who believe that the risks remain too great can choose not to use or prescribe particular products. But those who believe that FDA has been too risk averse have no corresponding choice. If the FDA says "no," the product cannot be used.

Providing greater room for individual patient choice would therefore be laudable. All Section 202 would do, though, is require FDA to "implement a structured benefit-risk assessment framework in the new drug approval process to facilitate the balanced consideration of benefits and risks, a consistent and systematic approach to the discussion and regulatory decisionmaking," something the agency has already agreed to do.

But, while this provision is not particularly revolutionary, the move toward a more formal assessment of benefits and risks in FDA decision-making should nevertheless be good for patients. Like the "scientific rationale" provision mentioned above, benefit/risk analysis is a valuable transparency and accountability tool because it forces the agency to reveal the values they place on each variable and "to state their assumptions clearly, exposing possible biases to criticism and correction." In addition, when combined with the increased use of patient-reported outcome data (to which FDA has also already agreed), the exercise would force FDA to think more systematically about its decisions and raise the saliency of patients' values in the approval process.

So, Section 202, while important, is far from radical. Section 201 on the other hand, which addresses medical device approvals, represents a somewhat more fundamental change. It would require FDA to "assess the safety and effectiveness of a device ... from the perspective of a reasonable patient in the intended use population who would assign the most value to the effect the device purports to have or is represented to have ... and who would be willing to accept the probable risks that may be associated with the use of the device as prescribed ..." Here too, FDA retains sole approval authority. But under the terms of Section 201, the agency is required to approve a medical device whenever a "reasonable patient" would judge the device's "purport[ed]" benefits to outweigh its "probable risks."

In statutory construction, the term "reasonable person" has a well established meaning, so this provision would not lower FDA's approval standard by matching approval decisions to the preferences of especially risk-tolerant patients. The provision would merely operationalize the standard most people think FDA is already using -- i.e. decisions that match the preferences of, for lack of a better term, the "median" patient. Nor should we expect FDA to faithfully operationalize the intended effect of the "purported benefits" clause. As long as FDA gets to judge, you can be sure it will demand some pretty strong empirical evidence of any claimed benefit. Still, this provision would codify the view that patient values matter, not only the paternalistic judgments of experts who don't have to suffer with the diseases or disabilities treated by the particular products in question. That, to me, is a major plus.

As Paul noted last week, the PATIENTS' FDA Act is "an attempt to remedy the not-so-benign neglect that Congress has inflicted on the agency and to begin to generate the data necessary to improve its performance in a thoughtful way." All that's left is to enact the legislation and then ensure that Congress begins to take its oversight authority seriously. Neither of those two things will be easy to accomplish.


When it comes to drug innovation, it doesn't look pretty out there - although appearances can be deceiving.

Still, the raw data can be downright discouraging. Consider this 2011 estimate from the Centre for Medicines Research (a subsidiary of Thomson Reuters) on attrition in the pivotal, Phase III trials required for FDA approval of new medicines from 2000 to 2010.

phase III attrition - resized.jpg

By Phase III, companies should have a pretty good idea of what they're looking at, in terms of the safety and efficacy profile of their candidates. But the number of projects failing in that late stage more than doubled over the last decade, according to CMR, from 26 to 55.

CMR also reported a decline in the number of new products entering Phase III trials, a 55% decline from 2007-2010. (Phase I and Phase II starts were down as well.) Oncology appears to be one of the few areas of where companies are increasing their investments:

Despite the overall decrease in the number of new compounds entering
each stage of development, Anti-Cancer is one of only two therapeutic areas
to see positive growth in the number of projects being developed for launch
compared to 2008 pipeline volumes. Anti-cancer development continues
to attract the highest proportion of investment across the industry, with in
excess of 25% of total R&D expenditure...and also contributed to
over one third of all NME launches in 2010.

The irony is that the technologies (like whole genome sequencing) generating leads in drug development have never been more sophisticated, or inexpensive (compared to a decade ago), while it has gotten progressively harder to translate those basic science discoveries into new drugs reaching patients.

The reasons for the breakdown are complex, but one issue appears to be increasing regulatory complexity and rigidity - which not only adds to the cost of drug development, but to the enormous uncertainty affecting the whole venture. And since the risk of failure is still enormous in even the last and most expensive phase of drug development, regulatory risk is a tremendous deterrent to investment in the field (although, again, oncology appears to be one of the few exceptions.)

My colleauge Avik Roy ventures an explanation for the woes afflicting drug development, and a potential solution that would help to de-risk late stage development projects in his new report, Stifling New Cures: The True Cost of Lengthy Drug Trials. Roy writes that:

Matthew Herper of Forbes recently totaled R&D spending from the 12 leading pharmaceutical companies from 1997 to 2011, and found that they had spent $802 billion to gain approval for just 139 drugs: a staggering $5.8 billion per drug.

The biggest driver of this phenomenal increase has been the regulatory process governing Phase III clinical trials of new pharmaceuticals on human volunteers. One reason: Phase III clinical trials have become far larger and more complex than they were in the past. From 1999 to 2005, as the Tufts group has shown, the average length of a clinical trial increased by 70 percent; the average number of routine procedures per trial increased by 65 percent; and the average clinical trial staff work burden increased by 67 percent. On top of that, increasingly stringent enrollment criteria and trial protocols resulted in 21 percent fewer volunteers being admitted into trials and 30 percent more enrollees dropping out before completion of the tests.

Overall, Phase III trials now represent about 40 percent of pharmaceutical companies' R&D expenditures. But this often-cited statistic actually understates the gravity of the burden. This is because overall R&D expenditures include all pharmaceutical candidates that a company tests--including hundreds that never reach the Phase III trial stage. When we confined our analysis to those drugs that actually get approved, we found that Phase III clinical trials typically represent 90 percent or more of the cost of developing an individual drug all the way from laboratory to pharmacy.

Roy notes that the exception to the rule of exhausting and expensive Phase III trials can be found in the FDA's accelerated approval pathway, which was created in 1992 for HIV medicines and later cancer drugs. Accelerated approval offers developers an opportunity to bring promising new medicines to market after mid-stage testing (typically late Phase II trials), provided companies agree to conduct confirmatory trials later. The FDA can pull medicines approved under AA if they don't prove to be effetive, or unanticipated safety problems crop up.

Roy believes that this pathway should be extended to create a "conditional approval" pathway for new medicines beyond cancer and HIV, including obesity, heart disease, and diabetes, indications that account for hundreds of thousands of deaths annually, but where the FDA still requires enormous Phase III trials to rule out rare safety risks.

Susan Desmond-Hellman, the Chancellor at UCSF, is one of the people (among many) who have endorsed this type of approach:

Is there a system where we could, as we increase our confidence in safety and advocacy, allow for broader distribution and more promotion? Not a yes or a no answer? I think that could really change two things. One is, the odds in the business model would be more stacked in favor of investing in difficult things like obesity, type 2 diabetes, [and] high blood pressure, which were at risk for no innovations.

Roy believes that "allowing these companies to gain revenues for their medicines in these severely obese or diabetic patients would allow them to fund Phase III trials with dramatically lower financial risk, while still demonstrating that their drugs were sufficiently safe and effective."

By focusing on targeted patient populations that are at the highest risk the FDA and companies could offer physicians and patients new therapeutic options where they are needed most, and where the "risk to benefit" profile would be much more likely to be positive.

The science, the industry, and the FDA are all moving in this direction, as has been amply demonstrated with new targeted drugs for cancer, cystic fibrosis, and other orphan indications. What the FDA appears not to be ready for is to endorse the approach for broader indications.

Still, one provision in the new FDA user fee reauthorization under discussion in Congress (and developed with input from the Agency) would create a new designation for "breakthrough therapies" that demonstrate significant efficacy in early stage testing, and mandate that the FDA work with companies to accelerate testing and review of such products in as few patients as possible, as quickly as possible, without changing the FDA's standards for safety and effectiveness. (Former FDA Commissioner Mark McClellan explains the approach here.)

This type of approach is an important incremental improvement, and a step closer to the conditional approval paradigm that Roy advocates. If the provision stays in the legislation, and the FDA (and industry) gains confidence in the process, it could be quickly broadened out beyond traditional accelerated approval indications.

And this is what we really should be asking FDA to do: not just review applications faster, but find ways to bring important new therapies to patients much faster and less expensively than we are currently doing.

For another overview of the problems that Roy discusses, see Ronald Bailey's excellent article Building a 21st Century FDA at Reason.



Bipartisan bills in both the House, and now Senate, contain provisions that would make permanent current statutes that encourage (Best Pharmaceuticals for Children) or require (Pediatric Research Equity Act) companies to conduct FDA-requested and approved trials in children (a fuzzy category that includes everything from newborns to adolescents).

The Senate bill (which is similar to the House version), sponsored by Senators Jack Reed (D, RI), Lamar Alexander (R, TN), Patty Murray (D, WA) and Pat Roberts (R, KS) would give the FDA some new enforcement tools, increase transparency by posting more data on FDA-requested trials on the agency's web site, and require companies to submit pediatric study plans by the end of Phase II, as opposed to current law, which allows them to submit such studies to the agency when they submit New Drug Applications (after Phase III trials).

The bill has been endorsed by several patients' groups, including the American Academy of Pediatrics and the Elizabeth Glaser Pediatric AIDS Foundation.

The central advantage of making both BPCA and PREA permanent would be to give both the FDA and companies certainty that they can advance the science of pediatric drug research without worrying whether or not Congress would rewrite the "rules of the road" or even scrap the programs while such studies were underway. (Pediatrics studies are typically complex, expensive, and can take several years to complete, longer than the current 5 year "sunset clause" for BPCA and PREA.)

The House version of the legislation can be found here. We'll write more on BPCA and PREA in a future post.



Over at the Drug Channels blog, Adam Fein discusses new legislation offered by Senator Hatch (R, UT) that attempts to address the underlying causes of the generic drug shortages that are currently plaguing America's health care system:

When drug shortages were in the news last fall, I (among others) cited the perverse economic incentives from Average Sales Price (ASP) as a key factor behind our very fragile generic injectable supply chain. ...

To my surprise, politicians have heard the message. Senator Orrin Hatch (R-UT) is now drafting the "Patient Access to Drugs in Shortage Act," which will change reimbursement for generic injectables from ASP + 6% to Wholesale Acquisition Cost (WAC) for injectable generics with 4 or less manufacturers. ...

Three items in the draft legislation relate directly to the broken incentive system:

•Price Stability--The Medicare reimbursement rate for generic injectable products with 4 or fewer active manufacturers would increase from ASP + 6% to WAC.

•Medicaid/340B Rebate Exemption--Generic injectable products with 4 or fewer active manufacturers would be exempt from Medicaid rebates and 340B discounts.

•Extended Exclusivity--Manufacturers who hold an approved application for a drug that would mitigate a shortage can extend by 5 years any period of exclusivity.

These fixes start to address the fact that the reduced return on investment from generic injectable manufacturing has created the enabling conditions for drug shortages.

Adam also links to my own take on the drug shortage problem, as well as a podcast where he and I discuss the underlying economics affecting the market for generic drugs, particularly sterile injectables.

Drug Channels is also a terrific blog. Check it out, if you haven't already.



Peter Pitts writes in the Washington Examiner that just six Group Purchasing Organizations (GPOs) dominate 90 percent of the GPO market, representing hundreds of billions of dollars in annual purchases of "drugs, devices, and health care supplies annually" for thousands of private, acute care hospitals.

GPOs keep prices down for their members, but their enormous purchasing power can also distort the market, particularly for low-margin commodities. Pitts writes that

As a result, drugmakers have little incentive to update old manufacturing facilities or build new ones. When a facility suddenly goes offline because of quality concerns (the major cause of supply line disruption) or is retooled for a different (and more profitable) use, shortages can occur.

The GPOs use a variety of practices that enhance their profits but exacerbate the problem of drug shortages. For example:

• Exclusionary, sole-source, long-term contracts;

• Tying and bundling product lines to give the advantage to large incumbent suppliers and discourage competition from smaller, entrepreneurial companies with fewer products;

• A byzantine system of manufacturers' rebates to large, favored distributors that ensures that only those distributors can sell to GPO-member hospitals.

These practices have created a concentrated market that excludes other existing and would-be suppliers and distributors. With no other suppliers able or available to fill the gap, increases in demand for generic drugs have resulted in shortages and surging prices.

As they say, read the whole thing.



Earlier this week, U.S. Senators Tom Coburn (R, OK) and Richard Burr (R,NC) introduced the "Promoting Accountability, Transparency, Innovation, Efficiency, and Timeliness at FDA" Act or PATIENTS' FDA Act. A summary of the legislation can be found here. The full text can be found here.

Allow me to sum up the 55 page bill in a single, short sentence.

What gets measured gets done.

Among its key provisions, the Act requires the FDA to identify gaps in regulatory science that may be impeding innovation or slowing new product reviews; review all existing product regulations and guidance to ensure that "the regulatory principles of benefits of regulations and guidance [justify] the costs and the adoptions of the least burdensome approaches to regulation as outlined in President Obama's Executive Order 13563 to improve regulation and regulatory review"; repeals counterproductive conflict of interest restrictions that limit the agencies access to the most authoritative experts; and requires the FDA to (among other things) ensure that its IT capabilities are up to date and meeting the needs of the agency.

It's hard to see how the FDA could strenuously object to many of its provisions. For instance, take Title V, section 601, "Integrated Strategy and Management Plan":

Not later than 1 year after the date of enactment of this Act, the Secretary shall submit to Congress a strategic integrated management plan for the Center for Drug Evaluation and Research, the Center for Biologics Evaluation and Research, and the Center for Devices and Radiological Health. Such strategic management plan shall--

(1) identify strategic institutional goals and priorities for the Center for Drug Evaluation and Research, the Center for Biologics Evaluation and Research, and the Center for Devices and Radiological Health;

(2) describe the actions the Secretary will take to recruit, retain, train, and continue to develop the workforce at the Center for Drug Evaluation and Research, the Center for Biologics Evaluation and Research, and the Center for Devices and Radiological Health to fulfill the public health mission of the Food and Drug Administration;

(3) identify results-oriented, outcome-based measures that the Secretary will use to measure the progress of achieving the strategic goals and priorities identified under paragraph (1) and the effectiveness of the actions identified under paragraph (2), including metrics to ensure that managers and reviewers of the Center for Drug Evaluation and Research, the Center for Biologics Evaluation and Research, and the Center for Devices and Radiological Health are familiar with and appropriately and consistently apply the requirements under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), including new requirements under the 2012 user fee agreements.

Developing a strategic plan for workforce management and continuous improvement is something the agency should be doing already - but without the "teeth" of actual Congressional oversight and pressure of reporting requirements, it is something that is likely to fall by the wayside amid the agency's many other responsibilities (like ensuring the safety of the food supply). Indeed, Senators Burr and Coburn note that a 2010 GAO report found that the FDA "does not use established practices for effective strategic planning and management" and that although the FDA agreed with GAO's recommendations, "three years later, many of these recommendations have not been adopted."

Again: what gets measured, gets done. In a competitive marketplace, private companies have powerful incentives to continuously monitor and improve performance of key products and services or risk going out of business. Government agencies can't go out of business, and many, like the FDA, have an absolute monopoly on the "services" they offer (in this case, marketing approval for medical products).

Ironically, the very mechanism that has led to improved funding and performance of the FDA - the Prescription Drug User Fee Act, first passed in 1992, and which gave the agency a much needed infusion of funds to hire new staff while also setting performance goals for the review of new drug applications - has probably diluted pressure for effective Congressional oversight outside of the user fee reauthorization process, which only occurs every five years.

Politico's Sarah Kliff describes PDUFA as the "most important health policy you haven't heard of." Kliff writes that

Over the past two decades, the new funding stream from pharmaceuticals has reduced FDA drug review times by nearly half. The agency added about 200 new staff members. A 2002 Government Accountability Office report found that user fees increased new drug reviewers by 77 percent in the first eight years of the act. The average approval time dropped from 27 months to 14 months over the same period.

Drug companies' user fees have, meanwhile, have become a crucial source of FDA funding: They made up 62 percent of the country's $931 million drug review budget in 2011. ...

But here's the funny thing: Among all the players on PDUFA, there's pretty widespread agreement that this is a fee that pharmaceuticals should be paying. It's a law that nearly everyone, from Republicans to Democrats to industry, thinks is working. ...

The question, now, is whether Congress can keep the law working. PDUFA doesn't make many headlines. But it's the one piece of must-pass health policy legislation in 2012.

Kliff is right that PDUFA is critical "must pass" legislation for patients, companies, and the FDA. But its "must pass" status and infrequent reauthorization results in little ongoing Congressional monitoring of FDA performance short of a full blown crisis (like contaminated Heparin, or drug shortages). But oversight-by-crisis (which frequently produces knee-jerk legislation) is hardly the most effective way for Congress or the FDA to ensure that it is not just "getting by" but actually excelling at its key responsibility of promoting and protecting public health.

In the FDA's defense, Congress continually adds to the agency's responsibilities - tobacco products and biosimilars regulation are among the most recent - without stopping to consider how well it is performing existing responsibilities or whether the agency has the capacity and resources to take on new ones.

This is a recipe for the FDA to fall into a state of dysfunctional disrepair. The PATIENTS' FDA bill is an attempt to remedy the not-so-benign neglect that Congress has inflicted on the agency and to begin to generate the data necessary to improve its performance in a thoughtful way.

Perhaps its most important provision is for the FDA to contract with an independent management company to conduct a top to bottom review of the drug review and approval process. The outcome of that review may or may not be welcome by the FDA - but it would force Congress to pay attention and highlight the FDA's importance as the gateway for medical innovation not just in the U.S., but for the world.

PDUFA must be passed - and the reauthorization negotiated by industry and the FDA (with input from patients' groups) does, in fact, contain several important incremental reforms.

But the PATIENTS' FDA Act is the long overdue start of a discussion on whether America has the FDA that we need in the 21st Century - to battle and eventually defeat life threatening diseases like cancer and Alzheimer's, drive innovation across the life sciences sector, meet emerging challenges like pandemic disease and bioweapons, and secure America's increasingly complex global food and pharmaceutical supply chains.

Do we have the FDA that we need? Let's not another five years to find out.


 Second of a Spenglerian series. The first part is here.


As noted in the previous installment, the medical system--as distinct from the healthcare system--is decaying.  "Healthcare" as an overall concept--defined as spending money on everything from acute care to chronic care to futile care to everything else--is doing fine; total annual outlays are heading toward $3 trillion a year.  Moreover, nobody is talking seriously about  curbing that growth anytime soon; even Rep. Paul Ryan of Wisconsin wants to leave Medicare as is for the next decade. 

Yet amidst this continuing torrent of aggregate healthcare spending, it's worth remembering that the essence healthcare is medicine. After all, most of the time, medicine is what makes healthcare succeed--or not.  A hospital without medicine is little more than a holding area.  Sporadic drug-shortages notwithstanding, the overall medical situation in the US is not totally dire at the moment, at least not yet.  Meanwhile, in many critical sectors--including brain diseases--the medical armamentarium is alarmingly empty.  

Yet as to this shortfall of medical research and new medicine, neither party seems interested. The number of new drugs and medical devices approved by the FDA, for example, has crashed over the last two decades.  Not surprisingly, at the same time, the overall life-sciences sector has also crashed.  Last year stock analyst Sebastien Buttet calculated that investors putting money into the top five US Pharma companies--Abbott Laboratories, Bristol-Myers Squibb, Eli Lilly, Merck, and Pfizer--would have lost  58 percent of their investment during the previous decade.   And the fate of medical venture capital seems little better; estimates of the falloff in economic activity in the biotech sector range from one third to one-half to three-fourths.  

We might ask: Do politicos and policy wonks really want to see the life-science sector shrivel like this?  Answer: Probably not.  "Big Pharma" has plenty of detractors, but we can presume that even Naderites and trial lawyers hope that medical progress comes from somebody, somewhere.  

Yet the reality of the decline of medicine is so obvious to anyone interested in healthcare that we must search for an explanation:  Why has this downward spiral not drawn more political attention, to say nothing of more action?   

Here's one possible explanation: Perhaps the basic model of medical progress is out of phase with larger trends in our political culture.  That is, the trends toward increased polarization and even atavistic conspiracy-mongering, as at least one Democrat went so far as to say that Republicans seek to kill people as their healthcare solution, and just recently, one Republican labeled Democrats as communists.  We might conclude: If the two parties see their job as fighting each other with such ferocity, it's easy to see why there's little interest in supporting scientific projects that presuppose long-term patience and the cessation, in the meantime, of political hostilities.   Moreover, perhaps both sides intuitively dislike the idea of a project for which the other side might someday take credit. 

In contrast to medical research, the Affordable Care Act, aka Obamacare, is much better suited to the political style of our time.  That is, both sides can attack and counter-attack on the familiar turf of the last few decades: "taxing and spending," "compassion," "big government," "social justice."  Nobody in the political class has to learn anything new to fight over Obamacare; they can just trot out the same basic arguments that have been used since the Carter or Reagan years.    

Today, the political class on the right is hoping for a victory in the Supreme Court later this year; in the meantime, they are savoring a new poll finding that shows "Obamacare" is more unpopular than ever, supported by 39 percent of Americans, and opposed by 53 percent.   Indeed, it would appear that a combination of bureaucratic incompetence and fractious multiculturalism have taken their toll on liberal-activist ambition: MSNBC anchor Lawrence O'Donnell lamented recently that "America has run out of altruism."  In other words, the sort of social solidarity that supports ambitious welfare-state programs has petered out.  And just on April 16, no less a liberal than Rep. Barney Frank (D-MA) allowed that it was "a mistake" for President Obama to push his healthcare bill to a Pyrrhic conclusion.

Yet let's suppose for a second that Obamacare is struck down by the Court.  Or suppose that Mitt Romney wins this November and succeeds in repealing the legislation, or at least waivering it out of existence.  What will happen then?  We know the answer: The same liberal politicians and activist groups will rise up with the same arguments they have been making for 60 or more years--perhaps joined, quietly, by the health insurance companies, as has happened in the past.   It's possible, of course, that MSNBC's O'Donnell is right, and we have entered into a post-altruistic era of atomistic social fragmentation.  If so, the left, if it had to start from scratch, seeking to enact national health insurance all over again, might fail.   Or maybe new healthcare finance mechanisms could be found, such as adroit use of trial lawyers and noisy street demonstrations.  

In other words, we might anticipate a new and even more shrill political debate, in which the focus, once again, is financial redistribution, as opposed to medical-cure creation. 

And maybe, for reasons noted, that's what politicos really want.  After all, as the production-process guru W. Edwards Deming always liked to remind his pupils, a system produces the results that it is designed to produce.   In other words, the current system of medical futility is working well for those who find it advantageous for the system to continue like this. And so what does that tell the rest of us?

To be continued.


Recently, Andrew von Eschenbach argued that the FDA needs a new focus on lowering costs through a much smarter process and a new set of criteria for approval. His comments appeared in a WSJ editorial earlier this year entitled Medical Innovation: How the U.S. Can Retain Its Lead. For the most part, I have been in agreement with his position.

Dr. von Eschenbach called for less pre-market gatekeeping and argued that the United States may be leapfrogged by other countries as the leader of the global life sciences industry if we don't change course in the approval process. His concerns are well-founded. There are clearly inefficiencies in the agency's ability to bring new products to market, and until these inefficiencies are effectively addressed, the United States is at risk of being surpassed.

Critics of Dr. von Eschenbach's proposal argue that if the FDA doesn't sign off on drug efficacy, then doctors may as well be prescribing placebos for everything. Dr. Von Eschenbach suggests that registries would provide the real-world evidence (RWE) necessary and sufficient to determining efficacy. While entering every patient in a registry may seem like a good idea on its surface - and thereby allowing the market to dictate the efficacy of a product - the FDA would run the risk of bringing snake oil salesmen back into the market. This is not where we need to be.

Yes...we need to be more reliant RWE and better post-market studies. And accelerated approval programs for certain drugs need to be maintained (registries to track efficacy and safety for these products make sense, as life-saving drugs for cancer, HIV and rare diseases shouldn't have to wait to get to market). But we must still be selective in how we go about deciding what gets this treatment. One example, nutriceuticals - products deemed safe by the FDA that are not reviewed for efficacy - may ultimately end up having negative interactions with other products while not truly adding any health benefits to the user. Is caveat emptor sufficient oversight?

More importantly, attention should be given to gathering better information about the products the FDA approves, but still making sure unsafe and untested products don't reach the public. Given that randomized controlled trials (RCTs) focus on narrow populations, they can't provide information as useful as that obtained through RWE, which can be gathered at a fraction of the cost and time. RWE should be used in conjunction with RCTs to enhance the approval process and keep unsafe and ineffective drugs from the market. But the market should not entirely dictate the efficacy of a drug.

The FDA must focus on both the mandate to affirmatively protect the safety and health of the public, and determine efficacy. I applaud Dr. von Eschenbach for bringing the FDA overhaul debate to center stage, but leaving efficacy entirely in the hands of the general public is not the soundest approach.


First of a Spenglerian series.

Why do we see so little sustained political support for medical progress? And, as an inevitable consequence, so little actual medical progress? Perhaps it's because, strange as it might seem, politicians and policymakers like it that way. Not consciously, of course--but, as psychologists and anthropologists know, any behavior repeated long enough must serve some sort of purpose. And so there must be some purpose served by the relentless over-regulation and litigation that has befallen the medical/pharma sector. And as a result, the steady decline of the sector's productivity thus falls into the category of not only "predictable surprise," but also, weirdly enough, "desired outcome."

Meanwhile, the very name of this blog, Medical Progress Today, has an antique feel to it. Unabashed endorsement of "progress" bespeaks a bright optimism; it's a bit of neo-Victorian progressivism that's increasingly incongruous in the present-day political-cultural context. Indeed, it's a forward-looking vision plunked in the middle of--or sinking below--an increasingly polarized and atomistic society, in which even the elites have subsided into the unproductive mire of zero-sum "gotcha" politics and superficial demotic grandstanding.

Why can we say this? Let's consider three medical news items, gleaned just from the last few days. Each speaks to a huge problem--and yet nobody in Washington seems to be listening.

First, The Washington Post reported that incidents of pharmaceutical drug shortages across the country have nearly quintupled in the last eight years. These are not trivial drugs; as the Post put it: shortages include "drugs used to relieve pain, fight cancer or infections, anesthetize surgical patients, treat cardiovascular disease, and manage psychiatric conditions." In other words, lives are being lost because of these shortages. The Post also adds that other vital products have gone missing: "Critical intravenous nutritional supplements and drugs for controlling attention-deficit hyperactivity disorder are also hard to find." This item was noted at MPT, of course--and at few other places.

Second, speaking of shortages--in the future--the Israeli newspaper Ha'aretz reported that Teva, the Israel-based pharmaceutical giant best known for generic drugs, is considering abandoning its efforts to create its own new drugs. As Ha'aretz put it, "More than half have reached the pivotal stage of human clinical testing. The drugs under development are for conditions from diabetes to nervous disorders and cancer." That is, a major company, operating in one of the most technologically forward-looking countries in the world, seems to be giving up on engendering its own medical progress.

Third, in a blog posting for The Fiscal Times, entitled "The Health Cost that Can Ruin the Economy," Michael Hodin, a former Senate staffer for the late Daniel Patrick Moynihan, argued that a cure for Alzheimer's Disease--or at least a significant improvement in treatment--is essential, because, as he put it, "the Alzheimer's trajectory is fiscally unsustainable." And yet, Hodin lamented, "Today, we focus on managing illness through care models. Looking ahead, this is less and less adequate-as populations age globally. . . . Twenty-first century demographic realities require a new approach to care." In other words, we need better treatment and cures--and we're not seeing them.

But are the chattering classes interested? Are they buzzing about taking necessary steps to expand the supply of new treatments and cures, now and in the future? Have important leaders in Washington DC made earnest speeches about the need to make medical progress, today and tomorrow? Has anyone held a hearing to knock bureaucratic and business heads together? Glance at any news or op-ed page over the last week--or the last ten years--and decide for yourself. So once again, we are reminded that ideas--good, bad, or absent--have consequences.

Yet, of course, the pols and pundits are interested in the healthcare issue; it's just a different issue than medical progress. Everyone in Washington is always up for a rumble over the Affordable Care Act, aka, Obamacare. And no what matter the Supreme Court might decide later this year, the battle over health insurance promises to be an endless fight, with no ultimate winner and no ultimate loser. Why? Because there's never a final judgment on economic distribution issues, and that's what the health insurance fight is all about--who gets more, and who gets less; those fights have occurred in every society and civilization, and they can be never be settled.

By contrast, progress in technology is mostly cumulative, in the sense that, say, the wheel was never uninvented. But progress in distributional issues is always chimera: It could all change in the next election, the next revolution, or the next conquest.

It's still worth fighting for lower tax rates and lesser regulation, because such measures usually lead to greater economic growth--and economic growth means productivity growth, which is to say, technological advancement. Over the last two-and-a-quarter centuries, the US has seen many politico-economic regimes, and will likely see many more. But in today's America, both the rich and the poor are better off than in the past, not because they won a political fight, but because producers have been winning their fight against scarcity.

So again, technology is progressive--while politics, as the historian Vico wrote three centuries ago--is inevitably recursive. That is to say, no true progress is assured for either side; politics is a see-saw. And as we shall see, paradoxical as it may seem, that may be exactly what the elites want. Even if they don't quite realize it.

Why? That's a long sad story--to be continued.


The Patient Protection and Affordable Care Act of 2010 (PPACA) - regardless of the view one has of the legislation - has created enormous disruption. And with disruption comes enormous opportunity, as well as risk. Many provider organizations (e.g. hospitals and physician groups) have responded to the changing healthcare delivery environment by safety in size through merger and acquisition. Payers are also buying or creating partnerships with hospitals, and hospitals are acquiring other hospitals and physician practices to become gigantic systems. To further complicate matters, PPACA directly supports this mass consolidation with its federally financed mechanism for healthcare delivery: the accountable care organization (ACO). But any attempt to fix healthcare through consolidation - at the expense of fair competition and without ensuring accountability - is destined to fail.


The critical shortage of generic hospital drugs has been big news for about a year. Much has been written about it, yet many are still not aware of it.

So, I thought that yesterday's very thorough and sobering story in the Washington Post on the topic, although profoundly upsetting, might make some people understand how high the stakes are, and what are the real causes behind the problem. It's not that complicated--price controls coupled with quality control issues has caused many generic companies to conclude that they cannot make even a reasonable profit on certain drugs, so they have halted production entirely. This leaves us with a national emergency on our hands.

This problem has absolutely nothing to do with brand named expensive drugs, the ones that are sold by large drug companies, who are somehow being blamed for this. One might hope that a few more people would understand this, put away their hatred for drug companies for a moment, and think. This problem originated mostly in Congress, when they passed a 2003 law placing price caps on generic drugs for Medicare. The number of drug shortages is five-times higher since then.

Some people get this, but many do not, as evidenced by the comments following the Post article.

roberto3: "there seem to be plenty of drugs for erectile dysfunction, calcium citrate etc that the Pharma is actively peddling..? Why not go over their heads and get the FDA to import these vital drugs anyway?" Well put, Roberto. But would you please tell me what the hell you're talking about?

CalypsoSummer: "many of these drugs are patented. We know what "patented" means, don't we? It means that only one (1) company can legally make them." Good point, except 100% wrong. Go back and read the article.

HGF78: "If some die so the drug companies can keep increasing quarterly profits, so be it. This is letting the "free market" decide. You are also killing 2 birds with one stone, no need for those death panels. Those that cannot pay are just eliminated." Uh, HGF, get help. Now.

Woodyag: "Nothing improves profits like scarcity. Wonder if there might be any connection." Maybe, but not between the lobes of this guy's brain

funfun881: "Medicine is highly regulated but when drug companies discontinue cheap drugs to force you to use more expensive ones, this is NOT regulation---it is theft. The solution is simple: let government make the drugs which free enterprise, out of its own free will, will not supply. Hate to break this to you, but cheap drugs arise when patents run out. If you don't like this, I suggest trying to speak to George Washington and Alexander Hamilton. Patent rights are written into the Constitution. And you want the government to make our drugs. Swell idea. Yeah- there will never be shortages then.

But, at least someone got it:
LouisL:The Drug Co's aren't perfect but have saved millions, me & my sister for ex[ample]. Some safety regs are necessary, but unless we make HealthCare market friendly, Shortages & Rationing are our Kid's Future. - except for the Political Class, (see USSR) Louis- thanks for nailing it. No- drug companies are not perfect, but they have saved millions of lives.

Do people really hate drug companies so much that they want them to fail, even though this mind-set is self-defeating? I guess this been hammered into our heads by the press and pandering politicians so that most people see is an evil empire. It might get some reporter a prize or an empty-headed political candidate something to talk about, but in the end, as the health of drug companies fails, so will ours. I suspect Louis knows this.



It turns out that evolution has "built" bacteria to be extraordinarily adaptive to antibiotics...even if the bacteria in question have gone 4 million years without coming into any contact with man-made antibiotics, according to an article in the Los Angeles Times:

No place on Earth demonstrates the resilience or inventiveness of life quite like Lechuguilla Cave, whose subterranean tunnels stretch for 130 miles through Carlsbad Caverns National Park in New Mexico.

Deep in the cave's most arid recesses, deprived of all sunlight and mostly starved of life-giving water, a lush garden of bacteria grows. Untouched by humans for all of their 4 million years, these strains of bacteria thrive on the harsh minerals of the geological formations to which they cling and fend off other life forms that would prey on them. ...

Scientists who collected 93 strains of bacteria from the forbidding depths of Lechuguilla found that all were resistant to at least one of the antibiotics that modern medicine uses to fight bacterial infections and some were resistant to at least 14. In addition, virtually all of the 26 antibiotics tested as part of the study proved useless in killing at least one of the strains of bacteria collected.

That these life forms evolved in ways that appear to anticipate medicines attests to bacteria's remarkable powers of survival. It also suggests that the rise in antibiotic- resistant diseases isn't due entirely to the runaway use of these drugs; rather, try as you might to kill them, bacteria are programmed to endure.

So while bateria are naturally inclined to antibiotic resistance, our regulatory system isn't naturally inclined to produce many more antibiotics. In fact, over the past several years tightened FDA regulations on clinical trial requirements for new antibiotics have sharply increased the costs of antibiotic drug development - already an unattractive field for pharmaceutical companies.

There is however, bipartisan legislation in Congress that creates additional incentives for antibiotic drug development by extending marketing exclusivity for these much needed products. Streamlining FDA requirements would help as well.

For more background on the topic of antibotic drug development and regulatory (and financial) hurdles, see this NRO article by fellow MPT contributor Josh Bloom, The Perfect Storm, by antibiotics expert David Shlaes, and the always excellent Megan McArdle.


The hope behind the Human Genome Project was that researchers would quickly be able to identify the genetic causes of chronic diseases like diabetes and cancer and be able (through simple blood tests) to identify biomarkers in patients that would direct treatment and prevention strategies.

That was the hope.

But the reality has turned to be a lot more complicated than people (and lots of smart researchers and companies) originally thought. And this is because singe genes are rarely the simple and single cause of complex chronic diseases.

In fact, in the case of diseases like cancer, there are dozens of potential underlying breakdowns in the regulation of cell growth and death that produce rogue cell growth and metastatic disease. And mining the myriad simultaneous biochemical interactions in the body to prospectively identify early stage cancers, or even using those interactions to predict the best chemotherapy regimen for patients diagnosed with metastatic cancers, has turned out to be monstrously difficult.

At least in part the difficulty is amplified by academic researchers who have said they've found a biomarker or panel of predictive biomarkers that later turn out to be, well, bunk. A recent report from the Institute of Medicine explains why (courtesy of Derek Lowe at In the Pipeline):

Genomics, proteomics, and other branches of molecular bioscience offer the prospect of greater precision in medical care, but some clinical tests based on "omics" research have proved invalid and highlighted the challenges of dealing with complex data. To enhance the translation of omics-based discoveries to clinical use, a new report by the Institute of Medicine recommends a detailed process to evaluate whether the data and computational steps underlying such tests are sound and the tests are ready to be used in clinical trials. The proposed process defines responsibilities and best practices for the investigators, research institutions, funders, regulators, and journals involved in development and dissemination of clinical omics-based technologies.

The request for the IOM report stemmed in part from a series of events at Duke University in which researchers claimed that their genomics-based tests were reliable predictors of which chemotherapy would be most effective for specific cancer patients. Failure by many parties to detect or act on problems with key data and computational methods underlying the tests led to the inappropriate enrollment of patients in clinical trials, premature launch of companies, and retraction of dozens of research papers. Five years after they were first made public, the tests were acknowledged to be invalid.

Lack of clearly defined development and evaluation processes has caused several problems, noted the committee that wrote the report. Omics-based tests involve large data sets and complex algorithms, and investigators do not routinely make their data and computational procedures accessible to others who could independently verify them. The regulatory steps that investigators and research institutions should follow may be ignored or misunderstood. As a result, flaws and missteps can go unchecked.

Investigators should be required to make the data, computer codes, and computational procedures used to develop their tests publicly accessible for independent review and ensure that their data and steps are presented comprehensibly, the report says. Agencies and companies that fund omics research should require this disclosure and support the cost of independently managed databases to hold the information. Journals also should require researchers to disclose their data and codes at the time of a paper's submission. The computational procedures of candidate tests should be recorded and "locked down" before the start of analytical validation studies designed to assess their accuracy, the report adds.

Sunlight is a great disinfectant, and requiring better peer review of the underlying data should help the field advance. The IOM report also recommends an enhanced role for the FDA in setting standards for biomarker validation.

What those standards should be, and how the data should be validated, is actually a question that the agency can't answer in isolation, but through collaborative efforts like those based at the newly funded Reagan Udall Foundation and existing partners like the Critical Path Institute.

Undoubtedly, creating valid biomarker panels will turn out to be a hard slog. But taking responsibility for the effort and setting clear standards with other stakeholders is the first step in establishing comparability of results - a critically important role for FDA leadership.

In other words, helping to bring order from chaos through basic standard setting.


An editorial in the new edition of Nature Biotechnology (behind a pay wall, unfortunately) takes a jaundiced view of the proposed TREAT and FAST Act legislation that MPT contributors have addressed previously here and here. These bills would expand the FDA's existing Accelerated Approval process to include drugs that treat conditions other than HIV/AIDS, cancer, and a handful of orphan diseases. That's not to say that the Nature Biotechnology editors oppose the effort. They don't. But they do point out some serious shortcomings with the proposals that make them look "more like an evolution than a revolution in drug approval."

To recap, FDA approval generally rests on a demonstration in two or more Phase III clinical trials that a drug or biologic reduces mortality or alleviates a clinically relevant symptom. Accelerated Approval helps expedite the R&D process by basing approval on a demonstrated improvement in a surrogate endpoint -- such as tumor shrinkage or lower T-cell count -- that is reliably associated with the hoped for clinical improvement.

The underlying premise is that critically ill patients in desperate need of a life-saving treatment shouldn't have to wait around for years while a drug is tested for efficacy when there is some evidence now that the drug could help. Currently, Accelerated Approval is primarily targeted at AIDS and cancer treatments, while patients with most other conditions have to wait at the back of the line for products to navigate the customary testing and approval process. TREAT and FAST would "codify the precept that any medicine targeted to a condition with no effective treatment should qualify for 'accelerated approval'."

That's a laudable goal. But as Nature Biotech points out, Accelerated Approval has been helpful for AIDS and cancer patients, but hardly a panacea. "[T]he pathway hasn't exactly been a mother lode of new approvals. In 2011, only 3 of 30 new molecular entities went through accelerated approval." And in the two decades since Accelerated Approval was first implemented by FDA, "only four drugs a year have emerged from this pathway. It is this underwhelming output that the new legislation seeks to address."

What's more, a study published in the Journal of Clinical Oncology in 2009 and funded by the National Cancer Institute concluded that oncology drugs that go through the Accelerated Approval track were not actually getting to market more quickly than other drugs. Median development times for the 19 Accelerated Approval drugs examined in the study was 7.3 years, compared to a median of just 7.2 years for the 32 regular-approval oncology drugs.

At least part of the problem is that, "[i]n recent years, FDA has been ratcheting up the requirements" to qualify for Accelerated Approval, because the agency has never been particularly comfortable with the concept in the first place. And the entire process has been under attack since its inception by critics in the public health community who believe the process is little more than a mechanism for letting unproven and possibly unsafe products on the market (critics who are not themselves afflicted with life threatening diseases, I would hasten to add). This has led some observers to conclude that Accelerated Approval amounts to very little advantage for new products.

"Much of the controversy has surrounded Richard Pazdur, the director of the Center for Drug Evaluation and Research (CDER)'s Office of Hematology Oncology Products, who has expressed skepticism about the use of single-arm, 'quick' trials. The oncology experience doesn't augur well for indications less traveled." [See here for some choice words about Pazdur.]

Perhaps the biggest issue that will need to be addressed, however, is whether or not clinically relevant surrogate endpoints can be defined for conditions other than AIDS and cancer?

"[I]n many cases these endpoints simply don't exist. ... It usually takes years to generate scientific consensus around a qualified marker--something that would be particularly difficult in rare diseases where few researchers are working. Paradoxically, rare diseases in which disease progression is slow and definitive proof of efficacy requires prolonged monitoring of patients are just the indications that stand to benefit most from biomarker research. ... But these cases are a drop in the ocean when one considers how few published biomarker studies are adequately powered and well documented, avoid sampling bias and accurately estimate error."

On the plus side, there has been a lot of attention paid in recent years to the identification of biomarkers, whose improvement could serve as meaningful surrogate endpoints. And it's worth noting that, in the late 1980s and early 1990s, many of the same reservations were expressed regarding Accelerated Approval has worked for AIDS and oncology. So, "[i]f TREAT and FAST spur FDA to further clarify regulatory requirements for this pathway, the quality of phase 2 trial design will likely be improved and attrition will likely decrease. They may even allow some companies to reach the market and generate revenue earlier while spending less on R&D."

If that happens, it would be good news all around -- good news with a lot of qualifications, but good news nonetheless.



From my colleague Avik Roy, at Forbes. From Peter Suderman, at Reason Magazine. Charles Blahous, the report's author, also rebuts his critics at Forbes.

On the left, Paul Krugman and Jonathan Chait take on the Mercatus report.

Here's what current CBO Director Doug Elmendorf said about the double counting issue in 2009, also courtesy of Peter Suderman:

Specifically, CBO has been asked whether the reductions in projected Part A outlays and increases in projected HI revenues under the legislation can provide additional resources to pay future Medicare benefits while simultaneously providing resources to pay for new programs outside of Medicare. Our answer is basically no.

...The key point is that the savings to the HI trust fund under the PPACA would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs.

...To describe the full amount of HI trust fund savings as both improving the government's ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government's fiscal position.

Shouldn't that end the debate?


The General Services Administration (GSA) scandal in Las Vegas has hit the front page again, 11 months after the event.... The event was an $820,000 training conference at a resort paid for by taxpayer dollars. On Meet the Press on Sunday, April 8, Dick Durbin (D-IL), who sits on the House Oversight Committee, proudly described his committee's action in holding folks accountable for the inappropriate use of funds for this 2010 Western Region Conference.

I understand that it's hard to root out individuals in the back office who are bilking their companies out of large sums of money: But this wasn't back office subterfuge. In this case the indiscretions were out there for all to see. So, anyone doing their due diligence in an oversight function should have picked it up. The question is, why weren't they doing their jobs? And when they weren't doing their jobs why aren't there any consequences for the failure of oversight?

When something blows up and the Congressional people who were supposed to be proactive and not let it happen hold hearings to publicly humiliate the wrong doers, where are the hearings that ask why wasn't this prevented? When the overseers fail why aren't they called to account? Why don't they look at themselves and scrutinize what they missed, and change their process so 'it' doesn't happen again? How is it that no one in Congress has to say I'm sorry?

A clip from a GSA video says it all... if you think the problems we create are bad, just wait until you see our solutions...

If we applied real due diligence to the waste, fraud, and abuse in Medicare and Medicaid, we'd have enough money to cover everyone and still get better health outcomes at lower cost.



There was always a lot of smoke and mirrors surrounding the Affordable Care Act accounting (aka, Obamacare), but the fog is finally starting to clear now that President is heading into an election year and the Supreme Court is deciding the constitutionality of the (still unpopular) law in late June.

Enter Charles Blahous, a Mercatus Center scholar as well as Republican Medicare and Social Security appointee whom President Obama approved in 2010. Blahous has done the public a tremendous service by looking at the fine print of the federal accounting conventions that allowed the Congressional Budget Office (CBO) to score the Affordable Care Act as (originally) reducing federal spending by $132 billion over the law's first ten years.

It's no exaggeration to say that the CBO score pushed wavering Democrats to support the law and that absent the CBO score its likely President Obama's signature domestic policy achievement would've died in committee.

Here's the key problem facing defenders of the bill: Democrats have claimed that the law both improves Medicare's long term fiscal health and pays for new entitlement spending - a massive Medicaid/CHIP expansion and new private insurance subsidies on state health insurance exchanges in 2014.

Blahous shows that Obamacare will increase the deficit by $340 billion through 2021 primarily because you can't spend the same dollar twice, no matter what "bipartisan" budget accounting rules would have you believe.

The White House is aggressively attacking the Mercatus Center scholar, accusing him of using "new math" to "fight the political battles of the past". They claim that the law "will reduce the deficit," a fact that "was true the day the bill was signed into law, it's true today."

Of course, if it wasn't true in the first place it's still not true. And here, it's critical to understand the current CBO scoring conventions in relation to current law for the Medicare Trust Fund. Here, Blahous quotes a 2010 report from the Medicare Actuary explaning the crux of the problem:

The combination of lower [Medicare Part A] costs and higher tax revenues results in a lower Federal deficit based on budget accounting rules. However, trust fund accounting considers the same lower expenditures and additional revenues as extending the exhaustion date of the HI trust fund. In practice, the improved HI financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.

The CBO, when asked, has said the same thing as the Medicare Actuary. Thankfully, this point didn't escape the Washington Post in it's story on the Mercatus study today:

Enter the health-care law, which provides about $575 billion in Medicare savings -- enough to automatically extend the life of the trust fund through 2029, according to estimates at the time, and avoid a sharp cut in benefits.

But in cost estimates by the nonpartisan CBO, those savings also offset a dramatic expansion of Medicaid under the law, as well as new subsidies for uninsured people to purchase coverage.

CBO and Medicare actuaries acknowledge the double-counting issue. "In practice, the improved [trust fund] financing cannot be simultaneously used to finance other federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from" traditional budget rules, Medicare actuary Rick Foster wrote last year.

And in 2010, the CBO wrote that, absent the Medicare savings, the law would increase deficits by $226 billion through 2019 -- instead of decreasing them by the commonly cited $132 billion.

Bottom line: As much as the Obama Administration would like to, you can't spend the same dollar twice. It's the administration that's using the funny math - not Blahous, and not the CBO and the Medicare Actuary who have the temerity to point out the truth when asked.

Still, what to do about it? Blahous says that:

Because of the federal government's untenable long-term fiscal outlook under current law, and because of the political difficulty (and thus infrequency) of comprehensive health care reform, it is essential that [health care] reform unambiguously and significantly improve the government's fiscal outlook.

For our unsustainable fiscal trajectory to remain qualitatively unimproved after the expenditure of so much political capital would represent a substantial failure of governance.

Furthermore, for comprehensive health care reforms to have rendered an already unsustainable federal fiscal situation still worse would be a disastrous outcome warranting immediate legislative corrections before the law becomes fully operational and before such corrections become too difficult to achieve.

The short version: repeal and replace the Affordable Care Act before the government's fiscal situation gets any worse - and it's already pretty bad.


I finally had a chance to read the Supreme Court's recent decision in the Mayo v. Prometheus Labs case, which invalided two patents claiming methods for analyzing blood test results to determine correct drug doses. The decision is likely to have substantial impacts on the drug, diagnostic, and biotech industries because it calls into question the validity of a huge amount of intellectual property that those industries rely upon.

My take is that the Court got this one right as a matter of patent law - though it's a closer call than many intellectual property skeptics have claimed. Here, I should note that some colleagues and I contributed to an amicus curiae brief to the Court urging the justices to find the patents invalid. Even so, the decision raises several new questions about scientific innovation. And it may be worth reconsidering the structure of our patent laws or finding another way to incentivize the very important research work that could become less common in the absence of market exclusivity for these kinds of discoveries.

So, what's the case all about?



I admit to being perplexed by an NPR story that ran yesterday on the Reagan Udall Foundation ("FDA to Fund Controversial Research Foundation"). The controversy is patently manufactured, and stems from the fact that Reagan Udall can raise money from private sources (the horror!) to fund research projects. Quoth NPR:

But some critics worry that this foundation, which will also raise money from private sources including industry, could provide a way for the food and medical industries to sway FDA decisions.

Let's see how that might work. Let's say that Reagan Udall funds a project aimed at finding out which patients might be at highest risk of cardiac adverse events during cancer chemotherapy. Let's assume that this project was successful, by identifying biomarkers or other predictive metrics, and allowed the FDA to incorporate that testing into clinical trial requirements or into labeling for approved chemotherapy drugs.

Patients would benefit from safer cancer drugs. Industry might benefit by identifying drug candidates with excessive cardiotoxicity earlier in the testing or development process, saving them wasted R&D. Physicians could more effectively monitor patients for early warning signs of cardiotoxicity. The FDA would have a better grasp on the relative risks and benefits of cancer chemotherapies, and could allow more products to reach market with the confidence that they were being used more effectively.

Every stakeholder would benefit from improving the science of drug discovery, drug development, and clinical use, in this scenario.

Except "consumer advocates", of course.

The objections to Reagan Udall have always been a mile wide but far less than an inch deep. The science is science - no matter who funds it. In this case, cancer patients, cancer physicians, and patient advocate groups will also serve as "quality controls" on the project, and the cancer research priorities of Reagan Udall, to say nothing of the FDA's own incentives for generating sound science to support its mission. (Or that of other federal agencies, like the National Cancer Institute.)

Reagan Udall struggled for five years to find funding for critical projects that Commissioner Hamburg says the agency "desperately needs to have in place", because consumer advocates in Congress objected in principle to the idea of having any private funding at Reagan Udall.

Sadly, those "consumer advocates" have never have to pay a political price for delaying scientific progress that could save lives.



The American Society of Clinical Oncology has released a list of tests and treatments that it believes oncologists should not offer to some patients, under some circumstances. This is exactly the kind of comparative information private sector entities should be generating to help patients and physicians make better decisions about cancer treatments, about how to address end of life care - and, frankly, how poor current treatments are for many patients with metastatic solid tumors like lung cancer. From Reuters:

Although the task force emphasized that its recommendations -- winnowed from about 10 suggestions by oncologists -- were driven by medical considerations, the report makes clear that expense was a major factor. A number of cancer drugs cost nearly $100,000 but extend life a few months or not at all. Widely-used imaging tests cost up to $5,000 yet do not benefit patients.

The list has been closely guarded, with public announcements scheduled for Wednesday. Patients, advocacy groups, and policy experts contacted by Reuters were mixed in their reaction to the recommendations.

"The American people have a much higher opinion of doctors than of government bureaucrats," said Kate Nix, a policy analyst at the free-market Heritage Foundation. Whether the ASCO recommendations to withhold some tests and treatments will be seen as rationing "depends on how they are used. Will they inhibit the ability of doctors and patients to make the best decision in each case?"

Having a single government panel make across the board decisions that set reimbursement decisions (like IPAB) is much more problematic than having a multitude of private sector entities, including practicing oncologists and patients' groups, issue their own recommendations.

The recommendation that may stir up the most controversy is the recommendation that patients who have not responded to previous first, second, or even third line chemotherapy regimens not receive additional treatment beyond palliative care. The study notes that "such [additional chemotherapy] is widespread" but "unlikely to extend [patients' lives] or improve its quality. The exception would be when the patient has been identified with a specific cancer gene mutation that responds to a targeted therapy, like Xalkori.

Rather than rail against the recommendations, cancer patients and their loved ones should ask why our treatments for solid metastatic cancers are often so poor, and what we can do to change that prognosis through better research or clinical trial designs.

We should save our outrage for fighting cancer, not the physicians who are admitting - bravely - that the outlook for treating metastatic cancer for many patients is bleak given the tools at their disposal today.

For an excellent discussion of the disincentives for producing better information on health care outcomes, and how to encourage more private sector organizations to generate comparative effectiveness research, see this Kauffman Foundation report by Wharton School professors Scott Harrington and Alan Miller. You can also find my podcast with Scott Harrington discussing the paper here.


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