MPT WWW
Selected news articles which highlight important policy issues.

News: Weekly Archives

News for the week of 10-26-2005

Drug companies warned on growth – IMS Health
Financial Times, 10-26-05

Editor’s Notes:

Aging populations in the U.S. and Europe are demanding access to a growing array of medicines for both chronic disabilities and the mundane ravages of aging. Affluent consumers in growing economies like India and China can be expected to develop the same tastes (and waistlines and dietary habits) in short order.

Better diet and exercise are, of course, critical to sustaining health. But, in many cases, managing chronic diseases effectively (diabetes, heart disease, cancer) may require life-long drug treatment. This is an expensive proposition for governments and insurers that subsidize pharmaceutical consumption. As a result, third-party payers and consumers (think cost shifting) are going to demand better data on the value and cost-effectiveness of medicines.

A recent report from IMS Health, a global consulting company, underscores the point that drug companies that can’t supply these data are going to find their medicines rationed and their profit margins squeezed.

The world's top pharmaceutical companies need to redouble their efforts to justify the cost-effectiveness of their medicines in future years in order to survive, IMS Health, the drug industry consultancy, warned yesterday as it predicted slowed growth for the sector in 2006.
Companies will have to do more to justify the value- for-money offered by their medicines as US healthcare reforms kick in from the start of next year, said Murray Aitkin, senior vice-president for corporate strategy.
We see companies continuing to under-invest in Phase 4 trials to demonstrate their products’ superior profile,” [Aitkin said], in reference to continued monitoring and trials on patients after a new treatment has already been approved by regulators as safe and is launched on the market.

The incentives to conduct postmarket surveillance, however, are muddled at best. Companies that do show cost-effectiveness, at least for certain groups of patients, may be unable translate that finding into a pricing advantage. At the same time, postmarket surveillance may very well uncover rare side effects that could slash a drug’s market size or result in its withdrawal.

Many companies do conduct Phase 4 studies (often as a condition of FDA approval). But until insurers and governments show more of a willingness to pay a premium for such efforts, enthusiasm from the pharmaceutical sector may lag.

The best approach may be to offer companies more of a quid-pro-quo. U.S. regulators in particular could offer an optional “safe harbor” liability shield to companies that conduct certain types of good Phase 4 studies. Policymakers could set up disease management plans that reward companies with bonus payments for better outcomes in high-cost, high-risk populations.

In the meantime, we shouldn’t forget that good data is often lacking throughout the health care system, not just for pharmaceuticals. In fact, it is conceivable that we already have better data on drugs than we do for many other forms of treatment.

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Trial Lawyers Inc. Health Care:The Lawsuit Industry's Effect on American Health, 2005
Manhattan Institute, 10-26-05

Editor’s Notes:

The Manhattan Institute has been at the forefront of research into our civil justice system, and a long-time advocate of tort reform.

In this new report, Trial Lawyers, Inc.: Health Care: The Lawsuit Industry’s Effect on American Health 2005, the Manhattan Institute shines a spotlight on how a litigation system run amok has affected U.S. health care. The report finds that litigation costs (both direct and indirect) have led to doctor shortages, hospital closures and the arrested development of life-saving vaccines and innovative drugs.

While many people know that medical malpractice claims are a growing problem for physicians, the report shows that this is merely the tip of the iceberg.

Although medical-malpractice liability provides Trial Lawyers, Inc. with its largest health-care sector revenue stream, litigation over pharmaceuticals and medical devices exacts a staggering cost on an increasingly important part of the U.S. economy. Wyeth’s massive reserve for Fen-Phen litigation is $21 billion, and Merck’s exposure to Vioxx lawsuits may total as much as $50 billion. Such figures are astronomical in comparison with these companies’ individual budgets, representing nine to twelve times each company’s annual research and development costs. In fact, since each drug was only widely used for about four years, the approximate annualized liability cost of these two drugs comes to almost $18 billion—equivalent to 10 percent of the annual revenues for the pharmaceutical industry as a whole.

The report shows that while Trial Lawyers, Inc. gets rich from health care related litigation, the average consumer loses - through higher health care costs, reduced access, fewer products, and less medical innovation.

Many states have passed needed health care litigation reforms—more than 60 bills passed in 2005 alone. Congress continues to consider the Health Act of 2005, which would cap noneconomic damages for medical malpractice liability and eliminate punitive damages in suits against FDA-approved drugs, but the report argues that much more must be done.

Congress should limit all noneconomic damages for suits against FDA-approved drugs - or develop a preemption and compensation scheme like the one in place for children’s vaccines. In addition, states should explore developing special health courts where judges with experience in adjudicating medical issues would vet expert witnesses and, where possible, try cases without juries. Recent successes in medical liability reform will help stop the bleeding from lawsuit abuse, but only comprehensive reform will effectively treat the wounds that litigation inflicts on our health-care system.

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BIO Files Lawsuit Against DC Over Pending Price Control Bill
BioWorld Online, 10-31-05

Editor’s Notes:

Price controls lower supply by choking off incentives to bring new products on the market. Ultimately, price controls hurt consumers at least as much as they hurt producers. That hasn’t, however, stopped policymakers in places like Washington, D.C., from trying to push price controls onto the (now unpopular) pharmaceutical industry.

Thankfully, companies are challenging the D.C. policy in court.

In an effort to curtail a drug price control measure being pursued here, the Biotechnology Industry Organization has brought suit against the District of Columbia, asserting the unconstitutionality of the "Prescription Drugs Excessive Pricing Act."
The law was written to allow suits against drug companies by the DC government or an individual if the wholesale price of a patented prescription drug in DC is 30 percent higher than the price in Australia, Canada, Germany or the UK. It is the first bill of its kind in the country, although there is talk of state legislatures considering similar measures, and clearly drug companies and their representatives are looking to nip the movement in the bud.
"The DC act is pre-empted by federal law," BIO's complaint says, "and is therefore void." The trade association's underlying argument against the bill's legality rests on three propositions that point to constitutional violations of the dormant commerce clause, which is related to interstate trade, the foreign commerce clause, which pertains to overseas trade, and the supremacy clause, which is connected to the U.S. patent system, as states cannot enact legislation that conflicts with an overarching congressional mandate. The lawsuit, filed in the federal district court of DC, seeks a judgment declaring the bill invalid and forbidding DC from enforcing it.

D.C. thinks it can bully the industry through price controls and lawsuits because of a quirk in how pharmaceuticals are manufactured. All of the costs of drug manufacturing—R&D, FDA approval—are sunk costs, so inflicting price controls won’t choke off the supply of current drugs. Whether the pill sells for $1 or $50, the producer has to get some return on their investment and operating costs, so they’ll sell cheaply if they have to.

But what they don’t have to do is invent another drug that won’t recoup their costs or generate decent profits. D.C. can mandate prices, but they can’t mandate innovation. We can only hope that the courts quickly overturn D.C.’s unconstitutional policy.

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Doctor’s Bold Step Paid Off For His Patients
Seattle Post-Intelligencer, 10-31-05

Editor’s Notes:

This article shows how one physician and his breast cancer patient took a gamble on an off-label course of cancer treatment that was later validated by research.

As much as we like to tout high-tech cures, at the end of the day much of what medicine boils down to is smart doctors making good decisions. Medicine remains as much of an art as it is a science, and sometimes the risk-to-reward ratio of different treatments has to be calculated one patient at a time.

[Catherine Daniels] was diagnosed with breast cancer in May 2000. She talked to a surgeon who suggested chemotherapy and then a mastectomy. While browsing the Internet, she found out about Seattle Cancer Treatment and Wellness Center, known for its integrative medicine approach. She called to make an appointment with its medical director, Dr. Ben Chue, because chemotherapy scared her.
As it turns out, Chue also recommended chemotherapy. But his approach was different. He prescribed smaller, more frequent doses of chemotherapy (known as "fractionated") for three months before surgery and that Daniels concurrently go on Herceptin. One reason was Chue had tested Daniels to find she was HER2-positive and another was the aggressive nature of the tumor. …
Chue's unconventional ways didn't set so well with the physician that Daniels saw to get a second opinion about the fractionated chemo and Herceptin treatment plan before undergoing a double mastectomy.

This isn’t to say that Dr. Chue was going out on a limb—he was extending use of a medical treatment approved for one condition to another based on evolving scientific evidence. New studies showing positive data on Herceptin’s effectiveness in early breast cancer patients have since justified his approach.

Dr. Chue’s odyssey is another example of how responsible off-label prescribing can help patients and physicians extend the boundaries of medical science.

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Bush seeking to protect vaccine manufacturers from lawsuits
Associated Press Newswires, 11-1-05

Editor’s Notes:

For decades, litigation has hobbled the vaccine industry and slowed the creation of innovative new medical products. The President, nonetheless, is already drawing criticism from some consumer groups and plaintiff’s lawyers for his proposal to expand liability protections for vaccine manufacturers.

President Bush said Tuesday that granting vaccine manufacturers protection from civil lawsuits would go a long way to spur the development of medicine needed to fight a potential pandemic.
"In the past three decades, the number of vaccine manufacturers in America has plummeted, as the industry has been flooded with lawsuits," Bush said. "Today, there is only one manufacturer in the United States that can produce influenza vaccine."
Not everyone agrees with Bush's reasoning. Officials have pointed out what they consider more significant reasons for the small number of flu vaccine producers worldwide. …
Anthony Fauci, the infectious disease chief at the National Institutes of Health, told The Associated Press last year that more significant issues are the low-profit margin vaccines provide, unpredictable demand and the complexity of the manufacturing process.

The dwindling production of vaccines is a complex problem, and there are certainly other contributory factors than lawsuits. For instance, the bulk of children’s vaccines are purchased by the federal government’s Vaccines for Children program, and are subject to innovation-strangling price controls.

But liability costs are a significant—and dangerous—factor in industry considerations. Given the enormous costs of drug development and the uncertainties associated with FDA approval, companies will gravitate away from products—like vaccines—that expose them to devastating tort liability without any clear pricing advantage. Liability is, in other words, the straw that broke the camel’s back.

An excellent history of how litigation has affected the development of new vaccines in the U.S. can be found in Paul Offit’s new book, The Cutter Incident.

[permanent link]

AIDS gel on a faster track; Merck, Bristol to License Drugs Free for Use in Poor Countries
Washington Post, 11-1-05

Editor’s Notes:

Heterosexual transmission of AIDS is the main avenue of infection in Africa, due at least in part to women’s low-social status in many countries there. Researchers, consequently, are searching for products that women can use to protect themselves from AIDS without having to inform their partners.

New research in monkeys suggests a combination of AIDS drugs applied as a vaginal gel might prevent infection with HIV, and two major drug companies said Monday they would license promising compounds at no charge so that such a product can be created.
A paper due for publication this week in the journal Nature found that a combination of three drugs applied topically in monkeys prevented infection with a virus similar to the human immunodeficiency virus, which causes AIDS. The results are among the most promising to date in tests of this approach and point toward a prevention strategy that could save many lives.
The International Partnership for Microbicides, a Silver Spring group working to bring a preventive gel to women at risk of AIDS in poor countries, said Monday it had struck deals with Merck & Co. and with Bristol-Myers Squibb Co. The contracts give the group, funded by foundations, the right to create a combination gel using drugs from a promising new category known as HIV entry inhibitors. They block the entry of the virus into human cells, and such compounds are already under development as pills for infected people. …
"These three companies really are, I think, setting a trend," said Mark Mitchnick, chief scientific officer with the Silver Spring partnership. "There's a real momentum building."

Much more research is needed and, even if clinical trials are successful, the gel won’t come on market for several years. But this is encouraging evidence of how new types of public-private partnerships are helping to conquer AIDS in Africa by empowering women to protect themselves.

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