It's just starting to sink into public consciousness how fiscally deceptive the Affordable Care Act is and was, and how much it worsens an already unsustainable trajectory for U.S. health care spending and the federal deficit. With Republicans in the House of Representatives voting yesterday to repeal the Community Living Assistance Services and Support (CLASS) Act, it may be an opportune time to revisit some of the other key fiscal gimmicks and extremely dubious fiscal assumptions that helped pass the law:

Double counting $53 billion in Social Security payments

Cutting Medicare reimbursement rates for hospitals and nursing homes to the point that, by 2019, Medicare payments would be lower than those currently paid for Medicaid - and which the Medicare Actuary says are, in the long run, unsustainable

But the CLASS Act has got to take the cake in terms of sheer chutzpah, since it was touted by supporters as saving $81 billion over its first decade - but only because the program counted 10 years of premiums before it started paying out benefits in earnest. The program was so seriously flawed even in its earliest conception that Senator Kent Conrad, Chairman of the Senate Budget Committee, called the CLASS Act "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would be proud of."

(While the Obama Administration has finally admitted that the program is unworkable as structured, it refuses to repeal the Act, perhaps hoping that if the U.S. Supreme Court sustains the individual mandate to purchase private health insurance or pay a penalty, President Obama could add another mandate and make the CLASS Act "sustainable" by imposing yet another mandatory entitlement program on every American.)

Here's what no one can argue with: the ACA creates a massive (and massively expensive) expansion of Medicaid (16 million Americans) and spends hundreds of billions of dollars in new subsidies for the purchase of private insurance on state health insurance exchanges. As the "out years" in the previous CBO estimate of the ACA's price tag have come into focus, cost estimates have risen as well: CBO now estimates that the subsidies and costs of running the exchanges will start at $17 billion in 2014, but will exceed $100 billion by 2022 (CBO now estimates that the ten year cost for the exchanges will be $650 billion).

To add insult to injury, America's budget forecast keeps getting uglier: according to the CBO, in 2012 the U.S. will spend $1.6 trillion or 44% of the entire federal budget on just three programs: Social Security, Medicare, and Medicaid. In 10 years, that figure will rise to 54% of the federal budget. (Along the way, the Social Security Disability trust fund is projected to go bankrupt in 2016; the Medicare hospital insurance trust fund will go bankrupt six years later, in 2022.)

What does any of this have to do with innovation? By expanding coverage without first seriously addressing existing entitlement costs, the ACA creates tremendous political pressure to crack down on spending through the crudest tools we have available: price controls.

Along the way, truly innovative reforms are apt to fall by the wayside because drugs or devices (or programs) that cost more up front, but payoff more in terms of better health and lower costs in the long run don't fit into the ACA's cut first and ask questions later structure. Indeed, if experience holds true to form, price controls will simply shift costs across the system and encourage providers to find yet more ways to game reimbursements without actually improving quality.

There are a few bright glimmers in America's health care system today: personalized medicine promises to make health care more predictive and more powerful, improving outcomes while chasing waste out of the system; health savings accounts continue to show the potential to make consumers smarter health care shoppers; and in the few parts of the market where providers compete (like retail clinics) it does seem possible to improve outcomes and access at lower cost using technology like electronic health records.

Ultimately, the CLASS Act is another morality tale in Washington's perennial fiscal shell game, promising everything without actually paying for it (like a jumbo subprime mortage, with no money down). To be fair, both parties have played that game cheerfully, but every fiscal bubble bursts eventually.

No matter who wins the White House next November, health care reform Part II is already a given, this time (hopefully) driven by smart bipartisan reforms like the Wyden-Ryan plan. While few people give it much chance of passing today, it has this to recommend it: we've tried everything else already.

And look where that got us.

Greg Conko did a terrific job in his post on the WSJ article discussing two private companies attempts to "clean up" and aggregate adverse drug event reports collected by the FDA.

The only thing I'd underscore is how little context drug warnings contain, whether they are offered by the media, private companies, or even on a drug's FDA approved label. For instance, what was the absolute rate of a particular serious adverse event? What's the rate compared to other drugs in the same class, or other types of treatments? Which demographic groups - based on age, sex, gender, or other variables - were more likely to experience serious adverse events?

Better yet, how do the risks and benefits of a given medication compare to the risks of the underlying disease for a given patient? (The benefits and risks may look very different to different groups of patients - even with a supposedly "dangerous" drug like Vioxx.)

The more you parse the data, the clearer it becomes that "one size fits all" warnings can be less than useless for individual patients.

So until adverse event information becomes much more personalized, the litany of reports collected by the FDA - or even disseminated by well meaning companies who are trying to empower consumers - is bound to frighten patients more than actually empower them. (Mostly, I suspect that the web sites the WSJ chronicles will be trolled by lawyers looking to launch the next class action lawsuit against a deep pocket drug or device company.)

To give credit where credit is due, the FDA is trying to develop a real time, distributed network of health insurance databases the agency can use to monitor for "signals" of adverse events called the Sentinal Initiative. This could mark the beginning of exactly the kind of nuanced risk information from the FDA that would actually help individual patients and physicians make smarter prescribing decisions.

As part of the next user fee negotiation for the FDA, the agency is also committed to working with industry and patients to develop more transparent methods for evaluating the risks and benefits of new medicines, and standardizing ways to collect data on "patient reported outcomes" - quality of life measures that would not only support product approval, but help companies develop better products to begin with.

Like Greg, I hope that more private companies dive into the raw data provided by health insurers, the FDA, and other government agencies and turn it into real information that's actually useful to patients and their families. There's definitelty a big market for that data - it it's done right.

An interesting article in today's Wall Street Journal explores the proliferation of websites that make it easier for users to search through the FDA's "often impenetrable database" of Adverse Event Reports (AERs). The CEO of one of the sites "likens these efforts to the advent of J.D. Power and Associates safety ratings for cars. 'Suddenly, manufacturers started competing on quality,' she says. 'The best way to drive quality improvements is to make things crystal clear and transparent as possible.' "

That's true, as far as it goes. But it doesn't go very far. The Journal article discusses a number of shortcomings with the data available from AERs. "Most reports come through drug and device manufacturers, but patients, physicians, family members--even lawyers--can send reports to the FDA, and they often contain errors and inconsistencies," for example. And, although drug manufacturers are required to report any adverse events they discover, or that are brought to their attention, most incidents are never reported at all by doctors or patients.

Other problems include the fact that "there is no way to determine whether a side effect is due to a drug or a coincidence. (Device malfunctions are even trickier, since operator error or surgical skill can affect how they perform.) For another, the reporting doesn't necessarily mirror the true incidence of problems. New drugs tend to generate more reports than older ones, and a negative news story about a drug or device can prompt a sudden spike in reported problems. ... What's more, the FDA files don't indicate how widely a drug or device is being used, so there is no perspective."

Still, defenders argue that more information is better than less. " 'If your doctor tells you to take a drug and it's three times more likely to give you a heart attack than another drug, not having that information seems foolish'," says the president and co-founder of one of the sites. Ordinarily, I would agree that more information is better than less. Unfortunately, what might, at first glance, appear to be more useful information, may actually just be out of context data. And it's important to recognize that "data" and "information" are not the same.

Let's assume, for the sake of argument, that the database of AERs was sufficiently complete to provide an indication that one drug is three times more likely to give you a heart attack than another. That doesn't give you the information you need to determine whether the drug is worth taking. The most important missing factor is how effective the drug is at treating the underlying medical condition. When it comes to choosing among treatment options, patients very frequently are willing to trade somewhat higher risks for greater rewards -- particularly when the risks associated with the underlying medical condition are great. But also relevant is how prevalent the background rate of the specific adverse event is and by how much the risk of that adverse event is raised. And how does this whole mix of risks and benefits of one drug compare to those of the other drug?

I don't want to be entirely critical here. And I do certainly want to be on record as tentatively supporting the move to make FDA data easily accessible in a user-friendly way. But without taking into consideration all the relevant factors, merely reporting a certain sub-set of data is problematic to say the least -- possibly even dangerous. What if I find that my blood pressure medication or diabetes drug has a higher incidence of reported AERs than an alternative and I stop taking it before I have a chance to consult my doctor? Since we know that patient compliance with prescribed drug regimens is a genuine problem, that scenario doesn't seem so far-fetched. In such a case, the availability of data, rather than information, might actually cause me to choose a less safe course of action.

I am decidedly not endorsing the standard FDA line that " 'the best source is to read the product label and talk to your doctor or pharmacist'," as FDA director of surveillance and epidemiology Gerald Dal Pan told the Journal. FDA doesn't always have the best information. And I would, indeed, like to see better efforts by the private sector to deliver information to consumers. I'd just like to see it done better than this. It is clear that the Internet will be able to help deliver a broad range of useful information to patients. And it is already making the collection and dissemination of both risk and benefit information easier (see here for a wonderful example).

Clarimed founder and CEO Nora Illuri is right to suggest that "The best way to drive quality improvements is to make things crystal clear and transparent as possible." But when it comes to drugs and medical devices, "quality" is complex, multi-variate trait. And overall medical product quality isn't likely to improve if we focus on only one of those variables.

The L.A. Times offers more details on studies showing that the use of Avastin may help shrink tumors in early stage breast cancer.

The FDA approves a new drug to treat metastatic kidney cancer - the seventh medicine approved since 2005, according to the FDA.

A study of nearly 200,000 women and girls shows that Gardasil, the HPV vaccine designed to prevent cervical cancer, does not cause autoimmune disorders.

Censoring influenza research: good for national security, or bad for public health? The Economist weighs the issues.

AEI scholar Joseph Antos offers a review of the Wyden-Ryan proposal for Medicare reform in the New England Journal of Medicine.

The Washington Post reports that FDA staff are suing the agency over surveillance of some personal email accounts.

It's hard to believe that we're at the end of the first month of the New Year! And it has been anything but dull. Just look at the world theatre or the controversies, twists, and turns of the 2012 presidential race in the U.S. Before we get too far into the year, I didn't want to miss the opportunity to reflect on one of the most significant developments of 2011... and perhaps even of the last several years.

In a political climate of flying rhetoric and accusations, it is noteworthy when calm and reason prevail. When self-interest is rampant, often cloaked in holier-than-thou proclamations, simplicity and compelling logic offer a welcome respite. When true collaboration appears to be in short supply, it is so refreshing when it emerges from the rubble. In case anyone hasn't figured out where this is going... let me be perfectly clear!

At the tail end of 2011 Senator Ron Wyden (D-OR) and Representative Paul Ryan (R-WI) came out with their bipartisan and cross-legislative proposal for the future of Medicare -- Guaranteed Choices to Strengthen Medicare and Health Security for all. It was a courageous act and a masterfully crafted document. Its Executive Summary is a mere three pages in length. The proposal is nine pages. The document is clear, to the point, compelling, logical and insightful. Oh, did I mention that it's readable, too? Or that it's devoid of jargon and policy-speak, accessible to 'every man' (or is it... 'every person'...) and challenges partisan attacks and assumptions. It is a sad commentary on the national debate surrounding the topic of healthcare (... no, a debate is far more reasoned, fact based and thoughtful on the issues)...that these positive characterizations are so special, in part, because what's represented by the document is so rare.

The basic outline of the Wyden-Ryan plan includes choice that begins ten years from now in 2022 (i.e. Medicare approved private plans and traditional Medicare); affordability through premium support, and a set of protections for vulnerable populations, ostensibly stronger protections against fraud and abuse, and most notably the opportunity to separate the purchase of healthcare insurance from employer sponsored programs. The latter component would apply to those employees who wish to do so in companies employing fewer than 100 workers.

At the heart of the recommendations is the recognition that Medicare has issues which must be confronted and resolved, and that any changes to the program must be patient-centered... not structured to meet the needs of bureaucrats... wherever they may reside. The language emphasizes market competition to improve quality of care as well as reduce cost and waste. Consistent with positions that I and others have taken over the last several years, the Wyden-Ryan approach relies on a market based set of solutions, competition that fosters innovation, and guarantees for those without the financial means to secure care and coverage on their own.

The proposal acknowledges serious flaws in the current system, including design issues inherent to Medicare Advantage which result in access and payment problems -- for both recipients and providers.

While the plan offers a broad brush outline of principles and a framework for a conversation, the devil is always in the detail. There are many points unspoken... like understanding and managing variation, employing predictive care paths, focus on outcomes and engaging greater transparency and accountability across the board... even among beneficiaries! We are all in this together; there really is no free-lunch. The Wyden-Ryan proposal represents a serious effort at presenting a framework for reasoned discourse to solve a very old problem. In that regard it is a welcome change we should embrace even as we challenge its assumptions and bring more insight to bear regarding how we will achieve better health outcomes at lower cost.

Roche already has a diagnostics division, so they don't need the acquisition to help drive any of their targeted medicines. After all, once you know the "target" for a personalized cancer drug (like Herceptin) and get it on the FDA-approved label you don't need to know anything else about your patient's genome.

So why the Illumina bid? (Besides the fact that the stock is way off its high.) This Bloomberg Businessweek article gives a lot of good background on the bid, and asks a lot of good questions.

Analysts also point out that the market for the expensive gene-sequencing machines - primarily academic scientists with government grants - is a shrinking market right now, so Roche's bid has got to be about the future market for genomic technologies more than the present one.

What is the next market for super-fast, cheap gene sequencing? It's hospitals, doctors offices - heck, maybe even the CVS drug store down the street. That's the future of genome sequencing: fast enough and cheap enough to become a consumer commodity.

(I think that Roche is betting that if you're willing to pay $500 or $600 today for a tablet to play Angry Birds, you'd pay the same - or more - out of pocket to know your or your children's genetic future. For instance, what diseases to watch out for, what drugs or vitamins to take - or avoid - etc.)

The problem I see is that we don't have a health care system, or a regulatory system, that is prepared to interpret the flood of genomic information from Illumina's superfast machines and then turn it into actual clinical knowledge. The FDA has already signaled that it's very leery about consumer genomic services, and without that approval the technology isn't going anywhere. (And even then, it still has to be translated into plain English for physicians and patients.)

Roche, I think, has the complete play here. They're intimately familiar with the regulatory hurdles at the FDA, and know how the agency thinks and what kind of data they will be looking for in terms of regulatory approval for genomic applications. They've got marketing channels into physician and hospital offices, and the science research base to help translate emerging genomic discoveries into clinical information and - better yet - personalized treatments coming out of Roche's labs.

If personalized medicine is going to expand beyond specialized cancer treatments, companies like Roche will lead the way since they have all the tools to translate the genome into mainstream medicine.

The question is, how long will it take (5, 10, 15 years?) for the transformation to become complete, and how much (or how little) regulators will slow the revolution down - in the name of protecting consumers from themselves.

Hopefully, innovative companies will be allowed to lead the way, with the FDA just validating the underlying methodologies.

Who should be liable when a patient is injured by a generic drug? That's an interesting question, since by law, a generic drug must be bioequivalent to and carry the identical labeling as the original brand name drug. So, if the injury arose from the drug's original design or labeling, how can you hold the generic manufacturer accountable?

[Last summer]About a year and a half ago, the U.S. Supreme Court held in a case called Pliva v. Mensing that negligent failure to warn tort actions against generic drug manufacturers were preempted by the Food, Drug and Cosmetic Act. Because generic manufacturers are obligated to use labeling identical to the FDA-approved labeling for the innovator, or branded, product, they can't be sued for failing to include warnings about certain risks if those warnings do not appear on the innovator's label.

It would seem to be common sense that you shouldn't be able to sue someone for not doing something they were legally forbidden from doing. But litigation-happy tort lawyers have been trying to find a way do it anyway. Even more troubling is the fact that four Justices of the Supreme Court seem to agree with that view. After all, their reasoning went, [Update: the generic manufacturers could have ask the FDA to initiate a labeling change in the expectation that FDA would pressure the innovator to agree to the change. "If the FDA agreed that a label change was required, it could have asked, and indeed pressured, the brand-name manufacturer to change its label." Justice Sotomayor's dissent, joined by three other Justices, argued the law should "require the Manufacturers to show that the FDA would not have approved a proposed label change."] [Update: An earlier decision from the U.S. Eighth Circuit Court of Appeals went so far as to argue that,] if the generics manufacturers don't want to be sued, they can just stop making generic drugs. In the view of those four dissenters [judges], if a patient is injured, then by golly there should always be somebody to sue. Well, based on the outcome of a handful of cases now making their way through the courts, it appears that there is -- at least in a handful of jurisdictions.

In a case called Conte v. Wyeth, a California Intermediate Appellate Court in San Francisco held that, since plaintiffs can't sue a generic manufacturer for negligent failure to warn, then they should be able to sue the innovator manufacturer who had some control over the contested labeling -- even if the patient didn't take the innovator's product, and even if the innovator is no longer manufacturing the off-patent drug and therefore no longer keeping its labeling up to date.

The California Supreme Court refused to review the case, which means it hasn't been implemented state-wide but is good law (that is, "good" in the sense of "valid," not "good" in the sense of "good") in the First Judicial District of California. [Update: There is apparently some dispute regarding the extent to which California trial courts are bound by California intermediate appellate court decisions. I'm no expert in California procedure, so I'll concede it's possible that not all courts in the First Judicial District would have to treat this decision as binding precedent.] Not long after Conte was decided, the U.S. District Court for the District of Vermont became the first federal court to agree with the Conte decision, in a case called Kellogg v. Wyeth. Following the rationale of Conte, the federal court held that it was "reasonably foreseeable" that physicians would continue relying on a brand manufacturer's approved labeling even after the innovator ceased making the drug. Thus, innovators have a duty of care to ensure up-to-date labeling for ... well, pretty much forever.

Unless this tort theory is struck down, and soon, it could very well metastasize throughout the country's state and federal courts, giving manufacturers and investors yet another reason to give up on innovation in the medical products space. Fortunately, both the U.S. District Court for the Middle District of Florida and the U.S. Sixth Circuit Court of Appeals have since rejected the Conte/Kellogg foreseeability theory, which presages an eventual Circuit Court split that would have to be resolved by the Supreme Court. And, at a more localized level, Jim Beck at the Drug and Device Law blog may have stumbled onto a way to rein in Conte based on an old California Supreme Court decision [from January 2011].

Yet, while it may indeed be possible to keep what Beck calls this "omniforeseeability" theory from spreading, these cases nevertheless raise a very important question: Who exactly should be responsible for ensuring that a drug's label is maintained in a post-patent, multiple-producer environment? In many cases, such as the one presented in Conte and Kellogg, the innovator manufacturer isn't producing the drug any longer. But none of the generic manufacturers has the legal power to change the label. That poses a real problem that merits a real solution. And its one of things that I'll be thinking through over the coming months and years.

When you think about the industries where the U.S. has been preeminent, it's mostly a list of has-beens -- steel, autos, heavy equipment. Those few industries where the US is still a world leader include pharmaceuticals and medical devices. But this is changing.

Today, pharmaceutical and medical device manufacturers rely on patents to protect their innovations as they compete in the commercial markets. In most cases, innovators have 17 years from the date of patent issuance to recoup their investment. But having a patent is not the same as having a product. First you need FDA approval.

That's when the real work begins. Experts estimate that it costs approximately $1 billion and 10 years to bring a new drug to market. There are lots of patents sitting on the shelf, never to see the commercial light of day. Molecules may not perform the way scientists had expected in the earliest stages of discovery; side effects may prove to be problematic and so development stops in the middle of clinical trials. And getting the biggest US insurer - the Centers for Medicare and Medicaid Services (CMS) to agree to reimburse the product is a further hurdle that must be crossed.

Given the substantial time and financial commitments required to bring a new drug to market, Congressional and public pressure to further reduce the length of patent protection represents a major challenge for the US medical products industry. What most people don't realize is this very pressure puts at risk one of our few remaining industrial jewels. The argument put forth in support of more limited protection is the opportunity to bring generics to market faster ... and at a significantly lower cost than branded pharmaceuticals.

That generics come at a cheaper price should come as no surprise to anyone. Generic manufacturers don't have to invest in risky R&D, don't bear the brunt of regulatory approval, and don't have the same commercialization costs to bear. But the focus on bringing generics out faster to lower overall healthcare costs misses one critical point. Pharmaceuticals, while highly visible, represent only about 10% of the cost of healthcare in the US. And they enable greater productivity on the part of people taking them for the most part! If we're serious about lowering healthcare costs, then we need to look elsewhere.

Finally, increased regulation in this country makes it more difficult to get drugs approved in the first place. So much so that venture capitalists, in evaluating investment opportunities, commonly reject proposals from start-ups who want to launch their new products first in the US. They regard such plans as reflecting business naiveté.

If the risk to innovation and access to life saving new compounds isn't significant enough, consider this: 6,000,000 jobs -- good jobs -- are connected to the pharmaceutical and medical device industry. There was never a time we could afford to put 6 million jobs at risk - and certainly not now.

Two new studies suggest that Avastin may have some additional benefit for small groups of patients with metastatic breast cancer. In particular, patients with HER-2 negative metastatic breast cancer showed "signifificantly higher rates of pathologic complete response when [Avastin] was added to neoadjuvant chemotherapy."

Translation: when given to women with localized breast cancer prior to surgery, Avastin helped produce a "pathological complete response" or pCR (so that the tumor was no longer detectable) somewhat more often (about 20%) than with chemotherapy alone.

The question that will obsess researchers now is whether or not the surrogate marker will translate into an overall survival benefit - and thus might lead the FDA to put metastatic breast cancer back on Avastin's label in this particular subgroup.

See also this article from ABC, and this article in the Washington Post.

But the most interesting story is what is - or isn't happening at the molecular level that makes the drug more potent in these subgroups. If we can identify that marker, doctors can target the drug at patients who are most likely to benefit, especially since both studies also showed that Avastin produced some serious side effects in patients who used it.

As if our trust in government isn't low enough, leave it to Mayor Bloomberg, Thomas Farley and the New York City Health Department to play us for fools once again.

As reported in an article in today's New York Times, a fear-mongering ad depicting an overweight man with only one leg sitting behind cups of soda is not what it seems.

The ad is visually disturbing and probably effective in perpetuating the myth that soda causes obesity and Type 2 diabetes, which can lead to, among other things, poor circulation in the extremities and amputations. The only problem is that it was made up. The model in question just happens to have two legs, not one. Thanks to Photoshop.

I'm going to take the liberty of assuming that the leg did not grow back since the photo was taken. In which case, one can only assume that they deliberately used fraudulent material to push their agenda. Perhaps I'm naive, but shouldn't the job of the Heath Department be to deliver factual information to the public they are supposed to serve? Well, not only did they fail to do their job, but Farley should lose his.

This isn't the first time this group has played fast and loose with the truth. In 2009, Farley's department ran an ad showing a soda bottle pouring a large volume of disgusting looking fat into an overflowing glass. This was the centerpiece of their "Pouring on the Pounds" campaign. As if a 16 ounce of soda gets converted into 32 ounces of pure fat. Sorry guys--it doesn't work that way. And you know it.

In 2011 they ran a really nasty TV ad showing a few examples of drinks that contain sugar, then cut away to an obese man's black, gangrenous toes, followed by the poor fellow flopping around while being given (presumably futile) defibrillation in an emergency room. Very subtle.

And, while I'm at it, please shut up about salt. The city's job is to put it on roads after it snows--not to tell me how much of it to eat.

Perhaps I'm being unreasonable, but shouldn't the Health Department try to provide us with facts, rather than scare the hell out of everyone?

Finally, what about the poor guy modeling for the ad? I sure hope he doesn't get typecast. It could be devastating to his career. Most ad agencies seem to prefer models with at least two legs.

The National Venture Capital Association and PricewaterhouseCoopers released a report on VC biotech investments for the 4th quarter 2011 and all of 2011 in a new report released late last week.

The good news is that "venture capitalists invested significantly more money in biopharma companies during the fourth quarter of 2011 and all of [2011] compared to a year earlier."

The bad news is that there was also less funding for the earliest (and thus riskiest) biotech investments, which may mean "fewer new drugs and technologies coming to market over time."

At least one commentator took the glass-is-half-empty approach to the latest data:

"This decline in first-time funding speaks to the precarious state of life sciences venture funding and with it the entire medical innovation paradigm in this country," said Jonathan Leff, a partner and managing director with Warburg Pincus, during a conference call with reporters. "We continue to see great potential in life sciences innovation. However, like other investors in the space, we have found that the life sciences investment environment has grown significantly more challenging in recent years."

Challenging enough, he said, that VCs continue to shun riskier early-stage startups in order to keep more capital for follow-on financings in existing companies, for later-stage investments, and for investments in companies overseas, especially in China. ...

"Unless this trend is reversed and unless the capital begins coming back into new formation and supporting new innovative products and technologies, this will result in a real decline in the number of new innovative drugs and medical devices that will come to market in the years and decades ahead," Leff declared. "VCs are finding that the cost, time, and uncertainty involved in developing innovative drugs and medical devices have all escalated to the point where increasingly, the economic math just doesn't work."

Queue up the dirge music. Leff holds out some hope that PDUFA V may smooth out some of the unpredictability in the FDA's drug approval process, and eventually coax VC investors back into the market for early stage funding, but also concedes that it may "take a decade" to gauge how any changes at the FDA affect the VC environment.

Of course, by that time, a more attractive investment and/or regulatory climate in China, Singapore, or the E.U. may make the whole issue moot by sending the lion's share of VC funding abroad.

Every year pundits announce the word-of-the-year. In 2010 the winning word was austerity; in 2009 the winner was admonish. I predict that for 2011 (or maybe 2012, or for sure by 2013...) the winning word will be value.

Questions about value in the healthcare industry have largely been missing, and getting individuals (and companies) focused on value is one of the milestones on the path of a more efficient and effective healthcare system.

Individuals have largely abdicated their responsibility as consumers to ask about economic and clinical value.

Questions have been left to employers and insurance companies who make the rules about what products we can and can't have and how much we'll pay. The system has come to take for granted the lack of a 'consumer reflex' that characterizes virtually every other purchase we make.

Part of the explanation for this missing consumer orientation is that patients historically haven't paid for much of their drugs and devices themselves, although this is changing rapidly. Another part of it has to do with the reluctance of patients to assert themselves and to believe that they're capable of playing a meaningful role in the clinical decisions that affect them.

Part of Government's 'grand plan' to fix healthcare, embedded in the 2,700 page regulatory nightmare titled the Patient Protection and Affordable Care Act of 2010, was the ACO -- Accountable Care Organization, which proposed in some vague fashion to make providers more accountable for the care they provided. As I've written in other posts, this approach will be unsuccessful for a variety of reasons.

Yet ironically, more accountability is needed, and it's up to patients -- healthcare's consumers -- to demand it; to become engaged, to ask the questions that matter to us about the economic and clinical value provided by the drugs, diagnostics and therapies we receive, regardless of whether or not we're paying for them directly. If we're serious about creating market based solutions to healthcare, then consumers will be key to making it happen.

For more information on a market based solution to the healthcare crisis, see my white paper: Why Accountable Care Organizations Won't Deliver Better Health Care -- and Market Innovation Will.

In a USA Today op-ed, Dr. Marc Siegel explains why the 2010 Affordable Care Act (aka "Obamacare") doesn't seem to be winning many friends among physicians.

The Hill reports that the CBO has found that Medicare demonstration programs designed to slash spending while improving quality "have mostly failed," undercutting hopes among supporters of the Affordable Care Act that similar demonstration projects included in the law will bear fruit. In fact, CBO analyzed "six programs designed to improve care coordination for patients with chornic diseaseses [and found that] they either made no difference or were actually more expensive than the traditional payment system. (Here's the Director's blog with more details.)

Is health care the next frontier for big data, Ben Rooney asks at the Wall Street Journal. Yes, but why is it taking so long for datasharing to become the new normal for doctors and patients?

When did "Big Pharma" get so big and bad and how might it recast its reputation, asks Han Zhong at the American Action Forum.

Reuters explains how combining targeted skin cancer drugs may produce better outcomes and fewer side effects for patients.

A new study conducted by the research organization Patient View confirms something many of us already knew: the pharmaceutical industry's corporate reputation is pretty dismal -- even among the patients and patient advocates who rely on innovative new medicines. Top scoring individual firms are, as you might expect, touting their positive reputations, defined as "meeting expectations of patients and patient groups." But, that should be cold comfort even to the winners since -- unlike say new car buyers -- pharmaceutical consumers don't generally shop for medicines on the basis of what they think of various manufacturers.

Reputation in the drug industry matters much more in the political sphere than in the retail sphere because, as Ed Silverman at Pharmalot points out, "patient groups are not only growing in number, but increasingly trying to influence regulatory and payer decisions through assertive lobbying." And regulation isn't imposed at the firm level, but at the industry level. A drug firm with a sterling reputation will suffer from regulation motivated by the public's attitudes regarding the entire industry. So, even top scoring firms need to be worried about these results -- and they need to think more strategically about how the entire industry can begin to burnish its reputation.

The study is available only to Patient View subscribers, selected news media, and other readers willing to cough of £750. But via Pharmalot and the Pharma Times, we learn that the survey included 500 patient groups from 61 countries, and respondents were asked about their views regarding the drug, biotech, and generic industries generally, and of the 30 largest companies specifically (The full list of companies can be viewed here.). The study used six indicators to measure company performance: "Whether the company has an effective patient-centred strategy," "The quality of the information that the company provides to patients," "The company's record on patient safety," "The usefulness to patients of the company's products," "The company's record of transparency with external stakeholders," and "Whether the company acts with integrity."

So, what did they find? Just 42 percent of respondents said "they believe the multinational pharma industry has a 'good' or 'excellent' corporate reputation, while for biotech and the generics sector the equivalent figures are 44% and 41%, respectively." And fewer than 30 percent believe pharma's reputation has improved over the past five years. In addition, "while 66% of the respondents believe that pharmaceutical companies are 'good' or 'excellent' at being innovative, only 13% consider them to be 'good' or 'excellent' at adopting fair pricing strategies which ensure that they do not make 'unseemly' profits. Just 31% consider that companies act with integrity, with only one-third believing that drugmakers run ethical marketing practices and 23% considering them to be transparent in their corporate activities."

Leading the pack of individual drug firms was Novartis, coming in first overall as well as in four of the six individual indicators: having an effective patient-centred strategy, the quality of information for patients, its record on patient safety, and the usefulness of its products. Pfizer and Lundbeck came in second and third respectively. For a full list of the results you'd have to read the full report, to which I don't have access.

One caveat worth pointing out is that "patient groups" are not the same thing as individual patients. It's entirely possible for patients, even in the aggregate, to have a higher or lower opinion of individual firms or the entire industry -- largely because patients will have more individualized experience with some companies and little or no experience with others. And, though I think patient groups generally do a good job representing the interests of their members, the professional representatives will tend to be much more attuned to questions related to a company's willingness to share information and work with the organizations.

Perhaps more importantly, as I noted above, the organized patient groups will be more active -- and more effective -- at influencing the development of laws and regulations. And, because even the most respected companies can't escape regulations implemented to rein in or punish the entire industry, the views of the organized patient lobby matter tremendously. So, while a company like Johnson & Johnson might be ranked in the top 20 of the "World's Most Admired Companies," that reputation won't necessarily help it fend off predatory or debilitating regulation if the view of the entire industry remains low -- particularly among the most active advocates.

Since over 80 percent of the respondents in this survey faulted the industry for its pricing practices, one of the first things the industry must do is debunk the belief that it is reaping huge profits on the backs of suffering patients. With soaring drug prices at the top of every pharma industry critics list of complaints, it does appear unseemly for drug firms to consistently return double-digit profitability. But, as the Congressional Budget Office has pointed out, "those figures misrepresent the industry's actual profits." Standard accounting measures overstate profitability for R&D intensive industries by treating most research spending as an expense rather than as a capitalized investment that increases the company's value. "Not accounting for that value overstates a firm's true return on its assets."

Ultimately, the high retail prices of pharmaceuticals reflect the vast expense of developing those products and getting them approved for sale. Without correspondingly high prices to enable the recoupment of those costs, few investors would willingly take the risks inherent in supplying capital to the pharmaceutical industry. The result would be fewer and fewer lifesaving medicines. We scholars may keep pointing that out. But if the drug industry itself doesn't figure out how to do a better job convincing patients and organized patient advocates of that fact, its reputation isn't likely to recover any time soon.

That's the title of a provocative new book by Dr. David Agus and the topic of an excerpt in the Wall Street Journal this past Saturday, called The Doctor in Your Pocket. In the not too distant future, Agus believes, his children - and everyone else - will be able to:

....monitor and adjust their health in real time with the help of smartphones, wearable gadgets--perhaps like small, invisible stickers--to track the inner workings of their cells, and virtual replicas of their bodies that they will play much like videogames, allowing them to know exactly what they can do to optimize every aspect of their health. What happens when I take drug x at dosage y? How can I change the expression of my genes to stop cancer? Would eating more salmon and dark chocolate boost my metabolism and burn fat? Can red wine really lower my risk of heart attack?

What is equally exciting is that this patient data will be added to a universal database that can be aggregated by powerful search engines like Google and constantly fed into new trials and experiments--speeding up our understanding of which drugs work best for which people. The database might show, for example, that people with a particular genetic profile respond to one type of cancer treatment but not another. As more people anonymously add their health data, this database would become more and more effective as a tool for preventive medicine.

Dr. Agus could've just as easily called the book, The End of Health. Today, we only think we're sick when the flu or the cold virus sends us staggering back to our bed, or the cancer becomes a lump we can touch or see on an X-ray.

In reality, your body is a constantly shifting molecular battleground, with life and death battles being waged every minute by myriad protective genes and the immune system to neutralize invading infections induce pre-cancerous cells to commit suicide, and keep a healthy balance between thousands of other protein-protein interactions.

Typically, tumors start from a single cell a decade before the fatal cancer is unleashed. The first insidious tendrils of Alzheimer's in the brain may launch decades before the dementia becomes detectable. And the diseases that will kill or cripple us are almost uniquely personal to our genetics, diet, and environment, requiring an equally personalized approach to treating the complex diseases that afflict modern humanity. (My colleague Peter Huber has written eloquently on the challenges and opportunities of personalized medicine in a seminal City Journal article, Cherry Garcia and the End of Socialized Medicine.)

So fighting the battle against disease, and the ravages of aging that often cause disease, is happening in your body now, and the drug that the FDA approves to fight the disease after it is half way to killing you is often too late to do much good -and at enormous financial cost.

If we want to really conquer diseases like cancer, as opposed to just slow it down at the margins, we need to mine the information on those myriad interactions in your body in something approaching real time. It'll be tremendously challenging, but as Argus points out all of basic technology - smartphones, supercomputers, whole genome scans, etc., are all available today and getting cheaper all of the time.

What we really need now, is a vanguard of people - hundreds or thousands - to put the technology to the test, and then let the supercomputers loose to crunch the data and uncover the associations that will help drive new prevention efforts to attack these diseases at their molecular roots when they're still just chemicals as opposed to solid tumors or ravaged neurons.

Thankfully, capitalism is very good at scanning things, crunching numbers, and delivering personalized recommendations (a la Amazon) simultaneously to millions of people.

To paraphrase Glenn Reynolds from Instapundit, "(much) faster please."

In recent months, concerns about the safety of medical devices have taken center stage. Recalls and lawsuits in recent headlines have led to scrutiny from the public, directed both at manufacturers and the FDA. These concerns were center stage again last month when Sens. Chuck Grassley, R-Iowa, Richard Blumenthal, D-Conn., and Herb Kohl, D-Wis. introduced The Medical Device Patient Safety Act, S. 1995.

This bill would give the FDA the authority to require companies to submit post-market data as a condition for continued approval of moderate-risk medical devices under the fast-track process, and would allow the FDA to rescind approval if this condition is not met.

While AdvaMed quickly noted that the FDA already has broad authority to require post-approval studies, this bill does underscore the growing sentiment that medical device manufacturers and the FDA ought to increase activities aimed at ensuring product safety. Last summer, the Institutes of Medicine also called for an integrated pre- and post-market regulatory framework aimed at improving device safety.

Unlike other recommendations in their report -- for example, the recommendation to scrap the 510(k) approval process altogether -- requirements for more post-market safety surveillance were considered relatively uncontroversial by AdvaMed and even the FDA.

The reality is that much more will be required of manufacturers to comply with post-market safety surveillance emerging rules. The current standard of practice for manufacturers has been to systematically report on and respond to certain classes of "complaints" such as deaths, serious injuries, and malfunctions likely to contribute to death or serious injury.

As regulators enact greater requirements for medical device safety, reviewing these passively-acquired complaints through call centers will no longer be sufficient. There will need to be a more comprehensive approach to ensuring medical device safety throughout the product lifecycle. This will mean more proactive planning for post-market safety surveillance based on product characteristics (e.g. product novelty, consequences of product failure, device complexity) identified in early product development.

In light of the Senate bill and the IOM report, it is increasingly clear that manufacturers will need to rethink their approach to safety surveillance, taking into account the current environment, including scrutiny from the public, new regulations, and likely future changes. For some thoughts on how to do this, see our recent brief, Post-Market Safety Surveillance: A Call to Action.

Analogies can be powerful tools to help us think and act clearly. However, we need to ensure that our analogies are faithful, or they may do more harm than good. Consider the following statement by the FDA's Dr. Steven Hirschfeld in 2002.

"We don't want to put a weapon into the hands of a soldier until it has been tested, and tested under stress." He was comparing weapons to medicines, both of which have benefits and risks, and was saying that both weapons and drugs should be tested to ensure safety before they are used.

If someone is shooting at a target, his/her weapon had better be pretty safe. Since target practice is just a pastime, the benefit is relatively low and so should the risk.

If someone is in a dire situation in the middle of a war or crime scene and death is imminent, the benefit of a functioning weapon is substantially higher and therefore the acceptable risk can be higher, too.

Consider Cristy Kessler, a University of Hawaii associate professor who was suffering from three rare autoimmune diseases and was "preparing to die." She received an unapproved stem cell transplant in Turkey (i.e., an "untested weapon"). We can think of her as being in the middle of a bloody military battle. What is the value to her of safely getting off the battlefield? Incredibly high. And since she was in mortal danger, it didn't matter much whether her own defective weapon or her enemy's weapon delivered the final, fatal blow.

The real issue is the relative risks. Are we, as Americans in 2012, facing a target shooting situation or a battlefield situation? It's a battlefield--but even worse. One single disease, lung cancer, kills more Americans each year than the combined U.S. casualties from battle in the Revolutionary War, the War of 1812, the Mexican War, the Spanish-American War, World War I, the Korean War, the Vietnam War, and the Persian Gulf War.

The issue of bias was in the news again this week as the Wall Street Journal reported that "three of the advisers [at an advisory committee meeting to discuss four Bayer birth control pills] have had ties to Bayer, serving as consultants, speakers or researchers."

Bias can be a hindrance to good decision-making. Unfortunately, most of us have some biases, whether they are religious, political, philosophical, nepotistic, analytical, or economic.

Religious bias can affect one's views on contraceptives, the termination of pregnancy, and "pulling the plug" on seriously ill patients. Political bias arises when the decision maker tries to foster a favorable image or to support a particular party or politician. Philosophical bias can affect how we think about who should be treated, or whether certain conditions should be treated at all. Or, perhaps, whether drug companies should be allowed to profit by treating illness. Or, perhaps, whether actions are best taken through public or private organizations. Nepotism means giving advantages to friends or relatives. Individuals can be analytically biased by, for instance, confusing low-risk and high-risk situations or by lacking the right analytical tools to make good decisions. Economic bias is the most common target and was the subject of the Wall Street Journal article referenced above. It arises when a person can profit from a role as a supposedly impartial judge.

If the FDA was serious about bias, it would consider all kinds of bias--religious, political, philosophical, nepotistic, analytical, and economic--and set up systems whereby the expertise of experts could still be extracted while the effects of their biases was minimized.

"A bias recognized is a bias sterilized." -- Benjamin Haydon, British painter and writer

The FDA has come under fire yet again over allegations that a drug advisory panel decision was tainted by financial conflicts of interest.

Some recent research has suggested that women taking birth-control pills containing the active ingredient drospirenone -- such as the Bayer AG products Yaz, Yasmin, Beyaz, and Safyral, as well as several generic versions of the drug -- had roughly double the risk of non-fatal blood clots as those taking other oral contraceptives (see here and here). Last spring, Bayer issued a statement contesting the validity of the study methodology, and claiming that other research -- presumably more valid in Bayer's opinion -- found no heightened risk.

Who's right and who's wrong is a difficult question to answer. But at a December 9, 2011 joint meeting of the agency's Reproductive Health Drugs Advisory Committee and its Drug Safety and Risk Management Advisory Committee panelists sided with Bayer by a 15 to 11 vote that drugs containing drospirenone should remain on the market.

What's particularly noteworthy about the vote, however, is that an investigation by The Washington Monthly and the British Medical Journal has revealed that at least four of the committee members "have either done work for the drugs' manufacturers or licensees or received research funding from them." What's more troubling, though, is that the FDA did not itself make public any of these financial ties, and it took a couple of reporters to reveal the information.

By itself, the presence on FDA advisory panels of researchers who have done work funded by the drug industry is not problematic per se. After all, the purpose of the advisory panels is to provide the best possible expert advice, so the agency can better evaluate the benefits and risks of medicines. As Harvard Medical School researcher Thomas Stossel has explained over and over to anyone who'll listen, the manufacturers of drugs are going to seek out the best researchers with the most knowledge about a particular disease or condition to provide insights on their research and development programs. So, if you bar anyone with any financial ties to the industry from serving on regulatory advisory committees, that necessarily means settling for people who are not the best. Moreover, despite all the sturm and drang about financial conflicts of interest, and a growing literature examining the effects of these conflicts, "Evidence that relationships compromise scientific integrity is weak or false," and "there is no evidence at all about the effect of physician-industry relations on patient outcomes."

Nor am I especially concerned about the narrowness of the vote in this particular case. The Washington Monthly/BMJ report tries to make an issue of the fact that, without the four conflicted panel members, the result would have been an 11 to 11 tie. That still leaves us essentially where we were previously -- that is, with conflicting evidence and an essentially evenly split panel vote elucidating the fact that, with many drugs, it's difficult to tote up the benefits and risks and make a well-reasoned decision.

More importantly, though, those decisions are left to the FDA, not the advisory committees. By all accounts, the FDA was in fact aware of the financial conflicts. And the agency itself is fully capable of evaluating the full weight of scientific evidence and discounting the advisory committee's decision if deems those financial ties to have affected the votes of various members. The agency often does side with advisory committees in its approval or disapproval decisions. But there are far too many cases in which the agency rejected an advisory committee recommendation (almost always in the direction of rejecting approval for a drug that an advisory committee recommended approving) to think that the committee votes are anything more than what they purport to be: advisory in nature.

What I do find troubling about the whole affair, however, is the fact that the financial relationships were not previously disclosed by the FDA. There is nothing especially pernicious about these financial arrangements. But full information disclosure by federal agencies serves an important function: It lets the public evaluate the performance of our regulatory overseers. Sometimes information disclosure can be used more to intimidate and demagogue public and private actors -- and that is a tendency to be feared. But when it comes to government decision making, we ordinarily should prefer more information to less. In the end, disclosing not just potential financial conflicts of interest, but also other conflicts (such as intellectual ones) is a far better approach than excluding experts from fully participating in the regulatory process. And in that regard, The Washington Monthly and BMJ should be congratulated for their work.

Yesterday, the California Healthcare Institute released a topline summary of a CEO survey that asked executives about the most important challenges facing biomedical innovation over the next five years.

The survey found that:

Nearly three quarters (74 percent) of biomedical industry CEOs surveyed said their companies have had to delay a research or development project in the past year.

In addition, 80 percent of CEOs surveyed do not believe that U.S. FDA has the best regulatory approval process in the world, and three-quarters believe that within five years, another country could conceivably recreate the ecosystem that has made the U.S. the leading biomedical region in the world.

Off course, it's not really possible to consider access to capital idependently of the regulatory environment. Investors have pulled away from life sciences investments as they perceive companies having a harder time getting new products through the FDA. For instance, this 2011 survey of over 150 VC firms from the National Venture Capital Association found that investors "identified FDA regulatory challenges as the most significant factor driving away investment from startup companies that are bringing critical therapies to market."

The possibility that another country could leapfrog the U.S. in creating a more attractive environment for medical innovation and investment is no idle threat. China, with an enormous market and an increasingly sophisticated workforce, could compete for biopharmaceutical investment in the not too distant future.

More findings on the challenges facing U.S. based life-sciences companies will be released when CHI isssues its 2012 California Biomedical Industry Report in February.

Look foward to more MPT commentary when it comes out.