He also shows that the ineffective drugs prevented from coming to the market are far outweighed by the effective ones that are delayed or never developed at all.
1) The information asymmetry between the public and drug developers is absolutely astronomical. This undermines any free-market attempt to keep bad drugs out of the market. Moreover, nobody with the resources to prove drugs ineffective has the incentive to do so.
2) The predicative power of the science is pitiful. 90% of drugs that make it to Phase I trials do not make it through Phase III. In other words, companies have no idea whether drugs will work until they actually test them on people. Indeed, there is a decent amount of evidence showing that many drugs that pass Phase III trials don't work.
The cost of proving efficacy through human trials is unavoidable. The question isn't whether or not to conduct trials, the question is whether you do those trials as part of the approval process, or by selling drugs that don't work to the public at large. The inherent information asymmetry involved makes the latter a less than compelling proposition.
1) The FDA already regulates what companies can say about their drugs. If there is no evidence your drug is effective, the FDA could certainly stop you from saying there is.
2) Without efficacy data, insurance companies won't pay much. To be honest, I would bet insurance companies wouldn't cover such drugs at all. It would be entirely on the patient to cover the costs.
Taking my second point further, if you can't charge a premium for your drug, I doubt pharma companies would even develop drugs they can't prove are efficacious. Gathering efficacy data takes a lot of money, but so does safety data. If you can save 50% on clinical trial costs, but only charge 10% the price, it's a losing proposition.
I have suggested that the FDA offer an "effective" endorsement that a company could go through the approval process to get. The carrot for the company would be that only legally consenting adults could receive drugs without the endorsement, and they'd have to specifically sign a contract saying they understood that the FDA did not endorse it as effective. A further carrot would be that they'd be immunized from liability lawsuits for endorsed drugs.
Furthermore, if the 1962 requirements are so onerous why have not European and Asian drug manufacturers been able to capitalize on this American regulatory shortcoming? Europe has no shortage of pharmaceutical expertise and is a larger consumer market than the US, so if the theory about the FDA being at fault were sound then other markets should be awash in life-saving medications and correspondingly improved mortality outcomes directly attributable to the wider choice of pharmaceuticals after 50 years of regulatory imbalance.
edit: Also, what stops drug manufacturers doing what makers of vitamins and dietry supplements do, ie saying 'may have beneficial effect XYZ - this statement has not been evaluated by the FDA.' True, that might weaken firms' brands since consumers seem to value the FDA's approval, but if there were a bunch of demonstrably efficacious non-approved drugs then presumably consumers would discount the FDA's approval in proportion.
I know nothing about European and Asian pharmaceutical regulation. They likely have something equivalent to the FDA's mandate.
It's my understanding that vitamins and dietary supplements are classified as "food" and not "drugs" and so fall under quite different regulatory systems.
That seems a rather large assumption - that foreign pharmaceutical regulatory regimes are so similar as to result in substantially similar economic outcomes. I'm no expert on the subject, but the European regulatory environment seems rather more diverse than you appear to imagine: http://www.commonwealthfund.org/~/media/Files/Publications/I...
So what? If consumers can buy a 'nutritional supplement' that provides a discernible health benefit, do they especially care whether it is branded as a food supplement or a drug? Given the burgeoning 'dietary supplement' market (with some $30 billion a year it seems the answer to that one may be 'no.' In other words, if you have something that definitely works why not just market it as a food supplement and let consumers throw money at you?
ed on 2012-05-15
Dietary Supplements and Cancer Prevention: Balancing Potential Benefits Against Proven Harms
Nutritional supplementation is now a multibillion-dollar industry, and about half of all US adults take supplements. Supplement use is fueled in part by the belief that nutritional supplements can ward off chronic disease, including cancer, although several expert committees and organizations have concluded that there is little to no scientific evidence that supplements reduce cancer risk. To the contrary, there is now evidence that high doses of some supplements increase cancer risk. Despite this evidence, marketing claims by the supplement industry continue to imply anticancer benefits. Insufficient government regulation of the marketing of dietary supplement products may continue to result in unsound advice to consumers. Both the scientific community and government regulators need to provide clear guidance to the public about the use of dietary supplements to lower cancer risk.
© The Author 2012. Published by Oxford University Press.
The FDA decides what is a food and what is a drug, and such determination determines what regulatory requirements and oversight will be applied. The two are very, very different in that regard.
You keep dodging my point; if drug regulation is so burdensome, why have none of the drug companies taken a promising product and tried marketing it as a nutritional supplement instead? The worst that could happen is that they get slapped on the wrist and told to label it differently. 'Nutritional supplements' are notoriously under-regulated at the moment, so what do the pharmaceutical companies have to lose?
My theory is that despite all the complaints about the regulatory burden and the nightmare-inducing sums of capital at risk, pharmaceutical firms in the aggregate are actually doing great business. I am simply not persuaded that there is massive opportunity cost in undeveloped medicine because otherwise firms in less tightly regulated markets should be cleaning up by making drugs that don't have to meet the FDAs efficacy standards, and there should be a thriving black market in importing them to the US. We should be deluged with stories about great drugs that reduce mortality by improving clinical outcomes at affordable cost that are widely available elsewhere but not in the US or EU because of gloomy bureaucrats.
As I explained before, the FDA will not allow that.
> My theory is
Peltzman's statistics show that new drug development dropped in half in the US coincident with the 1962 amendments.
> less tightly regulated markets
Can you give an example drug market in a 1st world country where this is true?
I'm not endorsing any of these products (obviously, I hope) but they're pharmaceuticals, some of which require a prescription in their originating country of Russia. You haven't explained why the FDA will not allow other manufacturers to sell products with similarly vague claims, merely asserted it.
Which were also coincident with the Thalidomide/birth defect problem, to which the regulations were partly a response. Is it not equally possible that drug companies felt more cautious in the wake of that fiasco? I hate to trot out the chestnut about correlation and causation, but I think it applies here.
> less tightly regulated markets
Can you give an example drug market in a 1st world country where this is true?
No. I said less tightly regulated market; requiring it be a 1st world economy is shifting the goalposts a bit on your part. It would require far more work than I am willing to put into a HN comment to quantitatively measure the regulatory burden in in different developed countries; I've also ready provided yo with examples of differences in the regulatory regime of 6 European countries above.
The FDA decides what is a drug, and what is a supplement, under the laws passed by Congress, and therefore which regulatory regimes apply. Not the company.
> Is it not equally possible that drug companies felt more cautious
The thalidomide disaster had nothing to do with effectiveness of a drug. It had to do with safety, and the FDA did not approve thalidomide in the US prior to the 1962 amendments under their authority to require safety.
> 1st world economy is shifting the goalposts
Not really. The 1st world will be the customers where the money is, and those regulations will apply regardless of where a drug is developed. Secondly, investing billions producing a state-of-the-art lab in a 3rd world country is not something investors will be happy about - problems with any and all of corruption, unstable governments, security, clean water, reliable power, unskilled local labor, rampant crime, unpredictable regulatory environments, culture, etc.
I do recommend you read the book. It deals with your questions. It's available on Amazon.
That doesn't alter the possibility that it could have influenced the behavior of drug manufacturers.
All these potential problems are true, and yet Russia, India, and China all have growing pharmaceutical industries (to name but three) notwithstanding these problems and intermittent scandals (which cause western drugs to fetch a premium in China, for example, due to the public perception of being developed and manufactured to higher standards). Given the size of these countries and their demonstrably looser regulatory regimes, we ought to be seeing a lot of competitive products. India and China are certainly not such profitable markets for drugs as the US is, but the economic input costs are also lower so it's not like there's no economic incentive to produce.
The problem I have with your argument is that it generalizes the effect of the 1962 amendments and their effectiveness provisions to the entire world, and you handwave away every objection by saying that the whole world is sufficiently like the USA that changes in FDA policy 50 years ago had a global inhibitory effect on drug development. This seems myopic, to say the least. I'm quite willing to buy the idea that Peltzman's book provides a good illustration of how changes in the regulatory environment affected the US pharmaceutical industry (while disputing that this would be the only factor), but as I said in the first place it was published 40 years ago and I'm extremely skeptical of your suggestion that we can ignore 40 years of technological and economic change.
Drug regulations are quite uniform among Western nations. For more reading google "ICH"... International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use....
That neither Peltzman nor Tabarrok are even name checked in the article is distressing.
It's not an inversion of Moore's law, it's totally consistent with it. Every time you shrink transistor size by half, you spend exponentially more capital on the new fabs: http://www.futrfab.com/wp-content/uploads/2012/04/Small-Volu... (Figure 2).
Recognizing these facts, large firms have begun prospecting and betting on start-up companies who focus on rare diseases because this is a space where innovation has very little bureaucratic overhead and there is very little competition. Also, this is also a space in which the market size is small and where barriers to entry are high, reducing the threat of future competition.
In fact, if big companies believe they have bought a company with a promising drug, they would prefer higher hurdles for FDA certification to reduce potential competition.
And that is the issue, time. Why not so many recently? The time involved is much higher. The low hanging fruit of the tree of science has mostly been picked at this point (At least I hope so). The blockbusters are then higher up and take considerably more effort to reach. Smart insulin needs nuclear magnetic resonance imaging, a lot of modeling and p-chem, trial after trial to verify results, a lot of post-doc and grad students, data processing and computer scientists, and the resources of a lab and a half. Penicillin was a petri dish that wasn't properly sterilized.
Science takes time, and as humans, we go for the easiest science first. We should not sacrifice safety for speed.
I agree, but it is also a function of money. Pharmaceutical companies often rely on basic research from academia to get pointed in the right direction. As that decreases, there are fewer academics discovering fewer new pathways that pharma can target drugs for.
Additionally, funding is aimed at investigators who are likely to succeed. It is common for a lab to essentially work one grant ahead of funding in order to be sure to deliver.
You have no idea. Friends at other universities have a very high end microscope 'core' that can be used all that apply as a shared cost and time device. Orientation went great, 'yeah, its awesome to use, you get great data, blah blah blah'. When she came to the lab however, she found that only 2 professors' labs could use the core, as they had outbid all the other professors for the time, for then next 15 years. Its a small thing, but it speaks to the incredible gains that go to the 'winners' and the scraps that are given to 'losers.'
I know a few people that work in pharma business development and they scour academic labs for anything of value. For whatever reason, they don't believe that DRACO as value, at least right now.
In the meantime, if it's as promising as you say, academic labs shouldn't have trouble getting funding to further develop it.
So what are you saying besides laying out your untested assumptions about how the world works? There are endless reasons why research doesn't get funded, and many of those aren't because the research is bad.
> In the meantime, if it's as promising as you say, academic labs shouldn't have trouble getting funding to further develop it.
What evidence do you have to back this up?
Do you have any idea on how much money is made in treatments for viral disease? Do you know how much would be lost if all viral disease was cured?
I just did some research and found out that the primary researcher on DRACO is Todd Rider from MIT. Now, when I saw that name, I said to myself, "Is that the same Todd Rider from MIT that did the thesis on non-equilibrium fusion reactors?". Apparently it is:
I really need to meet this guy.
I've developed internal software tools for healthcare companies -- having had to study and learn the FDA rules, and having seen what these companies go through, I'd rather give up on engineering than work in the development of medical devices. A sane, creative mind cannot work and flourish under compulsion.
Which may imply that our discovery approach has benefited from happy accidents which are hard to replicate and where the basics have been found already.
At some point, the claims that it made started to be tested rather than simply taken on authority, basic knowledge was accumulated, and the low hanging fruit was plucked. The rest of the fruit is harder to get to, or may even be largely exhausted IMO, because the field is still operating as if all sicknesses have the possibility to be cured by a magic potion (taken orally or injected.) Now, most announced discoveries are simply false, and the largest selling drugs either useless or intoxicants (statins, SSRIs, Xanax, Adderall, etc.)
I'm pleased about research on parasites and gut flora, though. It's being reduced to poop pills in its media coverage, but it's not the standard magic potion bit.
...which also sort of goes along with this overview of depression treatment in general:
The relevant upshot of that first link includes:
(1) Everybody agrees SSRIs are at least somewhat better than placebo
(2) Placebos really are unreasonably effective compared to non-treatment, so even merely being as effective as placebo is a huge benefit, not to mention being somewhat better than that.
(3) What constitutes a "clinically significant" improvement (even relative to placebo) turns out to be kind of arbitrary. As in, a drug that misses that arbitrary goal might still be hugely beneficial to people. (especially if you compare it to non-treatment)
(4) Glomming all SSRIs together into one big lump to reach conclusions about the group combines some that work pretty well with some that are known to not work well at all, which can bring down the average effectiveness of the group to below that arbitrary "clinically significant relative to placebo" mark even though individual SSRIs might on their own be more likely to make the cut.
It's marketed as an over the counter cure for Influenza and only sold in Russia and China.
I guess the proof is in the pudding. Death rates for influenza are low by world standards in Russian and China:
Of course that could be a fluke and this drug is just a sugar pill because all medicine not approved by the FDA is fake, right? We have the most expensive medicine in the world, by far, so it must be the best!
Your average startup brings exactly one drug to market, and then is aquired and broken up. The current system does not encourage building institutional experience in the field, in fact it destroys it.
Imagine if you opened up the vast knowledge of drugs and creating new drug and testing it was as easy as writing a program, it would do wonders.
Software is not eating up the world in this slice of the market.