The Democratic campaign trail this political season has been replete with policy “solutions” to the much-publicized spikes in the prices of a few drugs. These policy prescriptions are a doubling down on the kinds of government interventions that have made the current system slow, unwieldy, expensive—and sometimes, deadly.
Much of the politics-fed outrage was incited by an outlier in the pharmaceutical world: In 2015, Turing Pharmaceuticals acquired the anti-parasite drug Daraprim and aggressively elevated its price 55-fold to $750 a pill. Market forces intervened to solve the Daraprim price-hike problem in about a month with the announcement of a $1-per-pill alternative made by Imprimis Pharmaceuticals, but politicians, pundits, and policy experts did not let this crisis go to waste. Months later, they continue to decry high drug prices. In response, they have proposed a spectrum of government interventions of varying intrusiveness to control them.
The suggestions are all over the place, and many are unfeasible or otherwise ill-advised.
Some of the least constructive ones come from what has been called “Hillary Clinton’s Think-Tank,” the ultra-liberal Center for American Progress. It is run by Neera Tanden, who has worked for Clinton’s campaigns and in the Bill Clinton and Obama presidential administrations. Just as the Turing price hike was hitting a fever pitch in the news, CAP released a plan for “Public- and Private-Sector Reforms to Curb Rising Drug Costs.” It would drastically increase the influence of government bureaucrats. It requires that a minimum fraction of profits be allocated to R&D (or else pay a fine to the government); it arbitrarily caps the out-of-pocket costs of many drugs; it ends tax breaks for pharmaceutical advertising; and it allows Americans to import lower-priced drugs from other countries.
Clinton’s campaign reacted quickly, and at a campaign stop in Iowa she rolled out her own CAP-inspired agenda to address drug costs. Her campaign pronouncement followed that of self-described socialist Bernie Sanders who, unsurprisingly, also wants the federal government to exert more control over the pharmaceutical industry.
Both Clinton and Sanders have gone so far as to denounce drug companies as their “enemies.” That kind of demagoguery and scapegoating is a lot easier than crafting constructive reforms.
The bottom line is that we need more competition, not the more intrusive government interventions proposed by prominent Democratic politicians, whose “reforms” would actually diminish pharmaceutical companies’ incentives to take risks, to innovate, and to find new treatments and cures. Bringing a new drug to market currently requires 10-15 years and costs, on average, more than $2.5 billion. Does anyone believe that more government involvement would lower development costs, bring more drugs to market, and save more lives? I’m reminded of the quip from the late, great economist Milton Friedman that if the government were put in charge of the Sahara desert, in five years there would be a shortage of sand.
Delays in FDA approval of certain new drugs already available in other industrialized countries are well-documented and deserve as much attention as high drug costs. An example is the three-year delay in the approval of misoprostol, a drug for the treatment of gastric bleeding, which is estimated to have cost between 8,000 and 15,000 American lives per year.
Another example was the sordid saga of a drug called pirfenidone, used to treat a pulmonary disorder called idiopathic pulmonary fibrosis (IPF), which killed tens of thousands of Americans annually. The cause of the disease is unknown, and there were no drug treatments approved for it in the United States until October 2014, although pirfenidone had already been marketed in Europe (since 2011), Japan (2008), Canada (2012), and China. Pirfenidone was approved in the EU on the basis of three randomized, double-blind, placebo-controlled studies, one conducted in Japan and the other two in Europe and the United States.
In spite of a recommendation for approval by an FDA advisory committee (comprised of outside experts) in 2010, agency officials opted not to approve the drug and demanded another major clinical study. The results, published in May 2014, were impressive, and the FDA finally approved the drug without fanfare in October 2014; but between 2010 and the approval, IPF killed more than 150,000 patients in the United States.
Another example is the FDA’s November 24 approval of Fluad, a flu vaccine that contains an adjuvant, a substance called MF59, that boosts the immune response. It is intended for use in the elderly, whose immune response to flu vaccines is often poor, with devastating effects. People over age 64 account for 80-90 percent of seasonal flu-related deaths and 50-70 percent of flu-related hospitalizations in the United States.
Fluad has been in use in Italy since 1997 and is approved in 39 countries. The delay in the drug’s availability in the United States surely has resulted in thousands of avoidable deaths.
There are a number of approaches to regulatory reform that would improve this situation. As Bartley Madden and economics Nobel Laureate Vernon Smith wrote on Forbes.com, “A new paradigm is needed that fixes the system’s key constrain —the FDA’s monopoly on drug access that denies patient choice and eliminates competition for the FDA regulatory process itself.”
Among them would be “reciprocity” of approvals with certain foreign “A-list” governments, so that approval in one country would be reciprocated automatically by the others (with a brief delay to reconcile national differences in labeling format and so on). That would make drugs available sooner in all the participating countries, increase competition and put downward pressure on prices.
Madden and Smith advocate a fundamental change in the way drugs are regulated—the creation of a new paradigm, “Free to Choose Medicine” (FTCM), which would create a dual-track system. It would preserve the existing FDA-dominated process
while offering patients an alternative. Patients, advised by their doctors, would be able to contract with a drug developer to use not-yet-approved drugs after Phase I safety trials are successfully completed and one or more Phase II trials have demonstrated continued safety and initial efficacy. The resulting early access could make FTCM drugs available up to seven years before conventional FDA approval, which entails Phase III randomized control trials and a lengthy FDA review before the FDA makes an approval decision.
A critical element of this proposal is a large database, the Tradeoff Evaluation Drug Database (TEDD), which “would be available to the public through a government-supervised web portal.” It would contain all treatment results of drugs used under the FTCM pathway, providing doctors and patients with “up-to-date information to guide their decisions about the use of approved drugs versus FTCM drugs.”
In my book To America’s Health: A Proposal to Reform the Food & Drug Administration (Hoover Institution Press, 2000), I proposed a different significant change in drug regulation, which would strip the FDA of many of its current responsibilities. The essence of the proposed change was that day-to-day oversight of drug testing and review of applications for marketing approval would be performed by nongovernmental FDA-certified entities. The FDA thereby would become primarily a certifier of certifiers, rather than a certifier of products, not unlike the way that the federal government certifies organizations like Underwriters Laboratories for the “regulation” of thousands of categories of consumer products. Delegating a significant portion of the oversight responsibility for drugs to these nongovernmental bodies would generate competition among the certifiers for drug companies’ business and create pressure for greater efficiency in the oversight process.
However, proposals for significant changes in the status quo inevitably elicit resistance from big pharma and their trade associations and a collective yawn from members of Congress. Until there is an impetus for reform from all of these quarters, we will continue to be saddled with the ponderous, inflexible, monopolistic, and deadly system that exists today.