The Rising Cost of Getting Well

Friday, January 30, 1998

If you've filled a prescription recently, you may have had a nasty surprise. Anti-biotics or a tube of steroid cream used to cost a few bucks, but now you find drugs such as Epogen (erythropoietin for anemia) costing $324–$486 a week, Rocalcitrol (a vitamin D derivative) costing $55–$385 a week, and Biaxin (the anti-biotic clarithromycin) costing $75 for a week's course of treatment.

Why the astronomical prices? It's your tax dollars at work. Government regulation imposes enormous "taxes" on drug development, which are passed along to consumers in higher prices.

A regulation proposed in 1994 by the FDA that is expected to take effect soon will send the cost of clinical trials right off the charts. This proposal requires that clinical researchers report drug side effects more quickly and presume that the new drug is to blame any time a patient gets sick or sicker during a study. The regulations reconfigure the burden of proof so that all new drugs are construed guilty until conclusively proved innocent. They set an arbitrary and significantly lower regulatory threshold for stopping a clinical trial, making the entire drug development process unnecessarily risk averse, slower, and more expensive.

The comments on this proposal from academia and industry are instructive. The DuPont-Merck Pharmaceutical Company estimated that, under the proposed regulations, its reporting burden would double for each prospective drug in development. Amgen described the practical difficulties of estimating the expected incidence of death and serious adverse events that could arise, not from the drug but from underlying disease or concomitant medications. When medical researchers at the Johns Hopkins University Center for Clinical Trials carefully compared two clinical trials, one performed with reporting according to the old requirements and one under the new rules, they concluded that the FDA's proposed changes would increase the cost per patient 62-fold and the paperwork generated per patient 63-fold. The Johns Hopkins study concluded that these huge additional costs were not accompanied by a commensurate advantage to patients.

Government regulation imposes enormous "taxes" on drug development, which must be passed along to consumers in higher prices.

Such regulatory "innovations" from the FDA have pushed the time and expense required for drug development to stratospheric levels. The time required to develop a drug has more than doubled since 1964, from 6.5 to 14.8 years. And from 1990 to 1993 alone, the cost of bringing a single drug to market surged from $350 to $500 million.

The feds were at it again last August, when President Clinton announced that drug companies will be required to test whether the medicines they sell for adults are safe and effective for children and to put the pediatric dosages on the label. The new requirement will increase the cost of drug development by as much as $21 million annually, according to the FDA's own (conservative) estimate, which ignores the multiplicative effect of the regulation on reporting side effects, described above. The added cost was dismissed as a "very, very modest amount" by Chris Jennings, President Clinton's principal health care adviser. Consumers who pay out of pocket for their drugs may have other ideas.

The Clinton administration's new regulation makes unreasonable demands on drug developers and would actually delay the availability of new drugs if the FDA withholds approval for adult uses while data from pediatric studies are being collected.

More fundamentally, the regulation is a rigid, centralized governmental solution to a nonproblem, according to many pediatricians. Even the FDA concedes that physicians commonly and safely prescribe pain relievers, asthma drugs, antihistamines, antibiotics, and other therapeutics millions of times annually for children, despite the clinical trials of those products having been performed only on adults. "Pediatricians routinely tailor dosages for children by adjusting the dosage according to the patient's weight," confirms Kaiser Permanente pediatric allergist Dr. Michael H. Mellon.

The Clinton Administration's new regulation makes unreasonable demands on drug developers and would actually delay the availability of new drugs.

Even if additional testing of drugs in children were needed, there exist more measured and imaginative approaches. For example, the FDA could simply require a prominent label or logo on drug preparations whose safety and efficacy have not yet been determined in children, or the agency could publish a list of such drugs annually. This would make parents and physicians aware that such information is not available, and they, in turn, could exert moral and economic pressure on drug companies to obtain it. (Consider, too, that it is in drug companies' interest to expand the population that will purchase and benefit from their products.)

Alternatively, as suggested by Dr. Bob Ward, chairman of the American Academy of Pediatrics, drug companies could be offered incentives, such as extended patent life on their products, to perform studies on children. This approach would permit market forces, rather than the heavy hand of federal regulators, to foster the desired goal.

Why does the FDA propose unnecessary regulations that are expensive, rigid, and inimical to market forces?

For one thing, it's in the self-interest of bureaucrats to seek greater mandates and, thereby, to command larger empires and budgets. And it's in their nature. As former FDA commissioner Frank E. Young once quipped, "Dogs bark, cows moo, and regulators regulate."

When regulation is excessive, everyone is a loser--except government regulators themselves. Money spent by the government, industry, and consumers on FDA regulation is money not spent on something else, including the ability to protect public health in other ways--making buildings earthquake-resistant, improving highways, or performing diagnostic testing.

It is in the self-interest of bureaucrats to seek greater mandates and, thereby, to command larger empires and budgets.

Consider, for example, the potential benefits of spending the $21 million annual cost of the FDA's new pediatric labeling regulation on breast cancer screening. According to public health statistics, it would save some 6,300 to 14,700 years of American women's lives. If it were spent on cervical cancer screening, it would save some 14,700 to 31,500 years of life.

The FDA is a microcosm of U.S. regulatory agencies, whose behavior gives no hint of the "end of the era of big government," in President Clinton's mendacious phrase. Excessive or poorly crafted regulation increases costs to consumers and puts them at risk when, for example, the introduction of new drugs is delayed, fewer are developed, and competition is discouraged.

More fundamentally, the policy illustrates that the Clinton administration has a greater commitment to rhetoric than to the reality of protecting public health.