Sunday, January 23, 2011

Innovation, statist-style 

The Obama administration has implemented policies -- both at the Food and Drug Administration and via Obamacare -- that have simultaneously raised the costs of developing and approving new drugs and devices and lowered the expected returns new products in the future. Now it is allegedly worried that the pace of new innovation in drugs is decelerating, so it wants to establish a billion dollar government agency to do the work that the private sector is choosing not to do. Here is how the New York Times spins it (emphasis added):

The Obama administration has become so concerned about the slowing pace of new drugs coming out of the pharmaceutical industry that officials have decided to start a billion-dollar government drug development center to help create medicines.

Yeah, that's a real thigh-slapper for those of us who have been following the Obama administration's war on innovation. Much more burdensome regulatory hurdles for new drugs and devices (exceeding even the requirements of notoriously regulated countries like Germany and France)? Check. A new tax on the revenues of device and drug companies? Check. A Securities and Exchange Commission that has so raised the cost of going public that the specialty pharma and biotech companies -- which do most of the real discovery work for Big Pharma -- cannot raise the prodigious capital required to get new drugs in to the clinic? Check.

So, naturally, the solution is yet another federal agency. Sounds to me like an exciting new employment opportunity for university professors, who are one of Barack Obama's last reliable constituencies.


By Blogger Stephen, at Sun Jan 23, 12:55:00 PM:

It amazes me some people think Obama is smart. At least in economics he is quite stupid. This is probably true of most liberals. They should be mocked for their smug confidence despite abject failure.  

By Anonymous Anonymous, at Sun Jan 23, 12:56:00 PM:

These grand statist dreams will never stop. Progressives are immune to both lpersuasive ogic and their own direct experience. History has long been ignored. What can we do to avoid becoming England?  

By Anonymous MarkJ, at Sun Jan 23, 03:08:00 PM:

Here's what I find really hilarious about Obama's mindset: His Majesty no doubt thinks the New Deal was the greatest thing since sliced bread--especially the Works Progress Administration (WPA) and those big prestige projects like the Hoover Dam. "Goverment doing what the free market can't, or won't, do!"

Unfortunately thanks to the rise of the regulatory state fostered by the New Deal, few, if any, WPA-style projects would ever get off the ground because goverment bureaucrats or fellow "community activists" would tie them up in knots with legal and environmental challenges. OSHA would have a fit with the working conditions during construction of the Hoover Dam: the death count connected with the project was 112...and that's just the "official" number.

"A goverment pharmaceutical company? Great idea! What could possibly go wrong?"  

By Blogger JPMcT, at Sun Jan 23, 03:56:00 PM:

Challenge: Name ONE SINGLE THING that the US Government has done, made or administered more effiently than the private sector.

Just one...

(The Louisiana Pruchase doesn't count...the government nixed oil drilling in the gulf...we should sell it back)  

By Anonymous Anonymous, at Sun Jan 23, 04:59:00 PM:

Bad trip, man, bad trip.  

By Anonymous feeblemind, at Sun Jan 23, 06:47:00 PM:

Well said, TH.


By Anonymous Anonymous, at Sun Jan 23, 07:11:00 PM:

Challenge: Name ONE SINGLE THING that the US Government has done, made or administered more efficiently than the private sector.

They put a dude on the moon.  

By Anonymous Anonymous, at Sun Jan 23, 10:06:00 PM:

Obama is smart.

But it's rather a limited form of intelligence focused on self-promotion and his chosen ideology of redistribution of wealth and "social justice".

He's am egotistical two-bit hustler with a gift of gab and, as Democrat Senator Reid noted, "no Negro dialect".

Now isn't that better than actual accomplishment?  

By Blogger The Atlee Appeal, at Mon Jan 24, 05:28:00 AM:

This is so damning, yet so not surprising at the same time. Obama is a statist at heart, and will stop at nothing to have government involved in nearly everything he can get his hands on. How else can you justify wanting to have an extreme tax increase on carbon producers while wanting to have the government "invest" in non-carbon emitting energy? How will you eventually get a single-payer type health care system? Obama quoted himself that single payer is a goal and that "it will take time before we get there". So, just make it so impossible for private insurance companies to make any form of profit that the only people available to offer insurance is Washington. This man is taking us on a dangerous course, and it is up to our newly elected conservatives in the House to slow it down as much as possible.


By Anonymous 996GT3Cup, at Mon Jan 24, 08:46:00 AM:

Indeed, I nearly fell off my chair upon reading about this newly proposed agency. The House should be able to strangle this idea via a threat of no funding, should it not?

And just to be fair, the govmint built the interstate highway system, and won World War Ii.  

By Anonymous Anonymous, at Mon Jan 24, 10:32:00 AM:

This new agency is so clever that it is unlikely that it is the Kenyan's idea. So, the feds set up a billion dollar outfit and begin to develop drugs/chemicals that private companies can no longer afford to fund.
What is going to happen? The promising compounds will be licensed to private companies for marketing and exploitation. The companies will be IPOs, mostly owned by big city pols and their families, SEIU fact cats and those to whom the Kenyan owes a payback.

By Anonymous Ignoramus, at Mon Jan 24, 01:26:00 PM:

At last year's State of the Union, Obama said "jobs are priority #1" but then spent the next few months on ObamaCare.

Last year, Green Energy got pride of place in Obama's 2010 SOTU. He even threw us a bone with a call to build more nuclear plants and to increase our off-shore drilling. Education also got pride of place, with calls for more spending, etc.

Yesterday's NYT Sunday Magazine reports that for this year's SOTU, "Obama has been casting about for ideas." "The ideas presented to him, though, seemed familiar and uninspired. “You know, guys,” he said, according to someone in the room, “I’ve told you before, I want you to come to me with ideas that excite me.” Nothing he was hearing excited him. " That's the NYT talking.

Based on early leaks, expect this year's SOTU to promote the same old thing dressed up as a call to "increase our global competiveness."

Saints preserve us! Obama thinks that his new chief of staff Bill Daley is a businessman because he's currently on Jamie Dimon's payroll. He thinks that GE's CEO Jeff Immelt will be a great Domestic Jobs Czar.

Can't wait for Eagle Scout Paul Ryan's rebuttal tomorrow night. Expect to hear a lot about Job Killing and Enron Accounting.  

By Anonymous Ignoramus, at Mon Jan 24, 02:25:00 PM:

"They put a dude on the moon"

Actually the engineers at Grumman did. They had it all figured out -- including the Lunar Module -- before JFK gave his speech. Grumman et al just needed the funding.

So actually it wasn't the proverbial moon shot.  

By Anonymous Anonymous, at Mon Jan 24, 03:33:00 PM:

A lot like providing high calorie breakfast, lunch, and sometimes dinner to poor school kids, and then creating childhood obesity programs.  

By Blogger Don Cox, at Tue Jan 25, 10:05:00 AM:

So how should drugs or vaccines to treat rare diseases be developed? There isn't enough profit in such drugs to cover the research costs.

Should people with unprofitable diseases be left to suffer?  

By Anonymous Anonymous, at Tue Jan 25, 11:44:00 AM:

Are you serious, Don?

Other than science, the only bar to development of new drugs and profiting from that development is government regulation.

Piling on more government involvement in the various medical industries, under the guise of state sponsorship, is obviously just more of the same.

t will lead to less, not more, innovation. It will lead to more, not less, human suffering and misery.

So I ask you: Should people with unprofitable diseases be left to suffer? Or should the government imposed bars to profit be reduced?  

By Anonymous Anonymous, at Tue Jan 25, 11:58:00 AM:

And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

--Anon Attorney  

By Blogger Don Cox, at Wed Jan 26, 09:13:00 AM:

"Other than science, the only bar to development of new drugs and profiting from that development is government regulation."

I disagree. Developing new drugs costs a great deal of money. There are many diseases which are uncommon, so that sales of a drug to cure the disease cannot cover the cost of development.

There are also diseases which are practically confined to poor countries. Again, the drugs cannot be profitable.

What is the best way to develop such drugs? My answer would be research grants to reputable universities, from both governments and foundations.

What is your solution?  

By Blogger TigerHawk, at Wed Jan 26, 10:10:00 AM:

One solution, Don, would be to lower the costs of drug development for "small" diseases and poor country problems. Applying the FDA's regulatory regime to the problems of poor countries is incredibly wasteful. The truth is, life is a lot cheaper in Africa, and we should recognize that instead of pretending that we ought to have years of double blind clinical trials to support the approvals of products for countries with $500/year GDP per capita.  

By Blogger TigerHawk, at Wed Jan 26, 10:14:00 AM:

So, for example, the FDA just three weeks ago imposed a new set of "informed consent" requirements (above and beyond the old rules) on clinical trials conducted by US companies, including those outside the United States. Another cost increase.  

By Anonymous Anonymous, at Wed Jan 26, 04:25:00 PM:

Don, money comes from successful, profitable business and nowhere else.

Letting businesses produce new drugs, under a reasonable regulatory structure, increases the speed of development, increases the range of market size for "profitable drugs", and increases the availability of drugs. That's how you reduce human misery. Most government involvement acts only to slow the speed of development, forces companies to concentrate on very large potential markets, and reduces the number of new drugs that will come to market.

I'm an investor in a private equity fund that invests in drugs that are too small for large pharma firms to take all the way through to development. These are relatively low risk drugs too.  

By Anonymous Ignoramus, at Thu Jan 27, 06:28:00 AM:

I'd add the following thesis based on my limited experience in the industry:

Most of our spending goes to chronic illness. With most chronic illnesses -- especially the most intractable -- individual patient variability has a big affect on outcomes.

But the FDA process doesn't reflect this, as iarge scale tests don't asssess efficacy well -- they just assess whether there are any bad outcome outliers. So we test to eliminate risk much more than we test to measure benefit.

Big Pharma is running out of blockbusters, which is why this is getting current focus.

Were the FDA a business it would be going broke. In a sense it is going broke as its Big Pharma customers are languishing.

Am I wrong?  

By Blogger Don Cox, at Thu Jan 27, 08:12:00 AM:

"The truth is, life is a lot cheaper in Africa, and we should recognize that instead of pretending that we ought to have years of double blind clinical trials to support the approvals of products for countries with $500/year GDP per capita.  "

If you don't run proper double-blind trials, how do you know that the drugs work? Do you mean that Africans should be used as experimental animals?

There is no point in spending a single dollar in giving out drugs that don't do any good. (And much of the cost of drugs for Africa comes from US taxpayers.)  

By Blogger Don Cox, at Thu Jan 27, 08:20:00 AM:

"Don, money comes from successful, profitable business and nowhere else."

True, and some of the profit goes to taxes and some to foundations such as that swet up by Bill Gates. This fraction is a source of money for non-profit research.

"I'm an investor in a private equity fund that invests in drugs that are too small for large pharma firms to take all the way through to development. These are relatively low risk drugs too."

Sounds good, but how do these firms manage to do the job more cheaply than the large firms? I hope this is by controlling the cost of management rather that by cutting corners on trials.

I'm not sure what you mean by "low risk" here. Low risk to the patient, or to the manufacturer?  

By Blogger Carolyn, at Thu Jan 27, 11:07:00 AM:

Don, concerning your question:

"If you don't run proper double-blind trials, how do you know that the drugs work? Do you mean that Africans should be used as experimental animals?"

Back a few years, when The Lancet was still a reputable journal, I read an account from a whistle blower who uncovered massive fraud in a clinical trial of a hormonal drug which was conducted on women in Africa. The researcher who invented data out of thin air worked at a government-funded British university. The whistle blower's job was to review scientific data at the university.

The entire university turned against the whistleblower. He was shunned, got death threats, frequent crank calls and his home was vandalized. Only after going to the media with his glaringly obvious evidence did things start to turn around for him.

During this time period, there was also a story about an official at a government-funded British hospital who blew the whistle on misconduct. There was a concerted, temporarily successful, effort to classify him as insane and to get him committed.

Two former whistleblowers working for our federal government developed guidelines for protecting prospective scientific whistle blowers working in government-funded institutions, Some of their rules were that if whistle blowers ever revealed malfeasance by a superior, the evidence would be covered up and the whistle blowers would lose their careers and likely their families. Whistle blowers were advised that they had to have ABSOLUTE PROOF and that their own work had to be carefully documented and above reproach. Among other cautions. I had a special interest in the topic of persecution of government whistle blowers because it was happening to my fiance (but not in science).

Not too long ago, I watched a video of a test in the 1950s of LSD on a housewife at a VA hospital. And the government has had to apologize for using people in Costa Rica in dangerous clinical studies. The government has a terrible record of using people as experimental animals. A modern corporation would face massive litigation and disastrous media coverage if it acted in a similar manner.

Incidentally, before systemic antivirals were available, I once tried to help someone get an orphan drug approval for a topical product using commonly available ingredients which had shown tremendous effectiveness in reducing the pain and symptoms of shingles in terminal AIDS patients and others. It was approved by California's version of the FDA. But the federal FDA's hurdles were too high.

As far as the value of government-funded research is concerned, I believe that many researchers doing basic research are self-motivated, and will do quality research no matter the source of their funding. But it gives me nightmares to think about a government-funded entity doing the drudge work necessary to bring a successful product to market.  

By Blogger Don Cox, at Thu Jan 27, 01:29:00 PM:

Whistleblowers get rough treatment in commercial companies, too.

Neither universities nor companies are democratic institutions.

There is little that science can do in the short term about deliberate fraud, such as that by Andrew Wakefield. But sooner or later the experiment will be repeated and the truth will come out.

So long as full details are given and all data are available, other workers can judge a piece of research. You seem to be implying that all university research is faked, which is absurd. There is good and bad work both in industry and in universities.

The problem is still how to do research which cannot lead to a profitable product. I think this is a job for universities, supported by foundations and taxes. I am happy to pay taxes toward this end, and to pay a monthly sum to various charities.

Are you arguing that if there is no profit to be made from curing somebody, they should be left to suffer?  

By Blogger Carolyn, at Sat Feb 19, 12:21:00 PM:

No, Don. I am not implying that all university research is faked. I think that a lot of basic research done at universities is very good. I do worry about people at government-funded institutions who are doing the "drudge work" that is necessary to demonstrate basic safety and efficacy. In addition to the possibility of faked data, there is the possibility of "milking" a project for more and more money by discovering new things to test.

If government takes over more research there will also be fewer safe places for scientific whistle-blowers to get a job before blowing the whistle (this is the safest way to become a whistle-blower).

It is harder for victims (those who, for example, take drugs approved after phony research) to sue a government entity. And if they do sue, they are awarded "other people's money" -- not the money of the entity which was engaged in malfeasance. Therefore, while commercial companies are also sometimes hard on whistle-blowers, these companies have a greater incentive not to deliberately introduce products which they know will harm people.

While commercial companies sometimes introduce orphan drugs, I do not have a real problem with universities taking on the search for cures for obscure or unprofitable diseases, as currently happens. Your recognition that some of this research is funded through charitable foundations is a positive thing. People can monitor their donations and direct them toward entities they believe are doing good work.

But there are some potential problems with government-funded pharmaceutical research which we should try to avoid.

1. Costs for discovering treatments for "unprofitable" diseases could spiral out of control. These research costs would be a way of hiding "health care spending" by taxpayers.

2. When costs increase too much, there is a tendency for a fiscal backlash, which could cause government funding for promising projects to dry up suddenly at inopportune moments. Politics is a fickle business.

Another possibility is that requirements for safety and efficacy testing could be cut too much even for diseases with many victims. Commercial firms are not allowed to do this in most cases, and inflexibile rules are a big problem. But political pressure might lead to different rules for government-funded research. The history of medical research in communist countries is not very inspiring in this regard.

3. The actions by the Obama administration go far beyond supporting research for obscure or "unprofitable" diseases. They want to take over research which they have MADE unprofitable. The control freaks in federal government would be in a position to dispense ever-more favors to their friends with other people's money. I don't want to concentrate so much power in the hands of so few people.

4. Not all progress in pharmaceuticals comes from "blockbuster innovation". Much progress is incremental.

I know from personal experience that countries with socialized medicine, in Scandanavia for example, are often unwilling to approve new drugs which have somewhat better efficacy, safety or comfort than an older approved drug or which work better in a certain sub-population. Drug costs become a primary concern in product approval.

If you are in a sub-population which would respond better to a different chemical entity, tough luck. You will not be allowed to use a different product even if you pay for it yourself. Physician and patient choices are reduced.

Government-funded research would tend to be directed toward high-publicity projects rather than toward incremental improvements in therapy. If pharmaceutical companies are pushed out of research, this type of research will tend not to be done.

Genetically-engineered products bring up a whole new set of challenges which I have not addressed above.  

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