Saturday, January 26, 2013

Must read: End the FDA Drug Monopoly: Let Patients Choose Their Medicines

End the FDA Drug Monopoly: Let Patients Choose Their Medicines

by Doug Bandow,
June 11th 2012

Americans want to reduce health care costs and improve patient care. Congress says it wants to do the same, which is why both houses recently voted to renew drug approval "user fees." But it would be better to strip the Food and Drug Administration of its monopoly control over pharmaceutical development.

The FDA was created in 1906, before prescription drugs became a leading medical treatment. The 1962 Kefauver-Harris Amendments vastly expanded agency control over drug approval, giving the FDA, which also regulates most food products, cosmetics, vitamin and dietary supplements, the power to determine efficacy as well as safety of new pharmaceuticals.

Drug discovery is an uncertain business. Unfortunately, new medicines do not appear miraculously, like manna from heaven. Firms typically have to assess between 5,000 and 10,000 substances for every one that survives the extensive testing process and makes it to market. Of those that win approval, 80 percent lose money. Only a few pharmaceuticals pay for the entire development process.
The average cost of developing a new drug runs more than $1 billion, with estimates traditionally ranging between $1.2 and $1.5 billion. The more stringent the FDA controls, the greater the expense. Bernard Munos at InnoThink and Forbes magazine's Matthew Herper recently pegged the development cost much higher.

Critics complain that these numbers include administrative and marketing costs, but what business, let alone government agency, does not have administrative expenses? And marketing is an investment—drug companies advertise to sell more pills. It would be a strange industry if firms created products at great expense and then locked them away, playing a form of consumer hide and seek.

All told, Avik Roy of the Manhattan Institute figured that the consequences if unnecessary regulation "are higher-than-necessary health spending and poorer health outcomes. Pharmaceutical companies charge more for their products, in order to recoup their costly and risky investments. And fewer beneficial drugs reach doctors and patients."

Of course, the FDA claims to protect the public from unsafe, ineffective drugs. But the agency can make two different errors. One is to approve bad products. The other is to block (or delay) good products. Noted Henry Miller of the Hoover Institution: "Public health is harmed when potentially beneficial products are delayed, abandoned, or never tested at all."

The political penalty for the first mistake is high. Congressmen love a spectacle, and there is no better show than denouncing officials for allowing a dangerous product on the market. The specter of Thalidomide, which resulted in birth defects—but was never released in America—still hangs over drug development. (Ironically, the drug has made a comeback as a treatment for Leprosy.)

In contrast, the second mistake rarely carries a price. The absence of a good is harder to recognize than the presence of a bad. Richard Merrill, former FDA chief counsel, wrote: "No FDA official has ever been publicly criticized for refusing to allow the marketing of a drug." At least until AIDS emerged as a veritable death sentence most people seemed unaware that there even was a downside to strict pharmaceutical regulation.

Between 1962 and 1967 the average delay in approval time rose from seven to 30 months. Total drug development time jumped from around three years in 1960 to six years in 1965 and ten years in 1970. The Tufts University Center for Drug Development found little has changed in recent years. Estimates range between 10 and 20 years, most commonly settling around 15 years.

Economist Sam Peltzman concluded that the introduction of new drugs fell by more than half after Kefauver-Harris. Yet there was no comparable drop in the release of unsafe or ineffective pharmaceuticals or withdrawal of unsafe products from the marketplace. Moreover, Peltzman wrote, the "penalties imposed by the marketplace on sellers of ineffective drugs prior to 1962 seem to have been enough of a deterrent to have left little room for improvement by a regulatory agency," an assessment later backed by economists Henry Grabowski and John Vernon.

Increasing delays mean more than increased costs. The process slows the release of beneficial pharmaceuticals. Which means dead and suffering patients.

Years ago analysts began writing about the drug lag created by the FDA. Numerous medicines made it to the European market before they were released in America—drugs which were both safe and effective. Americans did without—or illegally smuggled medicines from overseas. The FDA's slowness did not increase safety: post-approval drug withdrawals were comparable on both sides of the Atlantic. Doctors William Wardell and Louis Lasagna concluded that "the United States has lost more than it has gained from adopting a more conservative approach." Although the U.S. may have edged ahead of Europe over the last decade, the FDA is still harming rather than enhancing the public safety.
Agency controls over advertising and marketing have a similar effect, reducing the speed with which new treatments by existing products are adopted. It often is not economical for a company to go to the expense of winning approval for additional uses for existing products, especially as a drug's patent life ebbs. However, doctors can prescribe the medicines for any treatment they deem appropriate. Alexander Tabarrok of the Independent Institute reported that the vast majority of pediatric, AIDS, and cancer patients have received off-label prescriptions.

Yet drug companies are forbidden to advertise these extra benefits. For years the FDA prevented any mention of aspirin's value in preventing heart attacks or even the federal Centers for Disease Control and Prevention's recommendation that women take folic acid supplements to reduce birth defects. Abbott recently paid $1.6 billion in fines to settle a Justice Department prosecution for promoting unapproved uses of its drug Depakote.

Tolls of doctors ranging from cardiologists to oncologists routinely found that a large majority believed that the FDA was too slow to approve new drugs. AIDS added a new political dimension, compelling, in Greenberg's words: "a grudging administrative recognition that the traditional mission neglected the interest of people whose lives were primarily threatened by the absence of treatment, rather than by unidentified harmful side effects of treatment."

But that recognition remains grudging. The agency periodically has become more industry friendly—regulatory bodies frequently are "captured" by those they supposedly are overseeing, to the detriment of consumers. But this process has not much helped get drugs to market.

FDA procedures were changed to speed release (through "Accelerated Approval") of drugs designed to treat life-threatening conditions. The improvement was real, but limited. Nature Biotechnology pointed out that only a handful of drugs have gone through the process and that "in recent years, FDA has been ratcheting up the requirements." Moreover, this initiative did nothing for the vast majority of drugs which benefit the vast majority of people.

The human toll has been high. Pharmaceuticals have significantly improved people's lives. But much more could be done. Where treatments are few the sick and dying feel helpless. For instance, the Wall Street Journal reported on patients with Lou Gehrig's disease who, "frustrated by the slow pace of clinical drug trials or unable to qualify, are trying to brew their own version of an experimental compound at home and testing it on themselves."

The greatest harms from drugs typically result from misuse or misprescribing rather than unexpected side effects. The deadliest latter problem pre-1962 involved Elixir Sulfanilamide, which killed 107 people. Through 1980, figured Dale Gieringer, an expert in drug regulation, the highest death toll may have been 3500 dead around the world due to Isoproterenol, an inhaler for asthmatics. (Thalidomide resulted in 10,000 or more birth defects, but no deaths.)

In recent years significant drug problems have typically involved deaths in the scores. In 2007 Merck settled roughly 3500 death claims charged to the painkiller Vioxx without admitting that the drug was responsible (the company won 11 of 16 individual cases before agreeing to general settlement). Moreover, argued Gieringer: "there have been only one or two major drug accidents that could have been averted through stricter premarket testing, and one or two that could not have been prevented."
The death toll from over-regulation is far greater. Pharmacologist William Wardell concluded that the five year delay in allowing the hypnotic Nitrazepam to be used in America (after Britain's approval) cost 3,700 lives. He believed that the FDA also cost thousands of lives by preventing the sale of the first beta-blocker Propranolol for three years after it was available in Europe, and another seven years before it could be used for its most useful purposes. Sam Kazman of the Competitive Enterprise Institute (CEI) figured the annual beta-blocker toll at 17,000. Overall, he wrote, "as many as 100,000 people may have died waiting for FDA to act."

Indeed, CEI warned that the agency has delayed the arrival of a host of live-saving medicines: ancrod, citicoline, ethyol, femara, glucophage, interleukin-2, navelbine, lamictal, omnicath, panorex, photofrin, prostar, rilutek, taxotere, transform, and vasoseal. While the specifics vary, the combined human cost has been high. Gieringer explained: "The benefits of FDA regulation relative to that in foreign countries could reasonably be put at some 5,000 casualties per decade or 10,000 per decade for worst-case scenarios. In comparison… the cost of FDA delay can be estimated at anywhere from 21,000 to 120,000 lives per decade. These figures would seem to support the conclusion that the costs of post-1962 regulation outweigh benefits by a wide margin, similar to Peltzman's results of a 4:1 cost-benefit ratio for the 1962 amendments."

Some illnesses rob people of many of the pleasures of life rather than of life itself. Noted Gieringer: the foregoing estimates "completely ignore the drug benefits of reduced morbidity from crippling strokes, polio, and other nonfatal illnesses, the value of which in many cases may be comparable to that of life itself."

Even harder to assess are the lost benefits from drugs not developed or marketed. Tabarrok pointed to the problem of "orphan diseases," rare conditions affecting relatively few people. The higher drug development costs, the less likely products will be produced for these ailments. He wrote: "Thus, millions of Americans have few or no therapies available to treat their diseases because of increased costs of drug development brought about by stringent FDA 'safety and efficacy' requirements."
The FDA is killing people. With kindness, perhaps. But it is killing, nonetheless.

Obviously, the answer is not to ignore safety. Rather, the regulatory process needs to reflect current scientific opportunities and patient needs. Observed John Lechleiter, the CEO and Chairman of Eli Lilly & Co.: "We can't have a 1950s or 1960s or 1970s regulatory system when we're doing 2011 or 2012 or 2020 science."

Regulatory reform by the FDA would help. However, Henry Miller warned that "within the current system, regulators' self-interest is not served by the implementation of meaningful change, so real reform is never accomplished." Indeed, of late the agency seems focused on the trivial. Two years ago the FDA proposed requiring movie theaters to release calorie counts for popcorn, only to retreat in the face of popular scorn mixed with political pressure.

Legislative initiatives for revamping the FDA and speeding drug approval abound. However, more fundamental change is necessary. For instance, Henry Miller would require continued FDA approval, but instruct the agency to anoint competitive "drug certifying bodies" (DCBs), which would actually review drugs. The government could be restricted to judging safety, leaving efficacy up to the marketplace. After all, assessing effectiveness is what markets do every day. Andrew von Eschenbach, a former head of both the FDA and National Cancer Institute, proposed establishing a pilot program allowing drugs "to be approved based on safety, with efficacy to be proven in later trials."

Better would be to eliminate the FDA's monopoly over drug safety as well. Explained Corinne and Robert Sauer of the Jerusalem Institute for Market Studies: "drugs are expensive not because of a lack of competition among research-based pharmaceutical companies, but because of a lack of competition in the drug approval process."

One approach would be to allow the sale of pharmaceuticals (and medical devices) approved by the regulatory agencies of other industrialized states. If an industrialized Asian or European nation has released a product to market, it could legally be sold in America, subject to a showing of unreasonable danger.

Best would be to make the FDA's approval advisory. If you only trust the U.S. government, then only take medicines (or use medical devices) endorsed by the agency. Otherwise consider the opinion of doctors, hospitals, and other medical providers, as well as look for certification by public or private organizations. The Sauers suggest leaving approval to private DCBs.

They point to a similar system which operates to regulate the sale of kosher food. A private agency, Underwriters' Laboratory, also tests electrical products. No law requires review, but wholesalers, retailers, and customers prefer products so certified. UL even helps local governments develop building codes.

Organizations interested in patient care could undertake or promote testing of new medicines. For instance, the American Hospital Formulary Service Drug Information manages a comprehensive drug database; the ECRI Institute researches patient care; the National Comprehensive Cancer Network, an organization of cancer hospitals, publishes a reference of cancer drugs; and the United States Pharmacopoeia Convention sets standards for prescription and over-the-counter drugs. Providers or provider associations (such as the American Medical Association and American Hospital Association) or insurers could pay to have products reviewed.

The industry might even establish and fund an organization, which would be left to operate independently. Reputation would be everything for an evaluation agency: if seen as a tool of industry no one would believe its assessments. And no association or company would have an incentive to fund it.

The most important principle for reform should be freedom of choice. People, in consultation with their doctors and other medical professionals, should be allowed to make different decisions reflecting their unique medical needs and risk assessments.

In many cases there is no one right medical decision. The FDA recently stripped Avastin of approval for use in treating breast cancer. Medical professionals disagree on the drug's value. Two recent studies found that Avastin had some value in treating metastatic breast cancer. One concluded that adding the medicine resulted in "significantly higher rates of pathologic complete response." Maybe the benefits don't justify the cost. However, the government should not deny this treatment option to people who are desperately ill with a disease that is most often fatal.

The current system presumes a trade-off between efficiency and safety. But Henry Miller argued that "If we can end regulatory excesses, introduce competition into regulatory oversight, and redirect government involvement to those few activities where a central, monopolistic role is essential, more patients will benefit from a greater number of drugs made available to them in a timelier way."
Who should decide what drugs to use? Patients. They need advice, not diktats. Congress should strip the FDA of its regulatory monopoly over pharmaceuticals and medical devices. The public health would benefit.

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Sunday, January 20, 2013

InVitae, Led by Randy Scott, Goes ‘All-in’ For Genomic Diagnostics

Very, very cool new venture. I like their approach, and like the fact that the GHDX folks are both recycling and extending.....

InVitae, Led by Randy Scott, Goes 'All-in' For Genomic Diagnostics

by Luke Timmerman,
January 18th 2013

Follow @ldtimmerman
You could call Randy Scott an E.F. Hutton for the genomics business. People listen when the co-founder and former CEO of Genomic Health talks. And Scott isn't just talking. He's gone "all-in," putting his time, and a significant amount of his own money, into a new San Francisco company called InVitae. The plan is to develop a kind of dream diagnostic test that would have been quite unrealistic a couple years ago.

"We want to aggregate all the world's genetic tests into a single assay, for less than the cost of a single assay today," Scott says. He adds: "It's kind of outrageous, but it's eminently doable."
InVitae—which is Latin for "in-life" and pronounced In-VEE-tay—has stayed stealthy in its early days. But that's changing this year, as the company has gotten certified to run a central diagnostics lab and it's gearing up for its initial commercial push.

The company, which combined assets last year from Redwood City, CA-based Genomic Health (NASDAQ: GHDX) and Locus Development, has pulled in $37 million to date from investors that include Genomic Health, Thomas McNerney & Partners, and Scott himself. Scott started moving in this direction back in February, when Genomic Health formed InVitae as a new subsidiary with him as CEO. Six months later, in August, he jumped ship completely for the new company, resigning his Genomic Health board seat. InVitae, which took in $30 million of investment in November, has grown quickly to assemble a team of 40 employees.

"Having done startups before, I'm a big believer that you've got to be all-in," Scott says. "If you want to start something from scratch and compete in today's world of healthcare, it should consume 150 percent of your time."

The goal of InVitae, in its early days, is to help geneticists to look broadly for rare, inherited genetic disorders (aka Mendelian disorders). There are thought to be about 1,500 of these rare conditions, which are often hard to diagnose. Sometimes these diseases prompt what Scott calls "medical odysseys" and are only diagnosed after physicians take stabs in the dark by running existing single-gene or multi-gene tests that can only answer narrow questions, and cost several hundred dollars apiece.
InVitae's plan is to start small, and build from there. While the usefulness of information from consumer-oriented genetics companies (23andMe, Navigenics) has long been questioned in the medical community, InVitae has instead focused on looking for the small number of genetic abnormalities and variations that are clearly linked to a disease that physicians treat.

InVitae can't yet run a comprehensive screen of all 1,500 Mendelian disorders, and deliver a report that definitely says whether a patient has one. It has spent its early days establishing a central diagnostics lab, equipped with Illumina sequencing machines, and combing through publicly available scientific literature to find the strongest links between genetic abnormalities and medical disorders. So far, for the small group of beta customers, the test can scan for 150 of those disorders, at a price of $1,500. If a physician wants to ask a narrower question—like whether a patient has one of the many genetic variations that lead to cystic fibrosis—the sequencing service and price can be tailored accordingly, Scott says. The samples get sent in to InVitae's lab, and a report comes back to the physician a few days later.

While a huge amount of information on these gene-disease links is in the public domain, it's full of conflicting information, and isn't curated. Just going through the public literature to try to find the valuable links between genomic abnormality and disease is a daunting task.

"What's happened historically is kind of a tragedy of the commons," Scott says. "People put all the variants they study into the public domain, but nobody curates it, cleans it up." The InVitae team, in doing the curation, has found "enormous errors" that it is weeding out of its central database. The variants in the InVitae database are ones that, Scott says, "accurately predict disease."

The time is right for such a test, Scott says, because physicians are becoming increasingly interested in not just single-gene or multi-gene diagnostics, but broader genomic tools that can aid in medical diagnosis. Over time, as sequencing gets even cheaper and more scientific links between gene variants and disease are established, InVitae hopes to cast a wider net. In the near future, InVitae hopes to make a single test that scans for all 1,500 known inherited (Mendelian) genetic disorders, and either rules them in or out for an individual patient.

Further in the future—maybe 10 or 20 years, in Scott's view—newborns will get their full genomes sequenced to look not just for clear inherited disorders, but to delve into predispositions and likelihoods of developing complex diseases that involve multiple genes and environmental factors. Many of these conditions could be spotted early, and managed, long before they start manifesting themselves through mysterious symptoms later in life, Scott says. Disorders like Klinefelter's syndrome, and hemochromatosis—a common iron-overload condition—can be detected today, but often aren't, because there's rarely an obvious reason to look. But InVitae expects that its tests will be able to routinely spot those disorders during its sweeping tests, and those findings could help physicians successfully treat the condition early in life before symptoms cause trouble.

"One of the goals for InVitae is to help manage your genome for life, and do it in a medically oriented way," Scott says.

Dietrich Stephan, the founder and CEO of SVBio, another aspiring "clinical genomics" entrepreneur, says he's closely tracking the competition and knows that InVitae has hired a number of experienced people from his previous company, Navigenics. His company is also looking at Mendelian disorders as the first of many genomic diagnostic opportunities.

"I have the highest regard and respect for Randy. I'm looking at it as validating what we're doing," Stephan says. "There's plenty of room in the market for more than one company. Physicians are starved for this."

The business at InVitae is quite different from Genomic Health, which markets specific diagnostic tests for breast and colon cancer. Those tests must be built on a basis of company-sponsored clinical trials that demonstrate the value of the test for both physicians and payers. By leaning on well-scrubbed, publicly available data from studies of gene variants and rare disorders, InVitae doesn't need to run lots of expensive clinical trials on its own, Scott says.

The concept for InVitae isn't actually that new—it was one of the earliest ideas that Scott flirted with back in 2000, in the founding days of Genomic Health. The concept was about what he calls the combination of "Moore's Law, Metcalfe's Law, and the law of finite genomes."

Back then, he saw DNA sequencing tools were on track to get exponentially better, faster and cheaper. The tools would create a flood of DNA data, which isn't worth much in isolation, but which could be much more valuable when widely shared and compared. The opportunity would someday be within reach, because there are only so many genes and mutations to study that will be really useful for healthcare.

For years, Scott worked on it before concluding that the technology needed to get better. "It was much too early."

That's changed now, as instrument makers are racing to develop technology that can sequence entire human genomes for $1,000, in as little as one day. Genomic Health saw the opportunity, invested some in it for a while, but spun it out as the company has other priorities going with specific tests for breast, colon, and prostate cancer.

The market opportunity for something like InVitae could be in the "many billions," Scott says. Mendelian diseases are one place to start, but even bigger markets could emerge in scouring the genome for cancer. Cambridge, MA-based Foundation Medicine has gotten off to a fast start, and recently attracted an investment from Bill Gates for a genomic test that looks for abnormalities in 200 different cancer-related genes. While Foundation looks for so-called somatic mutations that arise in tumor samples later in life, InVitae envisions looking broadly at the genome for inherited variants that are thought to raise the risk of cancer, Scott says.

How big the various genomic diagnostic markets could be is still anybody's guess, but Genomic Health alone makes more than $200 million a year, largely off one specific test for breast cancer recurrence. The underlying sequencing technology continues to get faster and cheaper, making it possible for scientists to ask more and more questions that enrich the public databases that InVitae will rely on, and contribute to, as its business grows.

Price, of course, will be a huge factor in determining how widely the tests are adopted, and how well they will be embraced by insurers. InVitae's service will rise and fall at various points, as technology drives things down, and valuable new features drive things back up, Scott says. Competitors, both publicly declared and stealthy, will also play a role in determining just how high or low the prices will be.

Scott, during a short interview at the JP Morgan Healthcare Conference in San Francisco, seemed to relish all the uncertainty and variables heading his way in the new venture. "We're really just entering the world, in 2013, where these types of products are coming to market," he says.

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Life Technologies Said to Be in Takeover Talks- Bloomberg

This article smells like it was planted to chum the waters for a deal.

I think that LIFE is generally fairly valued by the markets, so they're going to have to get one of the corporate buyers (Roche, Danaher, etc) excited enough to overpay.(I don't see that happening in the case of very-disciplined Danaher, or most of the other companies named, but then again, I was shocked at what Merck KgA paid for Millipore.)

Also, as I've mentioned before, the decision of whether or not to put a company up for sale very often is solely a question of whether or not a CEO wants to move on. (This is especially true in banking M&A), so I guess Greg Lucier is ready to move on to his next challenge. I wish more Boards in that event would decide to turn the company over to a new CEO internally sourced rather than  undertaking a sale. 

Life Technologies Said to Be in Takeover Talks- Bloomberg

by Cristina Alesci,
January 18th 2013 11:01 PM

Life Technologies Corp. (LIFE), a maker of DNA-sequencing equipment and laboratory materials, is in discussions with private-equity firms and health-care companies about a potential sale of the company, according to people familiar with the process.

Blackstone Group LP (BX) and KKR & Co. (KKR) are among four private- equity firms weighing bids, said two people, who asked not to be named because the discussions are confidential. Health-care companies also have expressed interest in a takeover and potential suitors have until late January to submit offers, the people said. Life said yesterday it had hired Deutsche Bank AG and Moelis & Co. to assist in a strategic review of the company.

The Carlsbad, California-based company has a current market value of about $10.5 billion, after shares rose yesterday to their highest-ever price based on takeover speculation. Life may sell for about $13 billion, with a buyout fund writing an equity check of $4 billion to $5 billion for the deal, one of the people said.

Life's "valuation has been relatively depressed," Ross Muken, an analyst with ISI Group, said in a telephone interview. "They've had an ongoing battle in terms of messaging, positioning and capital deployment."

Life trades at about 15 times estimated earnings, compared with about 33 times for Illumina Inc. (ILMN), its competitor in DNA- sequencing machines.

Life's shares rose 11 percent to $60.79 at the close yesterday in New York, the biggest single-day gain in almost four years and the highest value since shares started trading publicly in February 1999.
The company's board retained Deutsche Bank and Moelis "to assist in its annual strategic review," Life said in a statement. "The board of directors has not decided on any specific course of action."
The company's statement implies Life has "potentially received an offer from an acquirer, is contemplating a LBO or is potentially in the process of shopping the company for a strategic buyer," William Quirk, an analyst with Piper Jaffray & Co., wrote in a research note. He cited Roche (ROG) Holding AG, Thermo Fisher Scientific Inc. and General Electric Co. (GE) as potential strategic buyers.
Gene-sequencing companies such as Life and San Diego-based Illumina are attractive takeover targets because their technology can be used to provide a blueprint of a person's DNA, information that may eventually be used to diagnose disease, identify the risks of certain conditions or better target medicines.
Roche, the world's biggest maker of cancer drugs, failed last year in a hostile bid for Illumina. Life is more diversified than Illumina, with "slow-growth research consumables" dominating its portfolio, said Quirk. For that reason, "we believe an acquirer interested in the faster- growing next-gen sequencing business has better options."

ISI Group's Muken put the possibility of a leveraged buyout at 10 percent, pegging the price at $55 to $65 a share. He said a sale to a strategic buyer, such as a large pharmaceutical firm or equipment company like Danaher Corp. (DHR), may have a 40 percent chance of occurring, at $60 to $70 a share.

Roche backed away from its $6.7 billion bid for Illumina last year after investors asked for a higher offer. Roche doesn't comment on rumors or speculation, Daniel Grotzky, a spokesman for the Basel, Switzerland-based company, said by e- mail in response to a question about Life.
Seth Martin, a spokesman for GE, said the company doesn't comment on rumors or speculation. Ron O'Brien, for Thermo Fisher, declined to comment. Matt McGrew, chief of investor relations for Danaher, couldn't be reached for comment.

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