End the FDA Drug Monopoly: Let Patients Choose Their Medicines
by Doug Bandow, cato.orgJune 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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