Fight Aging!

The situation with respect to the effects of medical regulation on scientific and technological progress in the US is horrible and getting worse. Regulators at the FDA follow their incentives: they are only castigated in public when an approved treatment causes issues, but never suffer consequences from increasing the time and cost of development, nor from rejecting treatments outright, nor from the suppression of medical progress by making many viable approaches too costly for profitable development. The outcome is - of course - a continued increase in cost, a continued flow of demands for an extra test, for more data, for more rigorous certainty in an uncertain field, and so ever more money is required to commercialize ever fewer new treatments. To develop a drug a decade ago took a billion dollars all told, accounting for inflation since then, and is now more like two and a half billion. There is no benefit here for all that extra funding - or at least not unless you happen to be a bureaucrat who likes his or her job.

Sooner or later other incentives are going to come into play. Medical tourism is cheap. Entrepreneurs can run viable, professional medical businesses outside the US based on research carried out inside the US, and charge far less money for better and more recent types of treatment. The more that FDA staff protect their own careers at the expensive of commercial development of new therapies, the more likely it becomes that a solid, organized pipeline will emerge to carry the results from US labs to clinics outside the US, rather than the much more ad-hoc process that takes place at the moment. Simple economics will make the FDA irrelevant at some point absent significant reformation, but change is slow in coming, despite the situation for stem cell therapies in which the new and the best treatments have so far been available outside the US for years prior to final capitulation on the part of the regulators.

There are other important incentives here. Regulators and politicians are people too, albeit misguided examples of such. They suffer the same illnesses and age-related degeneration as the rest of us, and so there is only so much that any rational individual will do in order to block progress towards effective medicines for these conditions. Today I'll point out two economics posts from recent months, the first a look at the harms done by the FDA, and the second a note that Japanese regulators are backing off in the face of an aging population and the prospect of new therapies for age-related disease. I see the latter as a modestly encouraging sign for the decades ahead - that at least some bureaucrats are willing to do something other than watch the world burn.

Is the FDA Too Conservative or Too Aggressive?

I have long argued that the FDA has an incentive to delay the introduction of new drugs because approving a bad drug (Type I error) has more severe consequences for the FDA than does failing to approve a good drug (Type II error). In the former case at least some victims are identifiable and the New York Times writes stories about them and how they died because the FDA failed. In the latter case, when the FDA fails to approve a good drug, people die but the bodies are buried in an invisible graveyard.

In an excellent new paper researchers use a Bayesian analysis to model the optimal tradeoff in clinical trials between sample size, Type I and Type II error. Failing to approve a good drug is more costly, for example, the more severe the disease. Thus, for a very serious disease, we might be willing to accept a greater Type I error in return for a lower Type II error. The number of people with the disease also matters. Holding severity constant, for example, the more people with the disease the more you want to increase sample size to reduce Type I error. All of these variables interact. The authors use the U.S. Burden of Disease Study to find the number of deaths and the disability severity caused by each major disease. Using this data they estimate the costs of failing to approve a good drug. Similarly, using data on the costs of adverse medical treatment they estimate the cost of approving a bad drug. Putting all this together the authors find that the FDA is often dramatically too conservative. FDA regulations may appear to be creating safe and effective drugs but they are also creating a deadly caution.

Japan Liberalizes Regenerative Medicine

Japan is liberalizing its approval process for regenerative medicine. Regenerative medicines in Japan can now get conditional marketing approval based on results from mid-stage, or Phase II, human trials that demonstrate safety and probable efficacy. Once lagging behind the United States and the European Union on approval times, there is now an approximately three-year trajectory for approvals. That compares with seven to 10 years before.

Japan is liberalizing because with their aging population treatments for diseases like Alzheimer's and Parkinson's disease are in high demand. Under the new system, a firm with a gene or regenerative therapy (e.g. stem cells) can get conditional approval with a small trial. Conditional approval means that the firm will be able to sell its procedure while continuing to gather data on efficacy for a period of up to seven years. At the end of the seven year period, the firm must either apply for final marketing approval or withdraw the product. The system is thus similar to what Bart Madden proposed for pharmaceuticals in Free to Choose Medicine.

Due to its size and lack of price controls, the US pharmaceutical market is the most lucrative pharmaceutical market in the world. Unfortunately, this also means that the US FDA has an outsize influence on total world investment. The Japanese market is large enough, however, that a liberalized approval process if combined with a liberalized payment model could increase total world R&D. Breakthroughs made in Japan will be available for the entire world so we should all applaud this important liberalization.

I remain of the opinion that all these regulatory bodies would be better gone entirely, not just cutting back to inflict half of the needless cost and suppression of development that is currently the case. In the US that much of a reduction wouldn't even turn the clock back a decade, and the FDA was plenty onerous back then. In a better world, entrepreneurs and a free market would give rise to a competing set of review and certification organizations, just as it has for any number of other fields, and just as already exist for medical services in numerous areas. That is all that is needed to set standards, review effectiveness, and identify fraud, and it can be achieved at a tiny fraction of the cost of the present much worse regulatory edifice.