Incentives at Work in Medical Regulation
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.
As much as we might not want to hear it, the FDA isn't going anywhere, anytime soon. That being said, hopefully they follow Japan's lead on liberalizing regenerative medicine. Hopefully the 21st century cures act actually does something too. The FDA said they saw value in a drug that prevents or delays diseases, and increases survival... including aging in regards to the metformin trial presentation... So hopefully the wheels will get put in motion sooner than later. Or do you think it's possible that maybe the FDA will take the stance of the metformin proponents and don't want anything to be released that will extend life, just compression of morbidity?
Reason, even if the FDA does allow aging treatments to be developed and sold, do you think all the companies going to start pouring money into it? It's an honest question, because you would think more companies would be chirping about it now... Or at least doing more research on it... It's not like they aren't aware of the potential profits they could make.
As far as medical tourism goes, can one of the big companies (let's say Pfizer for example) even set up shop in a country with lax enforcement and regulation to sell things en masse to a global population? Surely there has to be something to discourage or prevent that?
The two and a half billion dollar figure is from people calculating the "time value of money" (if the investors had invested in something else, they would have made more!) as an actual expense. That's not valid.
Note the complete lack of examples of "Type II" errors in practice. And, as someone in the comments section pointed out, it's easy to breach the 27.9% threshold by pure random chance. If you need a weaker statistical threshold to justify putting a drug on the market, it's a good bet that the drug doesn't actually work. The authors of this paper do not even recognize the existence of people who will intentionally submit ineffective or incompletely tested drugs at a much greater rate (and they will). So it's worthless. Fails even the most basic logic. Attempting to use abstract math to human behavior without calculating the humans always ends in hilarious failure.
We already have an unregulated medical industry; it's called the supplements industry, and it's unregulated courtesy of Orrin Hatch (R-UT). And it is loaded, top to bottom, with quacks.
Japan's deregulation may or may not bring functional therapies to market faster, but it's a guarantee that the quackery will begin more or less immediately unless all the Japanese are saints. When your products are tested for safety but not efficacy before you can sell them, you can offer totally worthless cells, market them as "stem cells", and run away with the money. Caveat emptor, right?
@Slicer
Supplement-makers don't claim their product will fundamentally alter your cells at the genetic level, or that it will do anything really: they make subjective and vague claims like "proven to boost your energy!" or "boost your brain power!" They also add vitamins and minerals to their product, which probably accounts for the perceived improvements in energy and mood reported by consumers, as it is typical for people to have some degree of nutritional deficiency. They know what they're selling is worthless, but they don't make any claims that can be scrutinized.
If someone claims they can actually alter your DNA, and they state specifically the cells they are targeting and what outcome they hope for, they better deliver. Why would someone spend a fortune to open a scam genetic-clinic, just to rake in a profit for less than a year, only to have it all taken away when their customers realize they've been had and file a class action lawsuit?
Eric wrote: "They know what they're selling is worthless, but they don't make any claims that can be scrutinized."
They do, broadly and without any punishment:
https://en.wikipedia.org/wiki/Actimel
ah libertarians, stuck in a bygone age, trying to apply simplistic notions on a complex society. Society is just to complex for the chaos of the market it doesn't work, this has been proven a million times over.
The state did not arise as some sinister element that is simply in it for itself, It arose separate from the economic system to iron out the contradictions that exists within it, to reduce class tensions, reduce chaos.
So lets take the 'infamous' FDA. Do you honestly think with, all the low bearing fruit picked, that these drug companies would honestly choose to regulate themselves? History has proven the opposite many many times. So our libertarian friends chirp in 'ah thats the beauty of the market some leaner smaller company could swoop in and produce a better product'.... Which is what we see in less regulated countries don't we? No because as I mentioned once any market reaches certain complexities entry into it is expensive and requires large resources. Ones that only the state or very large companies have. Competition reaches it's limits you see. This is not some evil conspiracy it's just the limits of capitalism. If we didn't have these huge great companies controlling thing, do you think that capitalism could produce what it does? Could you imagine the chaos of millions of small little organisations trying to produce on the scale and complexity that modern society does? Of course not. The state is there to maintain the status quo, serve the ruling classes, so it makes concessions to the rest of us if and when it needs to, to protect capitalism.
Not that I'm arguing for the status quo, quite the opposite. There is so many problems with society today, society has reached a point where the mechanisms within capitalism to control itself can't do that anymore and as the only incentive once competition doesn't work anymore is profit that's all corporations chase and progress in society suffers, tragically in this case... the only way we can move society forward is to rid ourselves of a system based of private property and into a democratic society based on the abundance that partly already exists with current technology and even more so with emerging technologies like AI.
"Ah libertarians, stuck in a bygone age, trying to apply simplistic notions on a complex society. Society is just to complex for the chaos of the market it doesn't work, this has been proven a million times over."
Yes, it has been proven a million times, not.
Society is too complex so we need as much government intervention as possible? There are a million examples where this has worked out wonderfully. Perfect examples are National Socialism, Socialism and Communism. You're a great comedian, Karl. Why don't you move to North Korea or Cuba? No eeeeeevil captialism there.
The problem with all this discussions is always the same. There are libertarians and there are socialists. The only fair solution to this problem is that libertarians get the chance to try out there theories and socialists create their own utopia. People should then be allowed to decide in which world they want to live in. Uh, but another small problems comes to mind. When there was this wall in Germany, which side shot their people in the back because they tried to flee into a more capitalist society? And why did nobody flee into socialist utopia? Who knows the answer? Karl?
"They do, broadly and without any punishment:
https://en.wikipedia.org/wiki/Actimel"
Here is the scientific evidence from your link. Did you read it? All wrong? My advice for you, don't buy it if you don't like it. Problem solved.
"The main claimed benefits are referenced to several scientific studies listed by the manufacturer on various of its websites.[3] The list of scientific papers differs on each country's website.[4][5][6]
Claimed benefits range from reducing the incidence of diarrhea[7][8][9] and rhinitis reduction for young children,[10] to improvement of the immune function in adults[11] and seniors [12][13] and reduction of duration of winter infections for elderly.[14]
Some clinical studies suggest potential effects for children such as eradication of H. pylori when combined with antibiotics[15] or restoration of activity of fecal enzymes in children after surgery.[16]
A recent study published by the British Medical Journal[17] suggests that the product could help avoid antibiotic–associated diarrhoea and limit Clostridium difficile infections in elderly patients."
Here we go, Mr. I Want to Sell Crap to Idiots, So I Barf Neocon Screeds is at it again with the cherry-picked studies provided by the company. Fortunately, he's five years too late, as there actually was some punishment- Danone's been successfully sued in the United States because Actimel doesn't work and they claimed that it did without using the proper weasel words. (Folks, if you ever see "Not intended to diagnose, treat, cure, or prevent any disease" on anything, put it back on the shelf. If you see it on a website, find another website.)
'Society is too complex so we need as much government intervention as possible? There are a million examples where this has worked out wonderfully. Perfect examples are National Socialism, Socialism and Communism. You're a great comedian, Karl. Why don't you move to North Korea or Cuba? No eeeeeevil captialism there.'
'national socialism' wasn't socialism, such a silly lie repeated and repeated. Socialism was a buzz word at the time, Hitler used it to persade workers over to his cause. Now lets look at what actually happened shall we? Soiclaists, communists and trade unionists were the first ones sent to the camps. Here's an article by a libertarian (might be more persuasive then me?) totally destroying the argument: http://blogs.telegraph.co.uk/news/timstanley/100261121/hitler-wasnt-a-socialist-stop-saying-he-was/
I've been to Cuba, was a nice holiday. Fairing a damn site better then it's neighbouring islands who were in a similar economic situation when the cuban revolution happened. Considering the econmoic war America started with Cuba it shows you exctaly how much more efficient central planning is. Always the funny thing when people compare USA to Cuba, a rediclious comparison, Cuba is tiny and isolated, America is large and international. Like I said hows capitalist Hati doing... That's a fairer comparison, Hati and Cuba were in a very similar economic place before the cuban revolution.
'The problem with all this discussions is always the same. There are libertarians and there are socialists. The only fair solution to this problem is that libertarians get the chance to try out there theories and socialists create their own utopia. People should then be allowed to decide in which world they want to live in. '
Couldn't agree more, course as has happened time after time Capitalism and their goverments do everything they can to prevent any fair go at this. Chile (america funds coup of demcratically elected socialist government resulting in thounsands and thounsands of deaths), Russia (funding of the white terror by capitalist countries, even sending troops in to help the white arm and destroy farms and factories), the list goes on...
'Uh, but another small problems comes to mind. When there was this wall in Germany, which side shot their people in the back because they tried to flee into a more capitalist society? And why did nobody flee into socialist utopia? Who knows the answer? Karl?'
The soviet union is a good example of the oppsite of what i mentioned earlier. Russia was a backwards, pre capitalist country at the time of the revolution. So in that sense it was like applying complex ideas to a simplier society, rather then now we have a complex society with simplistic econmic chaos! So of course it failed, no Marxist thought it could become a democratic socialist society in it's isolated position, socialism must be international else it does indeed descend into the Stalinism, which I'm sure not going to defend...
At the end of the day the defence of capitalism grows weaker by the day. The world is in serious serious economic trouble, this isn't new, growth in advanced capitalist countries have been low for decades and decades now. Even China is crashing and burning. All the traditional methods of getting out of a recession have now be exhausted and it looks like we might be heading for another recession. What else can be done? So we either accept a massive roll back in our standards of living when we have the technology to live nice comfortable lives or we, you know create a democratic equal society...
Oh boy, here we go with vampiric capitalism's evil(er?) twin, starry-eyed communism. I can't believe I'm stepping into this.
If you think Haiti's problems have to deal with capitalism and not something more fundamental, then you're deluding yourself. Haitians ruined Haiti, not economic anything. And trying to make a "democratic equal society" leads to the "two wolves and a sheep" problems with democracy, and here it's that the means of production wind up in the hands of people who have no idea what to do with them. Look what happened to Zimbabwe. "We ran all those rich white farmers out of town- the land is ours now! Hey, anyone know how to use a tractor?" Or Soviet central planning, which was so rife with corruption and stupidity it's a wonder the Soviets got anything made at all. Anyone want some Lysenkoism?
"Socialism must be international"? If it doesn't work in a country the size of Russia then it's not going to work. You can blame other world powers all you want, but that only proves that socialism wasn't able to stand against capitalism.
By the way, continuous economic growth isn't the best metric. You can't grow forever, not in reality. At some point, you need to be able to hold steady, or even shrink, without causing widespread economic panic.
So let's recap.
Unfettered libertarian capitalism doesn't work. It leads to people taking advantage of the lower classes through unequal economic arrangements and easily masked fraud (high-frequency trading, anyone?) Maybe if there were no lower classes and no stupid people willing to buy worthless garbage, it might work. Try again when we're all transhuman.
Central planning doesn't work. The things that get "planned" are at the whims of the bureaucrats, and this system offers no opportunity for improvements or advancements. You can manage public services this way (i.e. health care if you have the right people committed to human health) but you can't manage anything resembling a market like this. Maybe if you had a super-advanced Friendly AI (and you better make damn sure it's Friendly!) you could pull this off, but it is not appropriate for entirely human societies. Try again when we're all transhuman.
The only thing that works for humans is private ownership of the means of production coupled with a robust regulatory structure and a functional welfare state (particularly as jobs are automated). Capitalists ought to be able to get rich, but they need to only be able to get rich by helping people and providing useful goods and services, not ripping people off.
Waverunner: "Claimed" is not the same as "demonstrated". The European Food Security Agency has accepted none of their health claims related to Actimel and Lactobacillus Casei. All these studies have either poor methodology, small samples or are only done in vitro, not in vivo. After some years being unable to prove their claims, they switched to a different strategy, claiming that it has vitamin B and thus it's good for the defences, but this is explained using a very small tipeface and still "L. Casei" is written in a huge font in their product and ads, and they allways suggests in their ads that L. Casei is good for the defences (but not saying it explicitly). Furthermore, vitamin B defficiency is very rare, you don't to supplement it, and, for example, a banana has 3 times more vitamin B than Actimel and is 3 times cheaper. But still 100% of customers buy it because "it has L. Casei and thus is good for their defences". 25% of benefits of Danone are from Actimel.
"'national socialism' wasn't socialism, such a silly lie repeated and repeated."
If you understand socialism and communism as means to suppress the individual, then it was. The individual was nothing in Nazi Germany and if you said something against the collective you found yourself in a concentration camp very soon. Property rights were only available for certain parts of the population. I found this very nice comment on quora:
https://www.quora.com/To-what-extent-was-National-Socialism-socialist
National Socialism versus Soviet Communism
Both Nazi Germany and the Soviet Union were examples of Totalitarian regimes in which all activity is controlled and managed by the state for the purposes of the state. Everyone was supposed to obey and sacrifice for the good of the country in both cases. Both regimes were willing to kill off any of their own citizens that did not fit into the plan. The main difference was in Nazi Germany profits were shared with the business owners and in the Soviet Union the businesses were owned by the state so the profits went to the party elite exclusively.
"I've been to Cuba, was a nice holiday."
Why did so many people flee from Cuba and why do so little people flee to Cuba? Haiti is anything but a capitalist country. If you want examples for small capitalist countries please look at Switzerland, Singapore and Hongkong.
What we can both agree on is that people should decide themselves, in what system they want to live in.
Antonio: I agree that scientific evidence should be a requirement before making claims. The question is how this scientific evidence should look like.
"If you understand socialism and communism as means to suppress the individual, then it was"
Oh sorry I thought we were basing it on facts not your opinion, my mistake... Lets dispense with any real references and rely on a Q&A website...
"If you want examples for small capitalist countries please look at Switzerland, Singapore and Hongkong."
Ha ha Haiti isn't a market economy!? Hmmm ok, can anyone say cherry picking? Im not sure the examples you gave are very good either to be honest. We live in a global world, and no where's really looking to good... Almost every country in the world fundamentally is a market economy of some sort. Many authoritarian, so please stop trying to make out the market has anything to do with freedom, totalitarian regimes exists in many capitalist countries.
"By the way, continuous economic growth isn't the best metric. You can't grow forever, not in reality. At some point, you need to be able to hold steady, or even shrink, without causing widespread economic panic."
Well no you can't keep growing, kind of my point. But you're wrong in one respect, you do need to keep growing if Capitalism is to survive. Wealth is derived from the amount of labour taken to create something. A worker gets paid for a part of their time and the rest is profit for the Capitalist. This creates a contradiction you see because the Capitalist needs to sell their goods, but the masses aren't paid their full value so there's no money to buy all those goods, so eventually the capitalist over produces, i.e. they are producing all these goods and no ones buying. So the Capitalist lays off some workers to compensate for the drop in profits, so even less people have money and it spirals from there, i.e. a recession, which is caused by over production, kind of ironic isn't it? The economy suffers because we have been able to produce to much?
Anyway the point being you need growth to keep these spinning plates going. The growth, at least for a time gives the capitalist some breathing room to pay workers a bit more while still making a profit, no growth big problems...
"The only thing that works for humans is private ownership of the means of production coupled with a robust regulatory structure and a functional welfare state (particularly as jobs are automated). Capitalists ought to be able to get rich, but they need to only be able to get rich by helping people and providing useful goods and services, not ripping people off."
The funny thing is while trying to be 'sensible' it is in fact you that is utopian. What you suggest does not work, look at the last 50 years. Capitalism can't make the concessions you suggest. Money doesn't just grow on trees you know... It comes from producing things, making profit, but there is little profit to be made anymore as there is little areas with growth. It's utopian to think Capitalism can be tweaked and magically it works, it doesn't, just look at the world finical markets!
"Oh sorry I thought we were basing it on facts not your opinion, my mistake... Lets dispense with any real references and rely on a Q&A website..."
When you use the word "facts" it puts a smile on my face because even a small child uses more facts than you do. Wanna have an example?
"Ha ha Haiti isn't a market economy!? Hmmm ok, can anyone say cherry picking?"
Do you know the economic freedom score of Haiti? It ranks on 151, just before Nepal and Belarus. The problem with everything you say is that nobody knows if you just made things up or you are living so deep in your dreamworld that you actually believe what you say.
"Almost every country in the world fundamentally is a market economy of some sort."
Yeah of some sort, like whales and humans are mammals.
"Well no you can't keep growing, kind of my point. But you're wrong in one respect, you do need to keep growing if Capitalism is to survive."
There is not one system which is more efficient at delivering goods and fullfilling the needs and wishes of the people than capitalism. People starve to death in North Korea, not in Hongkong. Even a poor person lives better today than any king lived a few hundred years ago.
"The funny thing is while trying to be 'sensible' it is in fact you that is utopian. What you suggest does not work, look at the last 50 years. Capitalism can't make the concessions you suggest. Money doesn't just grow on trees you know..."
The only funny thing is that you call other people utopian. Yes, lets look at the last 50 years. How did communism do? How did socialism do? How did national socialism do? How does Switzerland do, how does Singapore do, how does New Zealand do?
When you use the word "facts" it puts a smile on my face because even a small child uses more facts than you do. Wanna have an example?
I pointed you to a fairly good article quite comprehensively destroying your 'hitler is a socialist' nonsense, it's pretty well referenced... here it is again: http://blogs.telegraph.co.uk/news/timstanley/100261121/hitler-wasnt-a-socialist-stop-saying-he-was/
Do you know the economic freedom score of Haiti? It ranks on 151, just before Nepal and Belarus. The problem with everything you say is that nobody knows if you just made things up or you are living so deep in your dreamworld that you actually believe what you say.
Ah yes but why is it the way it is? That's the question! Again you're cherry picking. Lets take your beloved hong kong, or Switzerland there economic success is hardly purely there own doing, that's a ridiculous statement. There renter states, based on financial capital. You can't talk about about economic freedoms when the entire world economy really hinges on China, a bastion of freedom ah!? Capitalism needs a very large layer of low paid workers to you know do the work. Wages in Switzerland is really high, how would a sweat shop work there exactly? Come on... The financial sector make nothing. There middle men, they need other industries to cream off so without other countries to exploit they would be nothing. So to talk about economic freedoms of one nation over another in globalisation doesn't mean anything.
There is not one system which is more efficient at delivering goods and fullfilling the needs and wishes of the people than capitalism. People starve to death in North Korea, not in Hongkong. Even a poor person lives better today than any king lived a few hundred years ago.
But how much is that because of monopolisation and concentration to the free market competition? We live in an advanced capitalist world, financial capital, imperialism whatever label you wish to give it. Really there is so little competition in the world, because well competition is chaotic, and when we are talking about complex structures quite quite wasteful. The irony is that corporations are kind of doing what I'm talking about you know buying up the competition, centralising their resources, I'm just suggesting we take that out of the few and into the many and then sensibly deciding where those resources go, is it really that crazy? We already live in a mixed economy...
The only funny thing is that you call other people utopian. Yes, lets look at the last 50 years. How did communism do? How did socialism do? How did national socialism do? How does Switzerland do, how does Singapore do, how does New Zealand do?
As I said not to well because communism didn't take root in an advanced capitalist country. Although it's quite astonishing how much Russia did advance in those first thirty years because of central planning, going from a backward country to a super power, something that took america a hundred or so years. And again I'm not defending the human rights abuses, but where in the world did capitalism come into the world peacefully? The reformation, the birth of capitalism was freaking brutal brutal stuff.
I don't know man this is getting all a bit tit for tat, I just think you need to get past labels and just kind of look at the world from a new angel. This comment section really isn't enough to really explain dialectical materialism to you (or economics). But please try to understand you can't just look at indivdual countries, that ship sailed a long time ago, and you can't compare failed workers movements to well anything. History does not repeat itself, though perhas it moves in ovals. The point being I'm not harking back to any sort of past. I don't know what a future society would or should look like. Merely that it should be one that utliises the planning and oraginsation computers gives it and to be one that is democratic. With everything humanity has achieved I really don't think it would be to hard would it...?