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Trump and Coronavirus

26 Tuesday May 2020

Posted by in Pandemic, Public Health, Risk Management, Stimulus, Trump Administration

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It’s a bit early to fully evaluate President Trump’s performance in dealing with the coronavirus pandemic, but there are a number of criteria on which I might assign marks. I’ll address some of those below, but in so doing I’m reminded of Jerry Garcia’s quip that he was “shopping around for something no one will like.” That might be how this goes. Of course, many of the sub-topics are worthy of lengthier treatment. The focus here is on the pandemic and not more general aspects of his performance in office, though there is some unavoidable overlap.

General “Readiness”

Many have criticized the Trump Administration for not being “ready” for a pandemic. I assign no grade on that basis because absolutely no one was ready, at least not in the West, so there is no sound premise for judgement. I also view the very general charge that Trump did not provide “leadership” as code for either “I don’t like him”, or “he refused to impose more authoritarian measures”, like a full-scale nationwide lockdown. Such is the over-prescriptive instinct of the Left.

Equally misleading is the allegation that Trump had “disbanded” the White House pandemic response team, and I have addressed that here. First, while the NSC would play a coordinating role, pandemic response is supposed to be the CDC’s job, when it isn’t too busy with diseases of social injustice to get it done. Second, it was John Bolton who executed a reorganization at the NSC. There were two high profile departures from the team in question at the time, and one one was a resignation. Most of the team’s staff remained with the NSC with the same duties as before the reirganization.

Finally, there was the matter of a distracting impeachment on false charges. This effort lasted through the first three years of Trump’s administration, finally culminating in January 2020. Perhaps the Administration would have had more time to focus on what was happening in China without the histrionics from the opposition party. So whatever else I might say below, these factors weigh toward leniency in my appraisal of Trump’s handing of the virus.

Messaging: C

As usual, Trump’s messaging during the pandemic was often boorish and inarticulate. His appearances at coronavirus briefings were no exception, often cringeworthy and sometimes featuring misinterpretations of what his team of experts was saying. He was inconsistent in signaling optimism and pessimism, as were many others such as New York Governor Andrew Cuomo and New York City Mayor Bill De Blasio. It shifted from “the virus is about like the flu” in February to a more sober assessment by mid-March. This was, however, quite consistent with the messaging from Dr. Anthony Fauci over the same time frame, as well as the World Health Organization (WHO). Again, no one really knew what to expect, so it’s understandable. A great deal of that can be ascribed to “the fog of war”.

Delegation and Deference: B

Trump cannot be accused of ignoring expert advice through the episode. He was obviously on-board with Fauci, Dr. Deborah Birx, Dr. Robert Redfield, and other health care advisors on the “15 Days to Slow the Spread” guidelines issued on March 16. His messaging wavered during those 15 days, expressing a desire to fully reopen the nation by Easter, which Vice President Michael Pence later described as “aspirational”. Before the end of March, however, Trump went along with a 30-day extension of the guidelines. Finally, by mid-April, the White House released guidelines for “Opening Up America Again“, which was a collaboration between Trump’s health care experts and the economic team. Trump agreed that the timeline for reopening should be governed by “the data”. There is no question, however, that Trump was chomping at the bit for reopening at several stages of this process. I see value in that positioning, as it conveys an intent to reopen asap and that people should have confidence in progress toward that goal.  

International Travel Bans: A

If anyone wonders why the world was so thoroughly blindsided by the coronavirus, look no further than China’s failure to deliver a proper warning as 2019 drew to a close. Wuhan, China was ground zero; the virus spread to the rest of the world with travelers out of Wuhan and other Chinese cities. The White House announced severe restrictions on flights from China on January 31, including a two-week quarantine for returning U.S. citizens. In retrospect, it wasn’t a minute too soon, yet for that precaution, Trump was attacked as a racist by the Left. In early February, WHO actually said travel bans were unnecessary, among other missteps. Other bans were instituted on entry from Iran and Brazil, as well as entry from Europe in early March, as countries around the globe closed their borders. Trump’s actions on incoming travelers were prescient, so I’ll score this one for Trump. Some of these travel restrictions can and should be eased now, and certainly that is expected in coming months, so we’ll see how well that process is managed.

Deference to States: A-

As a federalist, I was pleased that Trump and his team left most of the specifics on closures and bans on public gatherings up to state and local governments. That allowed more targeted mitigation efforts as dictated by local conditions and, to some extent, public opinion. This is a classic case of “laboratory federalism” whereby the most effective policies can be identified, though as we’ve seen, there’s no guarantee less successful states will emulate them. I grade Trump well on this one.

On reopening, too, Trump has been a consistent advocate of allowing flexility where local conditions permit, though he wrongly claimed he had “total authority” over ending social distancing rules. It’s hard to square that remark with his general stand on the issue of autonomy except as a tactic to strong-arm certain governors on other points.   

CDC/FDA Snafus: D

I applaud the Administration for its emphasis on the salutary effects of deregulation, but Trump went along with some major pieces of “expert advice” that were not only poor from regulatory perspective, but an affront to federalism. One was a directive issued by the CDC to delay “all elective surgeries, non-essential medical, surgical, and dental procedures during the 2019 Novel Coronavirus (COVID-19) outbreak“. (See my post “Suspending Medical Care in the Name of Public Health“.)

This is exactly the kind of “one size fits all” regulatory policy that has proven so costly, sacrificing not just economic activity but lives and care for the sick, creating avoidable illnesses and complications. The idea was to assure that adequate health care resources were available to treat an onslaught of coronavirus patients, but that was unneeded in most jurisdictions. And while the contagion was in it’s early “exponential” phase at the time, a more nuanced approach could have been adopted to allow different geographic areas and facilities more discretion, especially for different kinds of patients, or perhaps something less than a complete suspension of care. In any case, the extensions into May were excessive. I must grade Trump poorly for allowing this to happen, despite what must have been extreme pressure to follow “expert advice” on the point and the others discussed earlier.

That’s not the only point on which I blame Trump for caving to the CDC. In a case of massive regulatory failure, the CDC and FDA put the U.S. well over a month behind on testing when the first signs of the virus appeared here. Not only did they prohibit private labs and universities from getting testing underway, insisting on exclusive use of the CDC’s own tests, they also distributed faulty tests in early February that took over a month to replace. The FDA also enforced barriers to imported N95-type masks during the pandemic. Trump tends to have a visceral understanding of the calcifying dangers of regulation, but he let the so-called “experts” call the shots here. Big mistake, and Trump shares the blame with these agencies.  

Health Resources: B-

The question of disaster preparedness is often characterized as a federal obligation, but the federal government’s role is not to replace state and local efforts, but to backstop them with a form of risk sharing across all 50 states. The obligation to have sufficient medical resources on-hand for a pandemic falls on hospitals, state and local governments, and certain federal agencies like FEMA. In terms of readiness for this pandemic, there were successes and failures at all of these levels.

The first question was having adequate hospital space in terms of the beds and ICU beds to handle a potential surge in coronavirus patients. Again, the CDC directive on elective procedures and non-essential medical care, along with general fear of the virus, helped to empty hospitals across the country. That proved to be unnecessary and should have been suspended in most regions by mid-April. There were a few “hot-spots”, New York City being the most noteworthy. Trump arranged to get Navy hospital ships deployed quickly to NYC and LA. Federal funds were also provided to create a temporary hospital at the Javits Center in NYC and a field hospital in Brooklyn. All of these facilities went virtually unused. Nevertheless, for this I give Trump some credit for effectively responding to requests from state and local leaders.

Another important dimension of preparedness has to do with the availability of personal protective equipment (PPE) and equipment such as respirators and ventilators. On this I give the Administration a harsher evaluation, but many hospitals and states were also culpable for failing to maintain adequate inventories. Even more culpable is China, which did its best to cache supplies before the virus became a real crisis in the West. In an incredible goof-up intended as charity in January, the State Department sent many tons of donated ventilators and PPE to China, leaving U.S. health care workers without adequate protection (Canada did too). On the other hand, Trump arranged to get resources mobilized to produce PPE and ventilators quickly, but on balance, this one gets Trump’s grade knocked down.

Managing the emergency distribution of PPE and ventilators to states did not go as smoothly as might have been hoped. The shortage itself left FEMA with the unenviable task of allocating quantities that could never satisfy all demands. A few states were thought to have especially acute needs, but there was also an obligation to hold stockpiles against potential requests from other states. In fact, a situation of this kind creates an incentive for states to overstate their real needs, and there are indications that such was the case. Trump sparred with a few governors over these allocations. There is certainly blame to be shared, but I won’t grade Trump down for this.

Vaccines and Treatments: C+

The push to develop vaccines might not achieve success soon, if ever, but a huge effort is underway. Trump gets some of the credit for that, as well as the investment in capacity now to produce future vaccine candidates in large quantities. As for treatments, he was very excited about the promise of hydroxychloraquine, going so far as to take it himself with zinc, a combination for which no fully randomized trial results have been reported (the recent study appearing in the Lancet on HCQ taken by itself has been called into question). Trump also committed an unfortunate gaffe when the DHS announced the results of a study showing that sunlight kills coronavirus in a matter of minutes, as do bleach and other disinfectants. Trump mused that perhaps sunlight or some form of disinfectant could be used as a treatment for coronavirus patients. He might have been thinking about an old and controversial practice whereby blood is exposed to UV light and then returned to the body. Later, he said he used the term “disinfectant” sarcastically, but he probably meant to say “euphemistically” …. I’m not sure he knows the difference. In any case, his habit of speculating on such matters is often unhelpful, and he loses points for that.

Fiscal Policy: B

The several phases of the economic stimulus program were a collaboration between the Trump Administration and Congress. A reasonably good summary appears here. The major parts were the $2.3 trillion CARES Act in late March and a nearly $500 billion supplemental package in late April. These packages were unprecedented in size. Major provisions were direct cash payments and the Paycheck Protection Program (PPP), which provides loans and grants to small businesses. The execution of both was a bit clunky, especially PPP, which placed a burden on private banks to extend the loans but was sketchy in terms of qualifications. The extension of unemployment compensation left some workers with more benefits than they earned in their former jobs, which could be an impediment to reopening. There were a number of other reasonable measures in these packages and the two smaller bills that preceded them in March. A number of these measures were well-targeted and inventive, such as waiving early withdrawal penalties from IRA and 401(k) balances. The Trump Administration deserves credit for helping to shape these efforts as well as others taken independently by the executive branch. 

Trump’s proposal to suspend payroll taxes did not fly, at least not yet. The idea is to reduce the cost of hiring and increase the return to work, if only temporarily. This is not a particularly appealing idea because so much of the benefits would flow to those who haven’t lost their jobs. It could be improved if targeted at new hires and rehires, however.

Trump’s proposal to grant liability waivers to reopened private businesses is extremely contentious, but one I support. Lockdowns are being eased under the weight of often heavy public and private regulation of conduct. As John Cochrane says in “Get Ready for the Careful Economy“: 

“One worry on regulation is that it will provide a recipe for a wave of lawsuits. That may have been a reason the Administration tried to hold back CDC guidance. A long, expensive, and impractical list of things you must do to reopen is catnip when someone gets sick and wants to blame a business. Show us the records that you wiped down the bathrooms every half hour. A legal system that can sue over talcum powder is not above this.”

Indeed, potential liability might represent a staggering cost to many businesses, one that might not be insurable. Accusations of negligence, true or false, can carry significant legal costs. Customers and employees, not just businesses, must accept some of the burden of risks of doing business. I give Trump good marks for this one, but we’ll see if it goes anywhere.

Some of the proposals for new stimulus legislation from democrats are much worse, including diversity initiatives, massive subsidies for “green” technologies, and bailouts for state and local government for unfunded pension liabilities. None of these has anything to do with the virus. The burden of pension shortfalls in some states should not fall on taxpayers nationwide, but on the states that incurred them. The Trump Administration and congressional Republicans should continue resisting these opportunistic proposals.

The Grade

Without assigning weights to the sub-topics covered above, I’d put the overall grade for Trump and his Administration’s handling of matters during the pandemic at about a B-, thus far. When it comes to politics, it’s often unfair to credit or blame one side for the promulgation of an overall set of policies. Nevertheless, I think it’s fair to say that Trump, could have done much better and could have done much worse. We will learn more with the passage of time, the continued evolution of the virus, the development of treatments or vaccines, and the course of the economy.

 

 

 

 

 

 

 

Coronavirus Controversies

11 Saturday Apr 2020

Posted by in Health Care, Leftism, Pandemic

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The coronavirus and the tragedy it has wrought has prompted so many provocative discussions that it’s hard to pick just one of those topics for scarce blogging time. So I’ll try to cover two here: first, the question of whether coronavirus deaths are being miscounted; second, the politically-motivated controversy over the use of hydroxychloraquin to treat severe cases of Covid-19.

Counting Deaths

I’ve been suspicious that Covid deaths are being over-counted, but I’m no longer as sure of that. Of course, there are reasons to doubt the accuracy of the death counts. For example, there is a strong possibility that some Covid deaths are simply not being counted due to lack of diagnoses. But there are widespread suspicions that too many deaths with positive diagnoses are being counted as Covid deaths when decedents have severe co-morbidities. Members of that cohort die on an ongoing basis, but now many or all of those deaths are being attributed to Covid-19. A more perverse counting problem might occur when public health authorities instruct physicians to attribute various respiratory deaths to Covid even without a positive diagnosis! That is happening in some parts of the country.

To avoid any bias in the count, I’ve advocated tracking mortality from all co-morbidities and comparing the total to historical or “normal” levels to calculate “excess deaths”. One could also look at all-cause mortality and do the same, though I don’t think that would be quite on point. For example, traffic deaths are certainly way down, which would distort the excess deaths calculation.

Despite the vagaries in counting, there is no question that the coronavirus has been especially deadly in its brief assault on humans. New York has experienced a sharp increase in deaths, as the chart below illustrates (the chart is a corrected version of what appeared in the Reason article at the prior link). The spike is way out of line with normal seasonal patterns, and it obviously corresponds closely with deaths attributable to Covid-19. It is expected to be short-lived, but it might taper over the course of several weeks or months, Once it does, I suspect that the cumulative deaths under all those other curves in the chart will exceed Covid deaths substantially. Also note that the yellow line for the flu just stops when Covid deaths begin, suggesting that the red line probably incorporates at least some “normal” flu deaths.

Once the virus abates, we’ll be able to tell with a bit more certainty just how deadly the pandemic has been. It will be revealed through analyses of excess deaths. For now, we have the statistics we have, and they should be interpreted cautiously.

Hydrocholraquin

A more boneheaded debate centers on the use of the anti-malarial drug hydroxychloraquin (HCQ) to treat coronavirus patients. There have been many successes, particularly in combination with a Z-Pak, or zinc. Guidelines issued by the American Society of  Thoracic Surgeons last week call for HCQ’s use in advanced cases of coronavirus infection. These and other therapies are being tested formally, but many are prescribed outside any formal testing framework. Remdesivir has been prominent among these. Plasma therapy has been as well, and several other possible treatments are under study.

With respect to HCQ, it’s almost as if the Left, much of the media, and a subset of overly “prescriptive” medical experts were goaded into an irrational position via pure Trump Derangement. Just Google or Bing “Hydroxychloraquine Coronavirus” for a bizarre list of alarmist articles about Trump’s mention of HCQ. To take just two of the claims, the idea that Trump stands to earn substantial personal profits from HCQ because he holds a few equity shares in a manufacturer of generic drugs is patently absurd. And claims that shortages for arthritis, lupus, and malaria patients are imminent are unconvincing, given the massive stockpiles now accumulated and the efforts to ramp-up production.

So much lefty hair is on fire over a potential therapy that is both promising and safe that the media message lacks credulity. But more ominously, the Democrat governors of Michigan and Nevada were so petulant that they banned HCQ’s use in their states, though at least Nevada’a governor rescinded his order. It’s almost as if they don’t want it to work, and don’t want to give it a chance to work. Or do I go too far? No, I don’t think so.

Victoria Taft has a good summary of the media backlash against President Trump’s hopeful statements about HCQ. Not only was the FDA’s authority over the use of HCQ misrepresented, there was also a good bit of smearing of various researchers who’d found preliminary evidence of HCQ’s effectiveness. Let’s be honest: the quality of medical research is often inflated by the research establishment. And the media eat up any study with findings that are noteworthy in any way. Over the years, a great deal of medical research has been based on small samples from which statistical hypothesis tests are shaky at best. That’s one reason for the legendary replication problem in medical research. In the case of HCQ, there has been widespread misuse of the term “anecdotal” in the media, prompted by experts like Dr. Anthony Fauci, who should know better. The term was used to describe clinical tests on moderately large groups of patients, at least one of which was a randomized control trial.

Every day we hear stories from individual patients that they were saved by HCQ. These are properly called anecdotal accounts. But we also hear from various physicians around the country and world who claim to be astonished at HCQ’s therapeutic efficacy on groups of patients. This link gives another strong indication of how physicians feel about HCQ at this point. These are not from RCTs, but they constitute clinical evidence, not mere “anecdotes”.

By virtue of state and federal right-to-try laws, terminally ill patients can choose to take medications that are unapproved by regulators. Beyond that, FDA approval of HCQ specifically for treating coronavirus was unnecessary because the drug was already legal to prescribe to cover patients as an “off-label” use. That’s true of all drugs approved by the FDA: they can be prescribed legally for off-label uses. When regulators like Dr. Fauci, and even practicing physicians like Dr. Jeffrey Singer (linked below) claim that the FDA hasn’t approved HCQ specifically for treating Covid, it is a technicality: the FDA can certainly “approve” it for that specific use, but it’s already legal to prescribe!

While it won’t end the silly argument, which is obviously grounded in other motives, Dr. Singer brings us to the only reasonable position: treatment of Covid with HCQ is between the patient and their doctor.

 

 

Left’s Pandemic Response: Politics As Usual

17 Tuesday Mar 2020

Posted by in Health Care, Pandemic, Regulation

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The Left asserts that President Trump dismissed and dismantled the nation’s Pandemic Response Team. That’s bullshit. So is the claim that the CDC was defunded. The news media and certain pundits have helped to feed this narrative. Or, as Glenn Reynolds calls those pundits, “Democrat operatives with bylines”.

First of all, the team in question was not at the CDC, a fact that hasn’t always been clear from the commentary on this issue. It was a team of White House overseers at the National Security Council’s “Directorate for Global Health Security and Biodefense”. What happened was this: the senior director of that team resigned after John Bolton was appointed to head the NSC. Bolton might have wanted him out, but what we know is the director resigned. Subsequently, that team was folded into another directorate as part of an long-overdue consolidation. Health experts from the team remain on the NSC staff today. Yet Sen. Sherrod Brown (D-OH)—and many others since—had the temerity to charge that Trump had fired “the entire Whilte House pandemic team”. Well, at least he didn’t imply that it was the CDC.

Tim Morrison wrote the following in the Washington Post yesterday:

“Because I led the very directorate assigned that mission, the counterproliferation and biodefense office, for a year and then handed it off to another official who still holds the post, I know the charge is specious. …

When I joined the National Security Council staff in 2018, I inherited a strong and skilled staff in the counterproliferation and biodefense directorate. This team of national experts together drafted the National Biodefense Strategy of 2018 and an accompanying national security presidential memorandum to implement it; an executive order to modernize influenza vaccines; and coordinated the United States’ response to the Ebola epidemic in Congo, which was ultimately defeated in 2020.”

This assessment at Brietbart.com quotes former senior NSC official Richard Goldberg:

“Weird. A year later I was inside the NSC working with talented global health/biodefense professionals who coordinated an incredibly effective response to Ebola. They’re still there. Working hard. On .”

It’s true that Bolton sought to eliminate red tape, duplication, and bureaucracy within the NSC, and that was wholly justified. According to Morrison, the NSC staff quadrupled from the 1990s through the second Obama term. Pandemics are supposed to be the CDC’s purview, but the proliferation of administrative layers is what happens as government grows uncontrollably. Leslie Eastman at Legal Insurrection questions whether the U.S. needs a permanent “Pandemic Response Team” in the White House. She quotes GOP Chairwoman Ronna McDaniel:

“JAN 7: CDC established a coronavirus incident management system, two days before China announced the outbreak. … Pelosi began Week 3 of withholding her sham impeachment articles. 

JAN 21: The CDC activated its emergency operations center to provide ongoing support to confront coronavirus. …What were Congressional Democrats focused on? Writing their opening arguments for their bogus impeachment trial.”

Well, bully for the CDC. As for “defunding the CDC”, the facts are this: the proposed budget submitted to Congress by the Trump Administration in February, but never passed, did indeed include cuts to the CDC’s budget, which has grown over the years as it expanded its mission from fighting infectious diseases to matters like obesity, racism, and questions of social justice. The cuts proposed by Trump, however, were primarily to state grants. Actually, the proposal called for increased CDC staffing, and it funded all programs related to infectious diseases. But no matter, because that proposal is unlikely to become part of any appropriations bill that would pass Congress.

True to form, the Left plays politics in the middle of a national crisis. When the Trump Administration told airlines that it was considering banning flights from China in late January, it was called racist. Now, of course, he hasn’t done enough. A huge irony, however, is that Trump’s biggest mistake was in trusting the FDA and the CDC’s authority to develop and regulate testing for the coronavirus. They botched it. In a classic case of over-regulation, they prohibited hospitals and labs from conducting tests developed privately or by academic researchers, insisting that everyone wait for the “approved” test to be distributed. Then, the test they released in early February was flawed, costing additional weeks before testing was available.

 

Rx Drug Prices Are Falling, But You’re Aging

08 Friday Nov 2019

Posted by in Health Care, Prescription Drugs, Price Controls

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Ask anyone on the street about prescription drug prices, or ask anyone in the press, and you’ll probably hear they are out of control. That contention is false. The conventional wisdom is typified by this exaggerated BS about insulin pricing … actually, you can find a vial of the kind I used for many years for about $25 without much difficulty.

Individual experience differs, of course. Yes, there are new drugs on the market that are exorbitant; there are older drugs still under patent that are pricey too. Those represent a fairly small part of the total market, however, and one on which policymakers should tread lightly if they hope to foster the development of new, life-saving drugs. Newer insulin varieties are not in that class, and those varieties don’t always incorporate meaningful improvements for patients.

Getting Old Is Hell

In fact, prescription drug prices have been declining for a number of years. The real problem is we’re always getting older! In a report from the Progressive Policy Institute, Michael Mandel describes what he calls the prescription drug escalator. Alex Tabarrok has a good summary of the article. The chart at the top of this post, from Mandel, shows that the number of drugs prescribed rises steadily with one’s age. The total bill rises along with age, which may create the perception that you’re paying higher prices. Unsurprisingly, more of each health-care dollar spent out-of-pocket  (OOP) goes to prescribed medications as you age, and more goes to prescription drugs as health declines. As Mandell says, the increases experienced by individuals are a matter of utilization as opposed to pricing..

Generic Dominance

Tabarrok notes that generic drugs account for somewhere between 80-90% of all prescriptions, and generic costs have been falling for some time. He links to one of his earlier posts on generics and to this study by the National Bureau of Economic Research, which states:

“… direct-out-of-pocket CPI for generic prescription drugs decline[d] by about 50% between 2007 and 2016 …”

Average OOP prescription costs peaked in 2006, according to Mandel’s data. Tabarrok quotes Mandell:

“May 2019 research report from the Agency for Healthcare Research and Quality reported that average out-of-pocket spending for prescribed medications, among persons who obtained at least one prescribed medication, declined from $327 in 2009 to $238 by 2016, a decrease of 27 percent. Data from the Bureau of Labor Statistics Consumer Expenditure Survey shows that average household spending on prescription drugs fell by 11% between 2013 and 2018.

Moreover, OECD data shows that average out-of-pocket spending on prescribed medicines in the United States ($143 per capita in 2017) is actually lower than countries such as Canada ($144), Korea ($156), Norway ($178), and Switzerland ($215).”

The declines in OOP drug costs came despite a shift in health-care payment responsibilities from insurers to consumers in recent years — OOP costs would have declined much more had the shift not occurred, according to Mandel. As he says, consumers now have more “skin in the game”, and apparently they act on it.

Another basis of the misperception about escalating drug prices has to do with the way they are reported. Mandel says:

“List prices are the published prices that manufacturers charge to wholesalers. Net prices reflect the revenues that drug manufacturers receive, net of rebates and discounts to prescription benefit managers, insurance companies, and hospitals.

Studies of list prices invariably show very strong growth. For example the IQVIA Institute for Human Data Science found that the list price of the average brand rose from $364.92 to $657.08 since 2014, an 80% increase. Similarly, a widely cited recent study based on list prices found that from 2008–16, the costs of oral and injectable brand-name drugs increased annually by 9.2 percent and 15.1 percent, respectively. … By contrast, net prices and net pharma revenue have been growing much more slowly, once rebates and discounts are accounted for.” 

The Pricey Segment

There are a variety of circumstances that bear on the pricing of individual drugs. Clearly, non-generic drugs are subject to more upward price pressure and give rise to anecdotes that feed misperceptions about the overall trajectory of drug prices. These are either new drugs or older ones sold under extended patents, which are sometimes granted for even minor changes in a drug’s chemical makeup.

Some new drugs are life-saving breakthroughs targeting rare diseases. The unfortunate truth is that drug development is a very costly enterprise, often stretching well over a decade in the U.S. under the FDA’s approval process. Moreover, U.S. consumers actually subsidize the cost of drugs for European consumers, where drugs are typically subject to price ceilings or are directly negotiated by government. By the time drugs go to market, development is treated as a fixed cost; even the low prices in Europe cover the marginal cost of production, so pharmaceutical manufacturers don’t mind selling there as long as their development overhead is paid by someone. That’s the rub.

Drug development costs are heavily influenced by public policy, often to the detriment of consumers. The FDA’s drug approval process is in dire need of reform, and patent extensions should be severely curtailed. As an advocate of free trade, I also favor a lifting of restrictions on imports of drugs to the U.S.

Conclusion

You’re likely to see more physicians as you age, they’re likely to prescribe more drugs, and you’re likely to pay more for prescriptions OOP. That’s the escalator in action. You can minimize the slope of your personal prescription escalator by taking good care of yourself and using generics when possible, but the slope is often beyond a person’s control. Nevertheless, over the past 13 years in the U.S.,  most of those experiencing higher OOP costs have this escalator, i.e., aging, to thank… it’s drug utilization, not pricing.

A relatively small but important share of the market has experienced price escalation. Newer, highly specialized drugs can carry high price tags. Patents give drug manufacturers considerably more pricing power, and drug companies have sought to maintain “evergreen” patents by manipulating their formulations. U.S. import quotas and restrictive pricing abroad have left consumers in the U.S. holding the bag for a large share of drug development costs. These shortcomings can be addressed via streamlined drug approval, patent reform, and lifting import restrictions.

A critical policy prescription is to liberate market forces and foster competition in the pharmaceuticals industry. Price controls in the U.S. would eliminate all incentives for new breakthroughs, leading progress in many areas of treatment to a stand-still. Price controls merely substitute the arbitrary decisions of politicians and bureaucrats for the market’s ability to balance dynamic consumer needs, medical expertise, and the costs faced by sellers.

 

 

Opioids and The War On Pain Treatment

08 Friday Mar 2019

Posted by in Prohibition, War On Drugs

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I repeatedly hear the bogus claim that prescription pain killers are a primary cause of opioid addiction. Twice this week I heard Geraldo Rivera prattling about it, blaming the drug companies for the opioid epidemic, expressing his view of the righteousness of the many lawsuits faced by Purdue Pharma and other firms. But these cases are hardly sure wins for the plaintiffs, and for good reason. The idea that pharmaceutical companies misleadingly promoted the effectiveness of drugs like Oxycontin for pain relief, and minimized their addictive potential, might appear credible, but there are a number of factors that argue strongly against these claims. Of course, opioids are legal prescription drugs, approved for pain relief by the FDA, and are generally marketed by drug companies under guidelines established by the FDA at the time of approval. And sadly, the narrative promoted by Rivera and many others is at tension with the needs of patients suffering from chronic pain.

In fact, opioids are effective for temporary and chronic pain relief, and they have been used for those purposes for many decades. In “The Other Opioid Problem“, anesthesiologist Dr. Ted Noel asserts that few chronic pain patients have overdosed or been killed by ODs. According to Scientific American:

“A Cochrane review of opioid prescribing for chronic pain found that less than one percent of those who were well-screened for drug problems developed new addictions during pain care; a less rigorous, but more recent review put the rate of addiction among people taking opioids for chronic pain at 8-12 percent [but less than 1% abuse].”

Those prescribed opioids for temporary relief after an injury or surgical procedure are even less likely to develop an addiction. The large majority of addicts are self-selected out of a population of individuals who want to get high. And most of them feed their addictions on opioids obtained illegally, often from imported heroin and fentanyl. Yes, opioids are stolen from legitimate patients, pharmacies, or elsewhere, and sometimes they are prescribed illegally by unscrupulous physicians. That might be the way many addicts get started, but most of the illegal opioid supply in the U.S. is imported heroin and fentanyl.

A causal linkage between opioid prescriptions, addiction and opioid deaths would imply a strong, positive correlation between prescription and death rates. However, Jacob Sullum reports that there is no correlation across states between prescription rates and death rates from opioids. As Sullum notes, this result offers “more reason to doubt that pain pill restrictions will save lives”.

In fact, in a separate article, Sullum writes of other evidence strongly suggesting that those restrictions may have counterproductive effects on opioid deaths, in addition to denying some patients access to the pain pills they legitimately need for treatment. According to Sullum, all 50 states have Prescription Drug Monitoring Programs (PDMPs) that monitor controlled substances and keep tabs on prescribers and pharmacies. These have succeeded in discouraging opioid prescriptions, but research appearing in the Annals of Internal Medicine suggests that the programs might be doing more harm than good:

“Fink et al found six studies that included heroin overdoses, half of which reported a statistically significant association between adoption of PDMPs and increases in such incidents. … To the extent that PDMPs succeed in making pain pills harder to obtain, they encourage nonmedical users to seek black-market substitutes. ‘Changes to either the supply or cost of prescription opioids after a PDMP is instituted,’ Fink et al. observe, ‘might reasonably drive opioid-dependent persons to substitute their preferred prescription opioid with heroin or nonpharmaceutical fentanyl.’

The FDA has enforced quotas on the production of legal opioids. According to the CATO Institute:

“The tight quotas on opioid production contributed to the acute shortage of injectable opioids being felt in hospitals across the nation. It is not only making patients suffer needlessly but places them at increased risk for adverse drug reactions or overdose.”

The FDA’s restrictions were eased somewhat after complaints from the medical community, but the harm continues. At the time of CATO’s report, opioid prescriptions had declined by 41% since 2010, while the overdose rate continued to escalate.

This pattern is all too familiar to those who have been arguing against drug prohibition for years. The flood of fentanyl into the country, and into what is sold as street heroin, is a direct consequence of prohibitions on supplies of legal heroin and other narcotics. But breaking through the puritanical and bumptious mentality of drug warriors is almost impossible. The worse the situation gets, the tighter they turn the screws, doubling down on the policies that have repeatedly failed in the past. Here I repeat the concluding paragraph of a Sacred Cow Chips post from January 2018 on the opioid epidemic:

“There are solutions to the deadly nature of the opioid epidemic, but prohibition is not one of them and never will be. If anything, prohibition in varying degrees has aggravated the dangers of opioids. To truly solve the problem, we should eliminate restrictions on the production and distribution of legal opioids for pain management, legalize heroin, and stop interfering in markets. That would be merciful for patients in real pain, make recreational use of opioids dramatically safer, and put an end to the gangland violence associated with underground competition. Second, redirect those resources into … harm reduction programs. [Jeffrey] Miron notes that legalization has worked in other countries, like Portugal and France, to reduce overdoses and opioid deaths. As a political matter, however, these steps might not be feasible unless we get over the cultural bias stigmatizing recreational opioid use as ‘evil’, and the idea that laws and enforcement can actually prevent people from trying to get high.

Slam the Damn Brakes on the Regulatory Potentate

28 Saturday Oct 2017

Posted by in Regulation

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The stock market’s recent gains have at least three plausible explanations: corporate earnings growth, the prospect of tax reform, and deregulation. Tax reform and deregulation are stated priorities of the Trump Administration and have the potential to lift the economy and generate additional earnings. Investors obviously like that prospect, though regulation itself is a tool used subversively by crony capitalists to stifle competition in their markets. Conceivably, some of the large firms that dominate major stock indices could suffer from deregulation. And I have to wonder whether the economic threat of Trumpian trade protectionism is not taken seriously by the equity markets. Let’s hope they’re right.

It’s no mystery that high taxes and tax complexity can inhibit economic growth. Let’s face it: when it comes to productive effort, we can all think of better things to do than tax planning, crony capitalist or not. The same is true of regulation: the massive diversion of resources into non-productive compliance activities stifles innovation, growth, and even the stability of the status quo. Regulation creates obstacles to activities like new construction and the diffusion of telecommunications services. And it discourages the creation of new products and services like potentially life-saving drugs and slows their introduction to market. The sheer number of federal regulations is so spectacular that one wonders how anything productive ever gets done! Patrick McLaughlin of The Mercatus Center and several coauthors tell of “The Impossibility of Comprehending, or Even Reading, All Federal Regulations“.

Regulation is more than a mere economic burden. It is the product of an administrative apparatus that is not subject to the checks and balances that are at the very heart of our system of constitutional government. That is a threat to basic liberties. Barry Brownstein offers an instructive case study of “The Tyranny of Administrative Power” involving violations of property rights in New Hampshire. The case involves the administrative machinations surrounding an installation of high-power lines.

Governmental efforts to spur innovation ordinarily take the form of spending on research, subsidies for certain technologies or favored industries (e.g., alternative energy), and large government programs dedicated to the achievement of various technological goals (e.g., NASA, DARPA). Together with regulatory rules that influence the allocation of resources, these governmental efforts are called industrial policy. An unfortunate recent example is Trump’s decision to retain the renewable fuel standard (RFS), but on the whole, industrial policy does not seem central to Trump’s effort to stimulate innovation.

It’s clear that a deregulatory effort is well underway: the so-called “deconstruction of the administrative state” hailed by Steve Bannon not long after Trump took office. First came Trump’s 2-for 1 executive order (also see here) requiring the elimination (or modification) of two rules for every new rule. In the Wall Street Journal, Greg Ip writes about changes at the FDA and the FCC that could dramatically alter the pace of innovation in the pharmaceutical and telecom industries. (If the link is gated, you access the article on the WSJ’s Facebook page.) Speedier and less burdensome reviews of new drugs will greatly benefit consumers. An end to net neutrality rules will support greater investment in broadband infrastructure and access to innovative services. There is a new emphasis at the FCC on enabling innovative solutions to communications problems, such as Google’s effort to provide cell phone service in Puerto Rico by flying balloons over the island. The Trump Administration is also reining-in an aggressive EPA, the source of many questionable rules that weaken property rights and inhibit growth. (Again, the RFS is a disappointing exception.) Health care reform could offer much needed relief from overzealous insurance regulation and high compliance costs for physicians and other providers.

But deconstructing the administrative state is hard. Regulations just seem to metastasize, so deregulatory gains are offset by continued rule-making. This is partly from new legislation, but it is also a consequence of the incentives facing self-interested regulators. With that in mind, it’s impressive that regulation has not grown, on balance, thus far into Trump’s first year in office. According to Patrick McLaughlin, zero regulatory growth has been unusual going back at least to the Carter Administration. In quoting McLaughlin, The Weekly Standard says that Trump might well earn the mantle of “King of Deregulation“, but he has a long way to go. Brookings has this interactive tool to keep track of his deregulatory progress. One item on the Brookings list is the President’s intention to withdraw from the Paris Climate Accord. That represents a big save in terms of avoiding future regulatory burdens.

I can’t help but be wary of other avenues through which the Trump Administration might regulate activity and undermine economic growth. Chief among these is Trump’s negative attitude toward foreign trade. Government interference with our freedom to freely engage in transactions with the rest of the world is costly in terms of both foreign and domestic prices. With something of a history as a crony capitalist himself, Trump is not immune to pressure from private economic interests, as illustrated by his recent cow-tow to the ethanol lobby. Nevertheless, I’m mostly encouraged by the administration’s deregulatory efforts, and I hope they continue. The equity market apparently expects that to be the case.

Now, What About Trump?

25 Wednesday Jan 2017

Posted by in Trump Administration

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This guy I voted for… Hoo boy! I’m tellin’ ya’, this guy’s a real beaut! But now, it’s time for me to make an accounting of the good and the bad I see in a Donald Trump presidency. I’ll cover a number of policy areas and how well I think, at this point, the Trump Administration will match my preferences, which are generally libertarian. In posting this list, I’m reminded of a wonderful quote of the late guitarist Jerry Garcia on his ideas for a new project: “I’m shopping around for something to do that no one will like.” I certainly don’t expect many to agree with the entirety of my “scorecard”, but here it is. But before getting to it, a few preliminaries:

First, I’ve had mixed feelings about Trump since he first announced that he’d seek the republican nomination. A basic concern was the difficulty of knowing his real philosophy about the role of government and fundamental constitutional rights. Trump has a history of contradictory positions on big issues like taxes, health care, and gun rights. It was a gamble to count on him to follow any particular idealogical course, and some of it remains unclear even now. My misgivings about Trump’s inclinations as a whirligig were discussed on Sacred Cow Chips in “Trump Flaunts Shape-Shifting Powers” in 2015. Uncertainty still colors my views, though his cabinet picks and other alliances have served to clarify the direction of policy. My discussion below reflects this uncertainty. Also, Trump shows every intention of moving fast on a number of fronts, so I hope the relevance of this post isn’t too perishable.

Second, it’s worth noting that Trump’s policy statements and predilection to “keep-’em-guessing” are probably a by-product of his instincts as a negotiator. His bellicosity may be something of a ploy to negotiate more favorable compromises in international affairs, trade and domestic issues. Still, I can’t know that. Should I evaluate all those statements at face value as policy positions? I have to make some allowance for the reasonability of a bargaining position, but I’ll try to be consistent in my approach.

Third, revelations during the campaign of Trump’s past remarks about women, and some in-campaign remarks like his attack on Megyn Kelly, were highly offensive. I’ve heard plenty of “locker-room talk” over my years, but some of Trump’s statements were made well outside the locker room and well beyond the age at which “youthful indiscretion” could be taken as a mitigating factor. Trump has plenty of female defenders, however, and he has a record of placing women in key roles within the Trump organization and for paying them well. While I do not condone the remarks, and I doubt that complete reform is possible, he cannot change his history and he is now the president. Evaluating his policy positions is now an entirely separate matter. I only hope the exposure has taught him to be more respectful.

Finally, I do not buy the narrative that Trump is a racist. This “Crying Wolf” essay on Scott Alexander’s Slate Star Codex blog demonstrates that Trump’s rhetoric and behavior during his campaign was not racist when viewed in the broader context of his record of denigrating anyone who opposes him. He seems to be an equal opportunity offender! In fact, Trump made strong attempts to appeal to minority voters and succeeded to some extent. His positions on border security and immigration were boisterous, but they were not truly about race or ethnicity. Instead, they were rooted in concerns about illegal immigration and public safety. Efforts by the left to characterize those points as de facto evidence of racism are simply not credible. Nor are claims that he practiced racial discrimination at his apartment buildings early in his career. Today, I would call those cases garden-variety disparate impact actions, as when a business is challenged on the use of screening criteria that might be correlated with race, such as credit rating. A legitimate business purpose is generally a valid defense, though Trump did agree to settle out of court.

So what about Trump from a policy perspective? Here is what I expect of his administration thus far:

I’m Pretty Sure of the Following, Which I Rate As Bad

Trump is a protectionist. He is extremely ignorant of trade principles and favors import duties to punish those who wish to purchase goods from abroad. This would raise both domestic and import prices and directly harm employment in import-dependent industries. It would also discourage innovation by domestic producers, who would face less competition. I cover these protectionist tendencies here as an unqualified negative, but I have a more mixed view on his opposition to certain government-negotiated trade agreements (e.g., the Trans-Pacific Partnership ), which are covered below.

Trump is likely to be a drug warrior. He could do much to restore order in inner cities by ending the drug war, but he will not. He will thereby encourage activity in the black market for drugs, which produces both violence and more dangerous varieties of drugs. He might well interfere with the rights of states to determine their own policies toward relatively benign substances like marijuana, including medical marijuana, by choosing to enforce destructive federal drug laws. The possible appointment of marijuana legalization advocate Jim O’Neil to head the FDA looks decreasingly likely. That might be a game changer, but I doubt it will happen.

Big public infrastructure outlays. This is distinct from private infrastructure, to be discussed below. The latter is motivated by private willingness-to-pay. Rushing into a large public construction program with questionable economic justification will bring waste, and it will probably be sold as an economic stimulus package, which is unnecessary and dangerous at a time when the economy is finally operating near capacity. The decrepitude of American infrastructure is greatly exaggerated by those with a private interest in such projects, and the media eats it up. The breathless promotion of massive but noneconomic projects like high-speed rail is also greeted with enthusiasm by the media. And politicians love to boast to constituents of their efforts to secure federal funds for big local projects. We also know that Trump wants to build a massive border wall, but I’m convinced that border security could be achieved at lower cost by leveraging surveillance technology and other, less costly barriers.

Deficits: Increased defense outlays, a big infrastructure package, a “great” wall, tax credits and lower tax rates will almost certainly add up to ballooning federal deficits in the years ahead. That fiscal combination will be unsustainable if accompanied by higher interest rates and could very well have inflationary consequences.

Trump favors public and private eminent domain and believes it should be treated as a hallowed institution. He truly thinks that a “higher-valued use” is a superior claim to existing ownership of property. This is perverse. I have trouble accepting eminent domain action even for a public purpose, let alone a private purpose; it should only be motivated by the most compelling public interest, as a last resort, and with handsome compensation to the existing property owner. We can only hope that Trump’s public and private infrastructure programs do not lead to many takings of this kind.

Industrial policy. This is the essence of government central planning, picking winners and losers by granting tax and loan subsidies, lenient reviews, and other advantages. The most obvious example of Trump’s amenability to industrial policy is his penchant for trade protectionism, but I fear it will go much deeper. For some reason, Trump believes that manufacturing activity creates private and public benefits far beyond its market value. Moreover, manufacturers require far fewer workers now than they did in his youth, so the sector is not the job engine it once was. His appointee for Commerce Secretary is Wilbur Ross, an investor with a history of trading on prospects for government assistance. This article provides disturbing background on Ross, along with this quote: “We ought, as a country, to decide which industries are we going to really promote — the so-called industries of the future.” Trump’s plan to meet regularly with leaders of giant corporations is a sure sign that corporatism will be alive and well for at least the next four years… as long as they tow The Donald’s line.

Restricting Legal Immigration. I’m all for securing the border, but legal immigration is a major driver of economic growth. Many industries rely on a flow of skilled and unskilled workers from abroad, a need that will be more intense given Trump’s plan to tax outsourcing. Moreover, the country will face a low ratio of workers to retirees over the next few decades; short of massive entitlement reform, immigration is perhaps the only real chance of meeting public obligations to retirees.

Endangered Privacy Rights: As a “law and order” guy, Donald Trump might not be a reliable defender of the privacy protections enshrined in the Fourth Amendment. He has expressed a willingness to repeal the USA Freedom Act, which restricts the bulk collection of metadata and provides other privacy protections. Trump also has expressed an interest in forcing technology companies to enable “back doors” into the devices and programs they sell to the public. I’m concerned that we’ll see the creation of security databases with an excessively broad scope. As a likely drug warrior, Trump will support the sort of privacy violations in law enforcement that have become all too common.

I’m Pretty Sure of the Following, Which I Rate As Good

He’s not Hillary Clinton, and he is not a statist in the mold of Clinton and Barack Obama, though he does embody some statist tendencies as described above.  I thought I would vote for Gary Johnson, but he made crucial mistakes, such as choosing Bill Weld as his running mate and fumbling at attempts to explain libertarian philosophy. At some point, my distaste for Clinton’s criminality and her advocacy of big government in so many aspects of life convinced me she had to be defeated, and that Trump was the only real possibility. But whether he can actually reduce the resources that the federal government absorbs is hard to say, as he has his own spending priorities.

Trump favors deregulation generally, as it places an enormous burden on society’s ability to improve well being. This covers aspects of the Affordable Care Act and reducing the role of the federal government in education. He opposes the costly Paris Climate Accord and other intrusive federal environmental measures, such as wetlands regulation.

Obamacare repeal and replacement with market-oriented delivery of health care, insurance with broad choices, and equalized tax treatment across the employer and individual market segments via refundable tax credits. There is a chance that Trump’s preferred alternative will assign excessive responsibility to the federal government rather than markets, but I’m optimistic on this point.

Entitlement reform is a possibility. Social Security and Medicare are insolvent. Ideas about how future retirees might take advantage of market opportunities should be explored. This includes private retirement accounts with choices of investment direction and greater emphasis on alternatives like Medicare Advantage.

Tax reform of some kind is on Trump’s agenda. This is likely to involve lower corporate and individual tax rates and some tax simplification. It is likely to stimulate economic growth from both the demand and the supply sides. In the short-run, traditional demand-side macroeconomic analysis would suggest that upward price pressures could arise. However, by encouraging saving and investment, the economy’s production capacity would increase, mitigating price pressure in the longer run.

Trump favors border security. No mystery here. My enthusiasm for this is not based on a physical wall at the border. That might come and it might be very costly. I favor a liberalized but controlled flow of immigration and vetting of all immigrants. The recent order of a temporary hold on refugees from a short list of countries will be of concern if it is not short-lived, and it remains to be seen what “extreme vetting” will entail. Nevertheless, I support enhanced integrity of our borders and our right as a nation to be cautious about who enters.

Education reform and school choice. Increased spending on public education, especially at the federal level, has made no contribution to educational productivity, and the country is burdened with too many failing schools.

Encouraging private infrastructure. This relies on private incentives to build and finance  infrastructure based on users’ willingness to pay, thereby avoiding stress on public funding capacity.

Deregulating energy: This includes encouraging zero-carbon nuclear power, deregulation of fossil fuels, and lower energy costs.

Deregulating financial institutions. Repeal of the burdensome Dodd-Frank Act, which has imposed costs on both banks and consumers with little promise of a benefit in terms of financial stability.

Unabashed support for Israel. I strongly favor repairing our damaged ties with Israel and the proposed move of our embassy to West Jerusalem, which has been a part of Israel proper since its founding. Israel is the only real democracy in the middle east and a strong ally in an extremely dangerous part of the globe.

Trump supports Second Amendment rights. This is fundamental. Private gun ownership is the single-best line of self-defense, especially for those with the misfortune to live in areas rife with black market drug activity.

States’ rights and federalism. On a range of issues, Trump seems amenable to transferring more responsibility to states, rather than asserting federal supremacy on issues that are unsettled from region-to-region.

Ending federal funding for abortion. Tax dollars should not be used for a purpose that is morally abhorrent to a large segment of the population. This is not the same as the “right” to abort a child, as settled by Roe vs. Wade.

Putting the screws to the UN. This organization is not aligned with U.S. interests, yet the U.S. foots a large part of the bill for its activities. Sharp reductions in funding would be a powerful message.

Reduced federal funding for the arts. I’ve never been comfortable with allowing the federal government to disburse funds in support of the arts. Lower levels of government are less objectionable, where there is greater accountability to local voters. Dependence on federal purse strings creates a powerful line of influence that usurps authority and may conflict with the desires of local taxpayers. Individuals pay for art voluntarily if they find it of value, and people give privately to support the arts for the same reason. Federal taxpayers certainly have other valued uses for the funds. Art is not a “public good” in a strict sense, and its external benefits, to the extent they exist, do not justify a federal role.

Reversing the FCC’s net neutrality rules. Trump has appointed Ajit Pai as the new chairman of the FCC. Pai is no fan of net neutrality, a policy that rewards heavy users of network capacity and is likely to discourage the growth of network infrastructure.

I’m Not Sure How To Rate the Following

Foreign policy reset. I welcome several likely foreign policy initiatives from the Trump Administration, such as deemphasizing our role in the UN, restoring our relationship with Israel, and taking a harder line on nuclear development by Iran. I also favor greater scrutiny of outlays for foreign aid, much of which is subject to graft by recipient governments. However, I would not welcome a continuation of foreign policy designed around U.S. strategic interests that are, in fact, private investments.

Defense build-up. Our armed forces have suffered a decline in their ability to defend the country during the Obama years. I favor some restoration of the defense budget, but I am concerned that Trump will go on a defense binge. I’m also concerned about how aggressively he’ll wish to project American power overseas. Let’s not go to war!

Upending Trade Partnerships. I am a free-trader, and I abhor Trump’s belligerent talk about erecting trade barriers. So how could I be “unsure” about anything that promotes trade? Formal trade partnerships between nations are an aggravation to me because governments don’t trade… people do! And they do because they reap unambiguous benefits from trade. I’d much rather the U.S. simply eliminated all trade barriers unilaterally than get entangled in complicated trade agreements. These agreements are rats nests. They stipulate all sorts of conditions that are not trade related, such as environmental rules and labor policy. I therefore view them as a compromise to sovereignty and a potential impediment to economic growth. To the extent that trade agreements can be renegotiated in our favor, I should not complain. And to the extent that we’ll never see a government allow completely free and open trade, I should probably hope for agreements that at least reduce trade barriers.

The Keystone pipeline. I am happy with Trump’s decision to approve completion of the pipeline on its merits for energy delivery, and also because it is environmentally less risky than rail, barge and container ships. And yes, it is private infrastructure. But I am unhappy about the heavy application of eminent domain against landowners in the path of the pipeline. The Standing Rock Sioux tribe’s opposition is suspect because the path does not cross its tribal land, and the tribe originally gave its consent to the project. The tribe’s recent position could be an effort to extract rents from the process.

Executive authority. I am somewhat wary of Trump’s aggressiveness thus far. He seems eager to take actions that are questionable under existing law, such as seizing wire-transfer remittances by undocumented immigrants. Granted, he is busy “undoing” some of Obama’s actions, but let’s hope he doesn’t get carried away.

Summary

What we have here is a very mixed bag of policies. On the whole, I’m still pleased that Trump was elected. I believe he favors a smaller role for government in most affairs. But while the balance of considerations listed above seems to be in Trump’s favor, the negatives have the potential to be disastrous. He certainly wants to spend. My biggest fears, however, are that Trump will not respect the Constitution, that he will govern as a cronyist, and that he will succumb to the notion that he can actively manage the economy like a casino build.

End The FDA’s War On Drug Development

16 Wednesday Dec 2015

Posted by in Health Care, Regulation

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For the seriously ill, the phrase “regulated to death” might hit close to home when it comes to the U.S. Food and Drug Administration. The agency is a notorious bottleneck on the availability of new, potentially life-saving drugs. Its policies seem to rely on an over-reading of the precautionary principle: that the risk of harm must be weighted heavily regardless of the opportunity cost in terms of curative, life-extending or palliative potential. The facts are as economist Alex Tabarrok describes:

“It costs well over a billion dollars to get the average new drug approved and much of that cost comes from FDA required clinical trials. Longer and larger clinical trials mean that the drugs that are eventually approved are safer. But longer trials also mean that good drugs are delayed. And the more expensive it is to produce new drugs the fewer new drugs will be produced. In short, longer and larger trials mean drug delay and drug loss.“

One billion-plus dollars of incremental cost for the average new drug! Not only are the lengthy delays unacceptable, but the added cost seriously inflates new drug prices. Furthermore, it is difficult for small, innovative competitors to engage in development in the face of costs like these. And while large pharmaceutical companies might be forced to limit investment in new drug research and might rightfully bemoan their cost structures, they are in a much better position to handle the regulatory burden than start-ups.

Tabarrok has long advocated “reciprocity”, or U.S. approval of “drugs, devices and biologics” that have been approved by authorities (such as the European Medicines Agency, or EMA) in certain other developed countries. He has also advocated “Free To Choose Medicine” principles, which would create a dual track allowing certain patients to opt into the use of drugs at a relatively early stage in the FDA’s approval process. Research studies cited by Tabarrok suggest that expedited drug approval can provide substantial benefits in terms of patient survival years without compromising safety.

A bill introduced by Senators Ted Cruz (R-TX) and Mike Lee (R-UT) would authorize reciprocity in the U.S. In October, Cruz discussed the legislation in this article:

“The FDA model is risk-averse, by its very nature obstructing promising innovations. It largely assumes that the biology of patients is the same, rather than recognizing that individuals’ genetic makeup varies widely. As a result, the only drugs the agency tends to approve are those that help a broad spectrum of patients and harm close to no one. That method may work to fight diseases that affect us all in a similar way, such as smallpox or cholera, but it does not work for diseases such as Alzheimer’s and cancer, which are highly tailored to each individual’s genetic makeup. In medicine, a one-size-fits-all approach ignores the diversity of the human person and limits the discovery of innovative cures to a small segment of those afflicted with disease.“

Tabarrok anticipates a certain objection to reciprocity:

“The argument for reciprocity, however, isn’t that the FDA is uniquely bad or always worse than the EMA or vice-versa. The argument is that it’s wasteful to duplicate the lengthy approval process and that both agencies sometimes make mistakes. As a result, it’s simple common sense to let Americans avail themselves of drugs and devices approved in other developed countries.“

There are other reform proposals in play. The Goldwater Institute has advocated “Right to Try” laws at the state level that would allow terminally-ill patients to access unapproved medicines. Representative Fred Upton (R-MI) has introduced the 21st Century Cures Act, which includes:

“... steps to streamline clinical trials; advance personalized medicine by encouraging greater use of drug development tools, such as biomarkers; and creat[es] incentives for developing drugs for uncommon but deadly diseases.”

Regulation is often an obstacle to vibrant competition and innovation, and the FDA’s antiquated drug approval process is certainly a hindrance. The process adds time and expense to drug development that carries unacceptable human costs. It is beyond comprehension that drugs can be rejected for procedural reasons when their proposed use involves circumstances that could hardly be worse, when those drugs carry little incremental downside risk. The rights of patients and the judgements of their physicians should take precedence over the sometimes picayune concerns of a regulatory bureaucracy. The reforms discussed above would be positive steps toward establishing that primacy.

 

Life’s Bleak When Your Goal Is Compliance

08 Wednesday Oct 2014

Posted by in Uncategorized

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Don’t underestimate the danger and cost of giving it up to the regulatory state. It’s ability to impel behavior in the absence of any legislative mandate, and apparently without accountability to the judicial branch or any other authority, is explored by Michael Greve in “Prescription for a Banana Republic.” He does this mostly in the context of the Department of Education, but he also mentions the FDA’s practice of issuing “draft” guidance, frequently with perverse consequences. I know from my own experience in the financial industry that the problem is more general. Here’s one snippet from Greve’s article:

“Why do we permit agencies to proceed in this underhanded, unreviewable fashion? The general idea is that in choosing to proceed by “guidance” rather than formal, reviewable regulation, the agency is giving something up: the legally binding effect of its rulings. It’s not really coercing anybody, and so why bother the courts? That answer, however, wildly underestimates government’s ingenuity in giving real-world effect to supposedly informal documents.”

Richard Rahn had a piece yesterday on the closely related topic of fines and asset forfeitures imposed by regulators without any court proceeding, let alone a conviction. He quotes two former directors of the DOJ’s Asset Forfeiture and Money Laundering Office:

“Civil asset forfeiture and money-laundering laws are gross perversions of the status of government amid a free citizenry. The individual is the font of sovereignty in our constitutional republic, and it is unacceptable that a citizen should have to ‘prove’ anything to the government. If the government has probable cause of a violation of law, then let a warrant be issued. And if the government has proof beyond a reasonable doubt of guilt, let that guilt be proclaimed by 12 peers.”

Greve mentions the strong influence exerted by regulators issuing so-called “Dear Colleague” letters containing “suggested” steps that might be taken “voluntarily” to avoid falling out of compliance with often ill-defined requirements:

“Whereupon compliance officers across the country can be heard clearing their throats: I can help…. Replicate the m.o. across the full range of government services and regulation: it takes a ton of money to escape. Once you start adopting Juan Peron’s legal model, social patterns will follow. We’re well on our way.”

Nudge me when it’s over. Oh, wait!