Doug Bandow, guest editor for the February Freeman, is the author and editor of several books, including Reforming Medicine Through Competition and Innovation (John Locke Foundation).
The collapse of the campaign to essentially nationalize America’s health-care system put a political stake through the heart of proposals to solve medical problems with new bureaucracies and more regulations. Health care remains a problem, however, because costs continue to rise and access remains restricted for many elderly and poor patients. Thus, we must continue looking for answers, only from a different direction—choice, competition, deregulation, and privatization.
Applying these principles to prescription drugs and medical devices would be particularly beneficial for Americans. Today the Food and Drug Administration (FDA) both discourages the development of new pharmaceuticals and medical products and increases their cost. Simply relaxing Washington’s bureaucratic stranglehold over the drug and device marketplace would be a useful first step. Even more advantageous would be reconsidering the role of the FDA itself; Congress could turn the agency into a certification rather than an enforcement body, for instance. The result would likely be improved medical treatment, less patient suffering, and lower health-care costs. Everyone, except, perhaps, a couple thousand federal bureaucrats, would gain.
Benefits of Pharmaceuticals
The wide availability of even expensive drugs has helped ameliorate and cure disease. Pharmaceuticals conquered a number of deadly conditions, such as tuberculosis; tranquilizers and polio vaccines offered similarly dramatic benefits. In this way, drugs contributed to the increase in life expectancy from 54 in 1920 to more than 75 today.
Prescription drugs have also reduced total medical expenses, because pharmaceuticals often replace far more expensive medical operations and treatments. Actigall, for instance, dissolves gallstones, and thereby saves an estimated $2 billion annually because 350,000 patients use it. The beta-blocker Timolol reduces the number of second heart attacks by 16 percent and also saves about $2 billion every year. Anti-asthma drugs save $3 billion a year by cutting emergency room visits and hospital admissions. Drug therapy for ulcers costs about $900 annually, compared to $29,000 for surgery; the yearly savings also runs about $3 billion. Even where a procedure, such as bone marrow transplants, remains necessary, pharmaceuticals can cut overall treatment costs by $40,000 a patient.
The potential for even greater savings from pharmaceuticals has been masked by the larger problem of third party health-care payment, through Medicare, Medicaid, and tax-induced comprehensive private insurance. The fact that patients directly pay only a small share of their medical expenses has bloated demand for health services. But since coverage of pharmaceuticals under such programs is generally limited, the system encourages reliance on more expensive, alternative treatments, like hospitalization and surgery. Analysts Gary and Aldona Robbins figure that a consistent reimbursement scheme would increase drug outlays by 45 percent but cut hospital expenditures by one-third. Overall, health-care spending would fall $85 billion.
Unhealthy Status Quo
Even worse, federal policies have directly raised the cost of prescription drugs and medical devices and discouraged development of products that would save lives and lower overall health-care costs. In the name of safeguarding the public from harmful drugs, the Food and Drug Administration has been protecting the public from useful drugs as well.
The problem is two-fold. First, the FDA’s power is excessive: drugs cannot be released until the agency has certified not only their safety, but also their efficacy. Such delays occur not because the $1 billion agency is underfunded, as it often claims, but because it tries to regulate far too much. The agency has been empowered to monitor pharmaceutical safety since 1938 but performed its duties relatively expeditiously until 1962. Then Congress, after thalidomide use abroad generated birth defects, empowered the FDA to certify effectiveness and control the clinical testing process. Why legislators did so remains obscure, since the problem with thalidomide was that it was unsafe, not that it didn’t work. To the contrary, patients used it because it was an effective sedative. Nevertheless, in the words of analysts Henry Grabowski and John Vernon, the legislation effectively shifted “primary decision-making authority in pharmaceuticals from market mechanisms to a centralized regulatory authority.”
Lengthening Time Lag
Unfortunately, the seemingly purposeless requirement that firms demonstrate efficacy—companies have no incentive to sell, doctors have no incentive to prescribe, and patients have no incentive to buy ineffective products—further lengthened the time necessary to win approval of new drugs. By 1967 the average review time for a drug application had more than tripled. Congress’s bias towards regulation exacerbated the agency’s natural bureaucratic tendency to be risk averse: to approve a drug that proves either ineffective or harmful will harm one’s career far more than holding up approval of efficacious, potentially life-saving products.
Which naturally leads to the second problem, that the FDA has created an unnecessarily cumbersome and expensive regulatory process. Drug development costs, which now average $427 million, more than doubled between 1963-1975 and 1970-1982. Much of this expense is due to the federal drug approval process—indeed, it has been estimated that the FDA may as much as double the cost of new drug development.
Such an expensive process would be burdensome enough for any industry. But the pharmaceutical business, dependent as it is on finding a few gushers in a field of dry holes, suffers disproportionately from FDA-induced delays. The result of over-regulation, then, is not only to reduce drug research, but also to encourage the diversion of resources into unregulated efforts—non-R&D expenditures, such as promotion, or R&D overseas—in what the Progress and Freedom Foundation calls “approval arbitrage.”
Disincentives to Drug Development
The result of all of these factors has been to discourage new drug development in the United States. The domestic rate of introduction of new compounds dropped sharply and America fell behind other nations. Up through 1965 the United States led Great Britain on the introduction of new drugs. Between 1966 and 1971 Britain enjoyed a 15-month lead. Of 98 drugs introduced between 1962 and 1971 in only one nation, 77 were available in Britain. The FDA apparently was not unaware of this problem: in 1972 the agency attempted, unsuccessfully, to transfer an employee out of its cardio-renal-pulmonary products division because, reports one FDA official, the division had “approved no new chemical entities . . . from 1968 to 1972, an experience that contrasted with the experience of every other medically modern nation and with the experience of other divisions of the FDA.” Between 1977 and 1987, of 204 new drugs introduced in America, 114 were sold first in Britain. Of Britain’s 186 new drugs, only 41 were first introduced in the United States. America’s time lags were greatest for drugs used to treat some of the deadliest diseases: cancer and cardiovascular cases. Eighteen of 20 drugs approved in the U.S. in 1988 had been available for an average of six years in other nations.
By the 1990s, total approval and development times ran 100 percent and 75 percent, respectively, higher in America than in other industrialized states. Of 150 new drugs and vaccines approved by the FDA between 1990 and 1994, 61 percent were available first overseas. Almost half of the latter, 40 different compounds, were considered to be important by the FDA. On a head-to-head basis America increasingly lagged behind other industrialized states.
The consequences of the FDA’s bureaucratic dithering are serious: people suffer and die. Real people, most of whom are not represented in Washington and who remain largely invisible. And tens of thousands of them. Argues Robert Goldberg of Brandeis University:
By a conservative estimate, FDA delays in allowing U.S. marketing of drugs used safely and effectively elsewhere around the world have cost the lives of at least 200,000 Americans over the past 30 years. That figure does not include deaths that might have been prevented by the use of drugs such as Prozac, which is associated with the decline in suicides of individuals suffering from depression.
Consider just some of the agency’s casualties:
• Families with a member suffering from Alzheimer’s disease were frustrated by the government’s refusal, for seven years, to authorize the use of the drug THA, long available in other nations, despite evidence that it helped four of ten patients who took it.
• The agency’s delay in allowing sale of the beta-blocker practolol probably cost 10,000 lives a year. Dr. William Wardell complained that “the FDA’s B-blocker policy has set back cardiovascular therapy in this country by years,” diverting research from new advances to re-examining settled questions.
• Agency delays in bringing propranolol, a beta-blocker for use in treating angina and hypertension, to the U.S. market may have cost 100,000 lives.
• The FDA’s two-year delay in approving streptokinase, which sharply reduces death rates after heart attacks, probably cost 22,000 lives.
• Even more bizarrely, the agency dithered over TPA, found to be more effective than streptokinase. The drug was available in eight nations, including Austria, France, Germany, and New Zealand, but not America. Science magazine complained that the FDA had “not only egg on its face but blood on its hands.”
• Scores of thousands may have perished from the non-availability of the anti-bacterial drug Depra.
• The FDA delay in approving Interleukin-2, for use in combatting once untreatable metastatic kidney cancer, probably left 3,500 patients dead. The drug was available in nine European nations before America.
• Between 8,000 and 15,000 people probably died waiting for misoprostol, a drug to prevent gastric ulcers. The drug was first available in 43 other countries, some as early as three years before the FDA’s approval in December 1988.
• Equally costly was the delay in bringing anti-AIDS drugs, such as AZT, which slows the advance of the disease, and ganciclovir, which reduces the incidence of blindness, to the market.
• The agency held up approval of Clorazil, useful in treating schizophrenics. As a result, as many as a quarter of a million people suffered despite the product’s availability for 20 years in Europe.
• Even more people suffered and continue to suffer moderate inconvenience from lack of access to other drugs—anesthetics, antibacterial compounds, vaccines, asthma medications, and many others.
Manufacturers of medical devices face similar problems as drugmakers. These products are often far more expensive than pharmaceuticals, but offer enormous benefits to patients—like a noninvasive, virtual-reality colonoscopy. Alas, band-aids, nuclear magnetic resonance machines, and more than 40,000 other products come under the purview of the FDA. The agency also controls changes in existing products and even the manufacturing process, treating everything like a new product.
Although federal rules are allegedly intended to serve health purposes, Robert Higgs of the Independent Institute observes: “Medical device regulation in the United States during the past 30 years has been driven mainly by political forces, especially by the reaction of members of Congress and FDA officials to shocking or scandalous revelations widely disseminated by the news media.” Decades after Congress broadened the agency’s authority to devices, the FDA had yet to finish setting standards to categorize products by riskiness.
The FDA dawdled as huge application backlogs developed. The number of approvals fell steadily from 1989 to 1992, before rebounding slightly in 1993. The number of so-called 510(k) applications, for the simplest products, pending before the FDA for more than 90 days, rose from two to 713 between November 1991 and 1992. The average review time jumped by 60 percent, to 141 days, hitting 200 days in early 1993 and 216 in 1994, before dipping to 185 in early 1995. Approval times for more complex goods exceed two years, running at 823 days in 1994. Some reviews take even longer, compared to an average of six to eight months in Europe. Naturally, the FDA’s response two years ago to criticism was to tighten its controls. Only after the 1994 election did the FDA make a concerted effort to reduce approval backlogs.
The ultimate victims of stifling FDA bureaucracy again are patients. New and improved medical products would enhance people’s lives in a number of areas, ranging from heart and coronary disease to ligament repair. Tens of thousands of lives could be saved; millions of people could enjoy a higher quality of life; billions of dollars could be saved. Unfortunately, federal regulation stands in the way of these advances.
Among the products delayed by the FDA are the Cook intracoronary stent, Heart Technology rotablator, and Interventional Technology atherectomy device, all recommended by a physician’s advisory panel. Dr. Richard Cummins, head of the American Heart Association’s emergency treatment committee, points to at least 1,000 unnecessary deaths from the agency’s hold-up of the shipment of Physio-Control (heart) defibrillators, which had already been approved for sale. An implantation coil for treating benign prostate swelling is available in Europe but not America. The Ambu CardioPump may increase the chances of surviving for a heart attack victim by 10 percent to 50 percent; manufactured in Denmark and available around the world, including Austria, where ambulances are required to carry it, and Chile, the device is banned by the FDA in America. Unnecessary deaths are probably running between 2,000 and 7,000 annually. Complains one analyst, it is as if the agency put up a sign that said “Do not resuscitate.”
Diabetics are waiting for approval of a noninvasive glucose sensor. Laser technology to remove corneal scars, available in 35 other nations, languished as the FDA’s ophthalmology panel met only once in 1992, failing to even consider Summit’s request for U.S. approval. Pediatric oxygenators are also available overseas, but not in the United States, because the small demand does not justify the expense of complying with FDA rules. The agency has seized an over-the-counter pain reliever, the Lido Pain Patch, even though its dosage of lidocaine is within FDA-approved levels. Dr. David Benditt, a medical professor at the University of Minnesota, criticizes “an FDA-instigated, several-year delay in the approval of transvenous implantable defibrillators for preventing cardiac arrests caused by ventricular fibrillation [which] has resulted in numerous patients being unnecessarily subjected to open-heart operations, with the inevitable risks and mortality.” The agency blocked the use of specialized baby ventilators, later backing down only after protests by physicians. A portable heart pump, manufactured in America, is available in Germany but not the United States.
On dubious evidence the FDA helped kill the market for silicone breast implants, ignoring the anguish of many female cancer patients. The Inventive Products Sensor Pad, a diagnostic test for breast cancer (which currently kills 46,000 a year), remains unavailable though produced in Canada for nine years and sold around the world, including in Japan. The FDA classified a simple “cap card” to recap needles with one hand as a Class III (potentially life-threatening) device; two years and $30,000 dollars later, the product remains unapproved. Richard Worland’s bipolar shoulder implant, developed in 1990, was approved by ten nations within two months, but remains unavailable here. Worland, who suffers from rheumatoid arthritis, may have to go to England to have his own invention implanted. FDA enforcement actions against established products, such as infant jet ventilators and muscle stimulators, may be responsible for hundreds or more avoidable deaths.
The case for reform is compelling. At the very least FDA decision-making should be streamlined. Another option would be to move towards the more decentralized system employed by the European Union. Even better would be to restrict the FDA to monitoring safety, leaving the question of effectiveness to patients and medical professionals. After all, pharmaceutical companies are not interested in promoting ineffective drugs; doing so would hurt sales and receive quick punishment by the marketplace.
Perhaps the best and simplest option would be to strip the FDA of its power to prohibit the introduction of new drugs. Suggests Sam Kazman of the Competitive Enterprise Institute:
There is, however, a simple way to preserve FDA’s criteria while eliminating the deadly costs of the current regime: change FDA’s veto power over new drugs to a system of certification. Let the agency continue to review safety and efficacy, but allow unapproved drugs, clearly labelled as such, to be available by prescription.
Such a system could allow patients, doctors, hospitals, and insurers to decide upon the use of pharmaceuticals and devices based upon a balancing of risks and costs in a competitive certification system, with testing performed by entities ranging from the FDA to Underwriters Laboratory, which currently sets 700 product standards, tests more than 16,500 types of products (and a total of 76,000 goods), and issues six billion UL marks. Indeed, 60 percent of pharmaceutical purchasers today are corporate enterprises, like HMOs. They could choose to rely upon FDA or foreign approval, private endorsement, industry recommendations, or whatever. And health-care providers could vary their decision based on the seriousness of the disease or condition being treated. Normal malpractice and product liability laws would apply. Making pharmaceutical purchases a private decision would not be a jump into the unknown. As Kazman points out, the “FDA, after all, does not approve surgical methods, yet we do not worry about podiatrists doing in-office brain transplants.”
Paternalism remains a powerful influence in Washington. But it is time for patients and doctors, insurers and hospitals, pharmaceutical firms and device manufacturers, senior citizens and healthy young people to together say “No more.” For years the system has seemingly “worked” despite stultifying regulation: highly competitive American firms have led the world in the discovery and marketing of new treatments and cures. But so much more could have been accomplished, and the U.S. government continues to put arbitrary roadblocks in the way of developing, testing, and marketing new drugs and devices. For too long too many people have unnecessarily suffered and died because of the FDA.