Latest Drugwonks' Blog

Elaine Schattner, a courageous and compassionate cancer survivor, physician and advocate has written a blog for Forbes entitled: “We Need To Tame The Price Of New Cancer Drugs” In the post she reports  on a presentation by Peter Bach (who she calls a drug pricing theorist!) about the clear and present danger of cancer drug prices and how nothing short of government set prices will make medicines affordable.   (I disagree with him on pricing but Dr. Bach is smart, articulate and creative.  And he is a Red Sox fan.  No one’s perfect.)

 Dr. Schattner writes that: “U.S. healthcare costs will approximate $3.41 trillion. Drug prices are a big part of that, Bach emphasized.”
Not really.   Even though cancer drugs are a bigger part of spending on cancer care, cancer spending as a percent of total health care spending has remained about 4.6 percent since 1965. 
If drug prices are a big part of the rise in overall health care spending, why has the percent spent on cancer care remained the same over time?  Similarly, spending on drugs as a part of all health care spending spiked in 1990 to about 11 percent (15 percent if you add drugs used in hospitals and outpatient settings) and has remained the same since then (with another spike due to Hep C drug spending in 2013).  The retail spending amount in 2014 is about $429 billion according to IMS.  Rebates and other discounts from drug prices are about $130 billion.  Most of that does NOT go to patients. 
Back to Dr. Bach:
“Although prescriptions drugs account for only 10% of national health expenditures, their prices are rising disproportionately. Bach showed a graph of cancer drug prices at the time of FDA approval, from 1965 to the present, demonstrating a 100-fold increase. “The y-axis is exponential,” he reminded the audience. The same graph indicates that since 1990, price tags for newly approved cancer drugs have gone up 10-fold.”
Two points. 
First, Prices are NOT rising disproportionately.  Especially when you back out rebates.  The chart below shows how most of the increase in drug prices driving Bach batty is in the form of rebates and discounts that do NOT go to patients.

In a reply to a tweet I sent to her about this trend, Dr. Schattner asked if it really made a difference if the price was set by insurers or drug companies. 
It does.
Schattner writes: “Bach referred to data from the Kaiser Family Foundation on rising premiums and high deductibles that affect 150 million non-elderly Americans who get insurance through employment. Many can’t afford out-of-pocket cancer drug costs until they meet their insurance deductibles, so they don’t take their meds, skimp on doses or wait before filling prescriptions. Even then, when companies charge over $100,000 per year per drug, and insured patients with cost-sharing plans are expected to pay some fraction of that, steep prices limit use.”
But as the chart below shows, Insurers are not only pocketing rebates and using them for everything other than reducing patient out of pocket costs.  They are increasing what patients have to pay as a percent of the retail drug price! 

Second, Dr. Bach’s comparison of cancer drug prices in 1960 and today is out of context and made to make an impact vs. making a substantive point.
For instance, Harvard tuition has increased by 145 percent from 1970 until today.

Or more to the point, the cost per cancer hospital discharge has increased (in unadjusted dollars) from $1778 in 1970 to $73379 in 2014.   That’s a 445 percent increase.
Hospitalization is a bigger contributor to health care cost.  But the interest and moral outrage about inpatients costs is nil compared to the time and emotion devoted to drug prices.

The reason for that is we pay more of the retail price of a drug on a regular basis than we pay for hospitalization on a less routine basis. 
Ironically, the use of new drugs has reduced the hospitalization (along with mortality rates and lost productivity) due to cancer as the
charts below demonstrate:


Schattner observes that “Prices are problematic at the group level, too. They’re a burden for public insurers such as Medicare. “These are serious numbers,” Bach said. In recent years, Medicare has been paying an increasing fraction of prescription drug costs. In private insurance networks, high medication prices drive up premiums and tend to reduce coverage for all participants. “Health insurance, although it’s been extended in the U.S., has beenstripped down in terms of what it delivers.”

Not true.   The share of the decline in hospitalization is due to the shift to outpatient procedures and most of it comes from substituting medicines for surgery, a trend that is associated with an increase in cancer survival and life expectancy.  
So how much could cancer cost if we had the same hospitalization rates in 2014 that we had in 1970 and at current charges per cancer hospitalization?   (I use charges vs costs because Dr. Bach uses retail drug prices.)   About $1 trillion dollars vs $100 billion:

Over time Frank Lichtenberg and others have shown that new cancer medicines explain from 60 to 90 percent of the decline in cancer death rates and is the main reason hospitalization costs have decline.   If Dr. Schattner or anyone can provide evidence of another reason, I’d be happy to see it.
Finally, the increase in cancer costs matched the overall increase in medical expenditures during the last 20 years.   The Bureau of Economic Analysis concluded that new medicines for cancer reduced the cost of treatment between 1990-2010.  One can only imagine what insurance premiums would be if we were spending $1 trillion on cancer hospitalizations alone.   So add profitability and lower insurance costs to the benefits new medicines generate.
Given what Bach presented, Dr. Schattner favors governments deciding what to pay for drugs based on a robust measure of value.  Well, it turns out that when the value parameters she believes Dr. Bach’s estimate of drug value (as well as ICER’s) are counted it would increase the cost per QALY threshold to about $250-300K.   That would make most, if not all cancer drugs a bargain, especially when rebates and discounts go to patients.  
I haven’t done all the math, but I also estimate that the rebates and discounts on the $18 billion or so spent on the kind of targeted drugs Bach believes will drive us into bankruptcy are about $2.4 billion.   Estimates derived from a recent Millman study of the drivers of cancer costs done for the Community Oncology Alliance suggest about 1.25 million people with cancer undergo active treatment each year.  I assume that half of these patients are likely to get targeted or immunotherapy and that $2 billion of the rebates are generated from such products.   That’s about $3800 per patient, enough to eliminate all but a few hundred dollars of out of pocket costs for those not protected from such a burden.
Yet, my guess is people still would want to solve for price by having the government negotiate prices. They support government price control (the euphemism is negotiation) of drug companies in the same of economic justice and are impelled by the feeling the industry as a whole generates excessive or windfall profits it doesn’t deserve.  As I pointed out in my last blog, price competition does not lead to lower prices in the long run since innovation – which requires more investment and higher costs – is the kind of competition that matters.
In any event, it should be noted that at present the government already negotiates drug prices through the VA, Medicare, Medicaid, the Public health service and the Defense Department.    (Average discount: 60 percent) And it should also be noted that such negotiations are always paired with limits on access (as they are in Europe) and that such limits on access such as cost sharing, step therapy and outright caps increase death and morbidity. 
If Dr. Schattner wants a kinder, gentler version of the cancer Abacus, she should bear in mind that there is no value framework in the world that does NOT limit access to reduce prices and does not reduce the pace of innovation.   Indeed, in the past Bach has argued against using higher priced drugs because they do not add more average survival to patients than older, less expensive drugs developed decades ago.
As the last chart shows, the impact of solving for price would be hundreds of thousands of additional cancer patients dying that are alive today.  Note that the steep decline in life years lost began as targeted medicines were introduced compared to what would have happened without new drugs.

 Source: The Impact of Pharmaceutical Innovation on Premature Cancer Mortality in Canada, 2000-2011
Solving for price exacts a high cost on society. 
From the pages of the Washington Examiner ...

Potential FDA chiefs eye faster drug approvals

Donald Trump's potential choices to lead the Food and Drug Administration have called for the agency to ramp up approval of new products, though in drastically different ways.

Two people have been floated as being under consideration to lead the agency: agency veteran and physician Scott Gottlieb and libertarian and investment firm director Jim O'Neill.

Both candidates reflect a desire by President-elect Trump to speed up approval of new products, albeit through different approaches. Trump didn't talk a lot about the FDA during the campaign, but he has said that the agency needs to cut red tape to get new products approved.

O'Neill is the managing director at the investment firm Mithril Capital, which was co-founded by Trump donor and Silicon Valley billionaire Peter Thiel. O'Neill also served as the deputy administrator in the Department of Health and Human Services during President George W. Bush's administration.

He previously has called on the FDA to approve drugs based solely on safety and not on effectiveness, a radical departure from the current approach.
The agency currently approves drugs based on whether they are safe and effective. However, it threads a fine line at times, balancing the risk of a drug versus the expected benefit, especially if it is a new or experimental treatment.

The agency this year approved an experimental therapy called Sarepta for the rare and deadly disorder Duchenne Muscular Dystrophy, but came under fire from consumer advocacy groups who say the agency should have rejected it because of serious safety concerns.

Gottlieb has called for a different regulatory approach at the agency, but hasn't gone to the same extremes as O'Neill.

In July, he advocated for clinical trials for drugs that treat rare diseases. He pointed to the 21st Century Cures Act, which Obama signed into law on Tuesday and would enable the agency to approve drugs using a different clinical endpoint called a surrogate measure.

"These are interim endpoints that can be used to more quickly gauge a medicine's benefit, such as measuring its ability to shrink a patient's liver rather than having to wait for kids to accrue enough disability to see if a drug can help them walk or breathe better," he wrote in the Chicago Tribune.
He also said the law nudges the FDA to make wider use of "adaptive" trials that test a drug on a smaller group of patients.

An agency veteran who worked with Gottlieb said that having support from the agency's career staff is vitally important to getting goals accomplished.
"It is important for the commissioner to be a change agent, not a bomb thrower," said Peter Pitts, a former associate commissioner at the FDA and the president and CEO of the Center for Medicine in the Public Interest. "If you bring in someone who is aggressively contrary to agency culture, those [career staff] will simply wait him out."

However, if a commissioner can get buy-in from career staff who actually review products, it can "help him accomplish it," Pitts said.

Public Citizen, a consumer advocacy group, has problems with both potential picks.

"I don't know if there is any reason to guess that the president has a real vision for the FDA besides the broad brush deregulate," said group President Robert Weissman. "I think that both of these potential candidates are in line with that. Both of them on the pharma side particularly aim to lower the standard of review for new drugs, presumably for existing drugs as well."

It is not clear who Trump will pick for the FDA. However, several other Cabinet picks have shown that Trump is willing to tap people who aim to radically shake up the agencies they are set to lead.

For instance, Trump tapped former Texas Gov. Rick Perry to lead the Energy Department, an agency he pledged to eliminate while running for president in 2012.

He also chose Oklahoma Attorney General Scott Pruitt to lead the Environmental Protection Agency. Pruitt sued the agency on multiple occasions over several regulations and said that people "are tired of seeing billions of dollars drained from our economy due to unnecessary EPA regulations."

Whomever Trump chooses, Pitts said that he is heartened that names are at least being floated early in the transition.

"A lot of times it is left as an afterthought," he said.
Note:  Today's blog is from the very talented Nicole Gray, formerly a reporter for BioPharmaDive and now an independent journalist who is covering and commenting on the passage and implementation of the 21st Century Cures Act in terms of how it will affect the patient groups that supported it.   Of note is the role The Critical Path Institute will play in ensuring that many of the objectives enshrined in the legislation are realized. 

Yesterday the Alzheimer’s Association was one of hundreds of patient/disease advocacy groups celebrating passage of the Cures Act. From the beginning, when Representatives Fred Upton and Diane DeGette introduced the bill in May 2015, the association rallied long and hard for this legislation, driven by the sense of urgency around Alzheimer’s disease (AD)—the leading cause of death from a disease that can’t be prevented or cured; the most expensive disease in the U.S. and a disease associated with a tremendous personal burden borne by patients and their families.

When Lilly canceled the solanezumab development program last month, it was disappointing, but not a complete surprise. Unlike oncology, AD drug development has been a battlefield where there have been very few victories. 

Between 2000 and 2012, there were 413 AD trials, including 83 phase III trials. While some of these studies tested disease-modifying or immunologic drugs, most focused on treating symptoms. The overall failure rate was 99.6%. There hasn’t been a new drug approved for AD since 2003 when Namenda was approved for symptomatic treatment of moderate-to-severe AD. 

Despite the high level of risk associated with AD drug development, committed companies continue to pursue R&D in this space, but it’s still not enough. As of December 2016, there are 23 drugs in phase 3 development for AD and 134 active trials---a mere pittance compared with oncology in which there are close to 5,000 active drug trials in process, and more recruiting. 

As Jeffrey Cummings from the Center for Brain Health at the Cleveland Clinic noted earlier this year, “Overall, the ecosystem of AD drug development must be altered to yield more targets and more candidate therapies if a robust pipeline of therapies is to be established.”
That’s where the Cures Act comes in. The AD research community stands to benefit in many ways from this eleventh-hour bipartisan feat, especially from the $1.6 billion Brain Research through Advancing Innovative Neurotechnologies (BRAIN) initiative and the funding of the EUREKA prize competition to spur innovation in AD research.  

Cures is being hailed as groundbreaking legislation, but for AD researchers, many of the law’s built-in initiatives reflect current best practices in Alzheimer’s R&D---large-scale data-sharing, innovative trials design and mega-collaboration. The day after Cures passed in the Senate, the AD research community convened in San Diego at CTAD to listen to a post-mortem recap from Lilly on sola, as well as more encouraging updates from companies like Biogen, which presented phase 1B data showing that adacanumab successfully reduced beta-amyloid plaques in the brains of AD patients; EIP Pharma, which highlighted positive phase 2A data on neflamapidmod in patients with mild cognitive impairment; Eisai with positive phase 1B data on its BACE inhibitor and Sangamo Biosciences, which presented positive, very early-stage data on its gene therapy.

On the last day of the conference, Anavex Life Sciences, a small company with a first-in-class small-molecule, sigma-1 receptor agonist in phase 2A development for mild-to-moderate AD, presented safety and exploratory efficacy data from a 32-patient study on ANAVEX 2-73.  Phase 2A, 57-week data demonstrated a favorable safety and tolerability profile, in addition to positive functional and behavioral outcomes. There were significant improvements in insomnia, depression and agitation, and patients reported feeling happier, being able to play golf again, enjoying international travel and even having more compassion for children.

The presentation’s high point was the cognition data. The data showed early signs of a disease-modifying effect when ANAVEX 2-73 was compared with the current standard of care, with drug-related improvements in attention, working memory, verbal learning and other cognitive domains, compared with declines in the standard-of-care population. And when treated patients were tracked based on MMSE/ADL/CogState scores, after 57 weeks, the scores hovered right around baseline, suggesting cognitive stability.

“This is the first drug to demonstrate statistically significant improvement in cognitive domains. We were able to learn from the vast data available from other AD trials,” said Christopher Missling, PhD, CEO of Anavex.  “We learned from others’ failures and we were able to factor everything that we know about this disease into our development process.”

As a small company, Anavex has been able to leverage data made available through the Critical Path Institute’s Coalition Against Major Diseases (CAMD) to inform clinical trial design. CAMD facilitates sharing of precompetitive patient-level data from legacy clinical trials, and supported development of a clinical trial simulation tool for AD. 

Because of collaborative culture of the AD research community, and the groundwork laid by CPI and other stakeholders, Anavex was able to successfully use adaptive clinical trial design to test their drug in 32 patients and show a statistically significant effect sufficient to justify moving into phase III. 

The Cures Act is intended to create more opportunities for companies to find methods to determine early on whether a drug has what it takes to cross the finish line---and when a drug shows real potential, and meets rigorous safety standards, new drug-development tools will be available to make the pathway to approval more straightforward. 

“I think the legislation is extremely important because it helps to allocate resources. Time is always lost in the interfaces between companies and the FDA. Every day counts,” said Missling.

In reality, implementation of Cures will be slow-moving. Nonetheless, the additional funding and adoption of more innovate trial design could move the target 2025 date for approval of a disease-modifying AD treatment up a year or two, possibly more. 
That’s what twenty-first century victories are made of---pragmatic, collaborative and relentless research that uses new technologies and reserves of knowledge to accelerate drug development and approval. 

Gray Goose

  • 12.14.2016
  • Peter Pitts
My letter to the NY Times ...

To the editor:

Clyde Haberman, in Lives and Profits in the Balance: The High Stakes of Medical Patents (NYT, December 11, 2016) raises an important issue – and then gets it wrong. Patents save lives and enhance the value of medicines. As Abraham Lincoln said, “Patents add the fuel of interest to the passion of genius.” Mr. Haberman points to the Bayh/Dole Act, and suggests that the innovator pharmaceutical industry is getting a free ride on R&D but, according to an article in Health Affairs, drugs with public-sector patents accounted for only 2.5 percent of US prescription drug spending. Also, Haberman refers to the Hepatitis C medicine Sovaldi as costing $1000 per pill. This is incorrect. Every major insurance company and pharmacy benefit manager (PBM) receives significant double-digit discounts from the manufacturer and now, with competition from other innovator companies, prices are dropping even further. That's the power of patents in a free market. The more important question is, why doesn't this result in lower co-pays for consumers? “Facts,” as John Adams said, “are pesky things.”

"Elusive" RWE

  • 12.08.2016
  • Peter Pitts
Pre PDUFA and post 21st Century Cures vote, BioCentury reports that ...

FDA cautious about real-world evidence

A great deal of work will be required to pave the road for the use of real world evidence in regulatory decisions, wrote FDA Commissioner Robert Califf and 14 other FDA staff members in a commentary published Thursday in the New England Journal of Medicine. The article sets a tone of caution just as the 21st Century Cures Act and PDUFA reauthorization goals commit the agency to create a framework for the use of real-world evidence to make decisions about post-approval studies of drugs and their approval in supplementary indications.

The article describes the definition of real-world evidence as “elusive.” The authors believe it refers to healthcare information "derived from multiple sources outside typical clinical research settings, including electronic health records (EHRs), claims and billing data, product and disease registries, and data gathered through personal devices and health applications.”

It warns that the “allure of analyzing existing data may lead to flawed conclusions," and says this “concern is especially salient in light of the growing proliferation of precision molecular medicine and treatments for rare diseases, many of which are anticipated to undergo review in accelerated approval programs.”

Real-world evidence could play an important role in reviewing such applications, the authors note, which adds to the urgency of developing rigorous methods for collecting and analyzing such information. The authors express optimism about "long-term prospects for the evolution of mature, robust methodologic approaches to the incorporation of real-world evidence into therapeutic development and evaluation," but emphasize that "caution is still needed, and expectations of 'quick wins' resulting from the use of such evidence should be tempered accordingly.

So-called Progressives vs Medical Progress

  • 12.08.2016
  • Robert Goldberg
Progressives Against Patients

This week the House and Senate overwhelmingly passed the 21st Century Cures Act.  The legislation increases National Institutes of Health funding, maintains the Cancer Moonshot and Precision Medicine initiatives and provides additional funding for the Food and Drug Administration to support the greater use of information from precision medicine and patient reported outcomes in determining the benefits and risks of new medicines and medical devices.

According to an article by Ed Silverman at STAT: “some consumer advocates and academics warn the legislation contains a provision that may usher in a new era of lower approval standards. 

Here’s why: The bill requires the Food and Drug Administration to develop a program for evaluating the use of so-called “real world evidence” for approving additional uses of medicines, as well as for any follow-up studies that may be required.”

Huh?  How does capturing evidence about the actual clinical risks and benefits of medicines in specific groups of patients translate into lower approval standards.  

Let’s give those who opposed the bill a bit of credit and presume they are uninformed instead of just crazy.  They have no evidence to show that randomized controlled trials guarantee safety or are better at demonstrating effectiveness.  On the contrary, most safety problems are discovered in a haphazard way through adverse event reporting after thousands of uses.  And real world use of medicines provides not information that can be matched against thousands of other data points that randomized trials do not capture.  

In opposing the bill, Public Citizen proclaimed “later-stage “Phase III” trials that have long been the gold standard for drug approval. Well-designed randomized controlled Phase III clinical trials are critical for weeding out bad drugs; more than a third of the drugs that enter Phase III testing fail to gain FDA approval.”

But the “failure” of Phase III trials have little to do with whether or not the drug is safe or even effectiveness at time.  On the contrary, “failure” is a product of being unable to identify reasons for ineffectiveness that would be more accurately and quickly discovered in observational studies.  

Public Citizen has used the gold standard as apolitical tool when convenient.  Michael Carome, MD director of Public Citizen's Health Research Group opposed the approval of Exondys 51 for Duchenne Muscular Dystrophy claiming “It would be a mistake for the FDA to approve this…. It would be giving in to political pressure and essentially eviscerating their standard for approval.... To put out a drug that’s not effective isn’t helping anyone.”   This from a group that has recommended not use ANY new diabetes drug introduced over the past 20 years. 

Ironically, Public Citizen, which now claims randomized trials are the gold standard had fought against their use in testing the effectiveness of HIV drugs in pregnant women living in developing countries.  And some of the groups that were part of the anti-Cures act cabal like Annie Appleseed have pushed for using alternative treatments for cancer that of course undergo no FDA testing at all.  

Similarly, Cures opponents deliberately mislead and misrepresented the truth when they claimed surrogate endpoints -- physical changes or measures that are reasonably likely to predict clinical benefit – leads to ineffective drugs.  Such surrogates are used mostly in a serious or life-threatening disease that lacks good therapies.  As FDA’s Janet Woodcock noted in congressional testimony: “During the last five years (2010-2014), out of a total of 197 novel drugs and original biologics approved across FDA, 84 (43 percent) relied upon a surrogate endpoint for approval. Most of these surrogates have gone on to be well-established tools for measuring drug response or the foundation for biomarkers.”   The talking about weaker standards is as devoid of evidence as it is full of malice. 

The newly found support of randomized trials has nothing to so with watering down FDA standards. It has everything to do with the belief that real world evidence and patient involvement will lead to an increase in the development and use of new medicines and – by extension – benefit drug companies who have a financial interest in getting drugs approved.  

Diane Zuckerman, the President of the far left foundation and trial attorney funded National Center for Health Research -- a woman with little insight and even less expertise about drug development -- pretends to stand up for patients.   She is part of a smear campaign against the hundreds of patient groups that supported Cures Acts, accusing them of being tools of the drug industry.   I will write more on this slander in a future blog.  But for now, let me note that Zuckerman and others like her believe patients can’t be trusted to make such decisions because hope (or pharma funding) clouds their judgment. 

Increasingly medical advances determine not only whether we live or die, but how we will live and die.  Ordinary citizens, those who are potential patients and the friends and relatives of such have as much of a right to determine a drug’s approval as any trial attorney or far left funded lobbying organization.   The anti-Cures Act cabal is more interested in hurting drug companies than in saving lives.   
Via Stat News

President-elect Donald Trump is weighing naming as Food and Drug Administration commissioner a staunch libertarian who has called for eliminating the agency’s mandate to determine whether new medicines are effective before approving them for sale.

“Let people start using them, at their own risk,” the candidate, Jim O’Neill, said in a 2014 speech to a biotech group.

O’Neill, has also called for paying organ donors and setting up libertarian societies at sea — and has said he was surprised to discover that FDA regulators actually enjoy science and like working to fight disease.

A source close to the Trump transition team told STAT that Peter Thiel, the billionaire Trump donor who is helping shape the new administration, is pushing for the FDA appointment for O’Neill, his managing director at Mithril Capital Management.

Trump’s focus on O’Neill was first reported Wednesday morning by Bloomberg.

O’Neill would be an unusual choice. He is not a physician, and lacks the strong science background that nearly all former commissioners have had in recent years.

A graduate of Yale University, with a master’s degree from the University of Chicago, O’Neill went to work at the Department of Health and Human Services in 2002, after a stint as speechwriter at the Department of Education. He worked his way up to principal associate deputy secretary, where he advised the HHS Secretary on all areas of policy, according to his LinkedIn page.

O’Neill first worked with Thiel at Clarium Capital Management, and also ran the Thiel Foundation and Breakout Labs, which funds early-stage companies in areas ranging from food science to biomedicine to clean energy. He is a promoter of anti-aging treatments and technology.

O’Neill also serves on the board of the Seasteading Institute, an organization that aims to create its own sea-based floating communities, on the theory that existing governments are woefully ineffective. “Obsolete political systems conceived in previous centuries are ill-equipped to unleash the enormous opportunities in twenty-first century innovation,” the Seasteading website notes.

O’Neill is not well known in Washington, but has been a frequent speaker on the biotech circuit.

In 2014, in a talk to a group gathered to discuss regenerative medicine, he recalled his days at HHS and expressed disdain for the FDA’s process.
“As a libertarian, I was inclined to believe that the regulatory costs that the FDA impose kill a lot of people and provide a lot of harm to the economy, and I don’t deny that… but one thing that surprised me is that the actual human beings at the Food and Drug Administration like science; they like curing disease and they actually like approving drugs and devices and biologics.”

The problem, O’Neill told the group, is the overall structure and incentives of the regulatory system.

“Every time the FDA commissioner approves something and someone gets sick who used it, the commissioner is summoned to a congressional committee that also controls his budget and forced to testify under oath, why he made this rash decision…It’s a miserable process,” O’Neill said.

O’Neill has proposed that the FDA only require companies to prove drugs are safe before they are sold – not that they actually work.

O’Neill has also said that organ donors should be allowed to be paid. “There are plenty of healthy spare kidneys walking around, unused,” he said in a speech at a 2009 Seasteading conference.

His participation in the Seasteading movement might be a sensitive topic, too. The video of his speech was available on The Seasteading Institute’s website in the afternoon, but by evening, it had disappeared.

In the speech, which is still available elsewhere, O’Neill said that “we can all wish that existing governments will somehow stumble into freedom, but if we want to achieve freedom, seasteads are by far the best prospect.”

Neither O’Neill, Thiel or Trump transition team staffers returned calls seeking comment.

Also under consideration for the FDA job: Dr. Scott Gottlieb, a former FDA deputy commissioner.

Gottlieb, a resident fellow at the American Enterprise Institute, was a senior adviser to the presidential campaign of Wisconsin Governor Scott Walker.  A clinical assistant professor at the NYU School of Medicine, he is a venture partner at the venture capital firm New Enterprise Associates, and a senior principal at TR Winston, a healthcare focused merchant and investment bank. He has testified before Congress 18 times on health and regulatory issues.

Gottlieb was recently named to the transition team.

WSJ Gets It Half Right On Drug Prices

  • 12.07.2016
  • Robert Goldberg
Thomas Sowell observed: “A cynic is said to be someone who knows the price of everything and the value of nothing. The same could be said of economic illiterates, many of whom are in politics and the media”.

But often what is perceived as illiteracy is really confirmation basis or just not understanding.  An example of the latter is WSJ reproter Jonathan Rockoff’s article “Drugmakers Find Competition Doesn’t Keep a Lid on Prices”.  Rockoff's article does transcend the usual narrative:that drug prices don’t decline in the face of competition because only drug companies can defy market forces and pass added costs onto consumers.  Rockoff acknowledges that drug companies are not the only culprits.  In making this point, he still implies competition should reduce drug prices without regard to the costs associated with producing goods or services.   In doing so, he perpetuates the meme that drug companies are so profitable they can cut prices and generate new medicines. 

Rockoff apparently has not looked at the relationship between competition, prices and production costs in other industries.

For example, when has Apple or Microsoft or Google engaged in a price war leading to lower prices over the long run? Have cable rates fallen in response to other ways of watching movies, tv shows, etc?   On the contrary, they have not.  Similarly, has Netflix or Amazon or Hulu reduced their prices as the battle for broadband viewership heat up?  

Have the prices hospitals and insurance companies charge fallen?  How about the cost of college? Or closer to home, why has the Wall Street Journal continued to raise its newsstand and digital subscription prices?  Heck, WSJ is laying off a bunch of high paid writers. Shouldn't prices go lower, not higher?   And why is the renewal price higher than the introductory price.  Shouldn't the $99 price be standard? 

The fact is prices are more than a response to competition.  And competition is rarely only about prices.  WSJ increases prices because the costs of staying in business and putting out a good product increase.   Netflix could have continued to charge 6.99 if it didn’t want to invest in new movies and original programming.  Would people be satisfied watching reruns of Law and Order?  

This dynamic is separate and apart from the increase in list prices that fuel higher rebates for insurers and PBMs.    But not totally.  List prices rise in response to the added cost of rebates and other discounts drug companies must give to get market share.  

As Sowell points out (should he really have to?) “Costs are not just prices arbitrarily put on things. Whether the economic system has prices or not, there are real costs for everything. Whether under capitalism, socialism, feudalism or any other system, the real cost of building a bridge are all the homes, factories and other structures that could have been built with the same labor and materials that went into building the bridge.’

To be sure, rebates and discounts don’t mostly flow to the consumers of the drugs generating rebates and discounts.  But that is due to the control insurers and PBMs have over retail pricing.  This is a huge problem as I have pointed out time and again.  Until recently most reporters were unaware of how rebates worked.  (Credit due to me and Peter for doing the explaining!) 

None of the above changes the fact that lower prices can often lead to less innovation across industries or that prices do reflect value in market economies. Generic drug companies don’t innovate and often stop producing essential medicines that go off patent because prices are often drop below increasing production costs. 

Rockoff, like many of us, seek explanations when competition doesn't lead to lower prices.   The key is to look deeper into how competition sustains innovation.  Companies compete on quality, on novelty and on value.  Prices reflect what those qualities or values are as well as the cost of making them.   If we want 1990s prices for anything, college, cellphones or drugs, be prepared for 1990s technology.  
A footnote:  Rockoff’s piece is featured in a WSJ weekly business ethics course reviewed by OC Ferrel, a professor of business ethics at Belmont University.  Ferrel writes: “Students should understand that 'fair' competition should result in competitive or lower prices. This phenomena (sic) is causing increased burden on the health care system and should have public policy consequences.”

Maybe Sowell was not tough enough.
The 21st Century Cures Act provides a legal foundation for regulatory innovations including approving supplemental indications based on real-world evidence and approving antimicrobial drugs for limited populations. The bill also would help FDA recruit and retain staff by creating mechanisms for it to pay salaries that are competitive with those offered in the private sector.

Other key provisions include:

* Real World Evidence. Require FDA to establish a framework for use of real-world evidence to approve supplemental indications and satisfy post-approval requirements. Timeframe: Within 2 years

* Healthcare Economic Information. Clarify ability of manufacturers to discuss pharmacoeconomic data with payers, formulary committees and others. Timeframe: Immediate

* Limited Population Pathway. Allow limited approval of antimicrobial drugs for life-threatening infections; require labeling and advertising to include “Limited Population” language. Timeframe: Immediate

* Summary Level Review. Allow approval of new indications based on data summaries from sponsors (sponsors must also submit full data). Timeframe: Immediate

* Accelerated Approval for Regenerative Advanced Therapies. Create regenerative advanced therapy designation that allows accelerated approval and use of clinical evidence, clinical studies, registries or other real-world evidence to satisfy post-approval requirements; require FDA to explain decision not to grant regenerative advanced therapy designation. Timeframe: Immediate

* Qualification of Drug Development Tools. Establish review pathway for biomarkers and other drug development tools to shorten development and reduce failure rate. Timeline: Draft guidance within 3 years; final guidance 6 months after end of comment period

* Reauthorization of Program to Encourage Treatments for Rare Pediatric Diseases. Reauthorize the pediatric rare disease Priority Review voucher program until 2020; a drug designated by Sept. 30, 2020 could receive a voucher if approved before Sept. 30, 2022. Timeframe: Immediate

* Silvio O. Conte Senior Biomedical Research Service. Increase senior biomedical research service positions to 2,000 from 500, allow FDA to deploy biomedical research service members for product assessments, increase maximum salary to president’s salary. Timeframe: Immediate

* Hiring Authority for Scientific, Technical, and Professional Personnel. Allow FDA commissioner to set salaries for scientific, technical, or professional positions at up to the president’s salary. Timeframe: Immediate

* Patient Experience Data. Require statement upon drug approval about FDA’s use of patient experience data collected by patients, caregivers and their representatives; disease research foundations; researchers; and drug manufacturers. Timeframe: 180 days

* Patient-Focused Drug Development Guidance. Require FDA guidance on how to collect patient experience data for use in regulatory decisions, how patients can submit proposals and how FDA will respond to them, and how FDA plans to use such data. Timeline: Initial plan in 180 days; draft guidance within 18 months; revised or final guidance 18 months after end of comment period

* Expanded Access Policy. Require companies to have publicly accessible compassionate use policies for investigational drugs treating serious or life-threatening conditions. Timeline: 60 days

On the down side, the $500 million of funding is not mandatory. Stay tuned.

For an excellent recap of the legislation, have a look at BioCentury’s Steve Usdin’s excellent article. Per Usdin, “The political process has created a consensus bill that lacks the kind of paradigm-shifting changes its authors promised. But Cures would produce real, though modest, forward motion in several areas that are important for translating scientific advances into new therapies.”

And, importantly, “Critics of the 21st Century Cures Act have warned that it would erode approval standards by allowing FDA to approve drugs based on anecdotal evidence. This is a huge exaggeration. What Cures would do is start FDA down the long road toward relying on real-world evidence to support selected regulatory decisions.”


The best way to measure the value of medical progress is to find out what people fighting serious chronic illnesses do as they get stronger and healthier.   

When two people going on different journeys in overcoming potentially life threatening diseases and wind up on a common mission --  to battle against health care policies that deny well-being to others --  you know that value cannot be defined simply as what saves health insurers money. 

Don Wright was diagnosed with multiple myeloma in 2003 just ran his 100th marathon.   He has been taking one pill a day since then to keep the disease in check and now, with the latest addition of another medicine, he is making his centennial run without missing a stride.   When he not running or practicing law, Don provides other people with cancer support and guidance.  

Dani Yevsa was diagnosed with psoriatic arthritis. Denied newer medicines by her insurer, she had to try older drugs first. Unable to move, let alone work, her husband quite his job to care for their four children.   To get the care and medicine they needed to stay alive, went on welfare.   Medicaid where she was forced to fail on three treatments that made her sicker, not better.   
She is finally on medications her doctor prescribed.  

Both Don and Dani took different approaches to the same path.  They are making thousands of patients around America about an insurance funded organization called The Institute for Clinical and Economic Review (ICER).  ICER states it is “a trustworthy, independent source to help assess how valuable a new drug really is.”  And it claims its goal is to make innovative drugs affordable to patients and insurers.  

Except that ICER has decided Don and Dani should only get the older drugs that would have left him disabled or dead.

ICER is deciding for Don, Dani and millions of other patients how much their lives are worth, not the other way around.  And ICER has decided that the benefits new drugs provide healthy people are MORE valuable than life-years gained by those who are chronically ill or disabled. Similarly, Dani and Don are worth less according to ICER’s economic assumptions, because they are less likely to get as much benefit from medicines than people with more treatable conditions.  And finally, ICER assumes that future benefits are less valuable to Dani and Don than to others.   

So it’s no surprise that ICER concludes every new medicine isn’t worth paying for unless they are deeply discounted off retail price and save money by reducing the use of other medical services.  

ICER responds that it’s trying to find prices that patients can afford first and foremost.  But the deeper discounts they recommend don't make medicines affordable or free up cash. In the real world of how PBMs and insurers price drugs, the savings go to PBMs and insurers, not patients. At the same time, insures overcharge customers for prescription drugs by making them pay up to 50 percent of the retail price of the drug.  ICER has issued over a dozen studies and never once wrote or spoke about passing these savings to the patients.  

Additionally, ICER suggests that to save even more money, insurers limit the number of people who have access to these new life extending medicines.  ICER believes that spending more than $900 million a year on a new medicine should set off alarm bells that strong action – capping how many people can get the novel treatments – must be taken.   For psoriasis, ICER concludes that health plans can only cover about 35 percent of the 183000 people diagnosed with psoriasis could be treated with before potential budget impact reaches $904 million.  For multiple myeloma, ICER caps access at 25 percent.

That means they before they can get these new drugs, if ever, they have to take older drugs and get sicker.   That means, over 5 years, ICER would deny 44000 people with myeloma a second and third chance at life and cost 88000 life years. Over the same time period, given the mortality rate associated with older psoriasis drugs, about 52000 life years would be lost.   Dead patients cost nothing. 

Don and Dani and others already pay thousands in premiums and taxes only to be denied new medicines based on the kind of rationalizations ICER produces. They have ICER in their sights because the more its recommendations spread, the more money health plans make at the expense of people they often impoverish when they are most vulnerable. 

ICER defines value as what’s most profitable for PBMs and health plans. It devalues what makes medical progress so important: When you’re seriously sick, it’s hard to plan or hope. Our dreams our diminished and deferred.  We are forced to forsake our full potential. 

ICER claims such benefits can’t be counted because they can’t be quantified.  I think we can easily measure the value of medical progress: Value is what Don has achieved, what Dani has fought for and the path they are forging for everyone who is or may be forced to fight disease

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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