Increasing Access to Pharmaceuticals; D. Bandow

Applying these principles to prescription drugs and medical devices would be partic ularly beneficial for Americans. Today the Food and Drug Administration (FDA) both discourages the development of new phar maceuticals and medical products and in creases their cost. Simply relaxing Wash ington'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 healthcare costs. 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 Foun dation). Everyone, except, perhaps, a couple thou sand federal bureaucrats, would gain.

Benefitsof Pharmaceuticals The wide availability of even expensive drugs has helped ameliorate and cure dis ease. Pharmaceuticals conquered a number of deadly conditions, such as tuberculosis; tranquilizers and polio vaccines offered sim ilarly dramatic benefits. In this way, drugs contributed to the increase in life expect ancy from 54 in 1920to 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 in stance, dissolves gallstones, and thereby saves an estimated $2 billion annually be cause 350,000 patients use it. The beta blocker Timolol reduces the number of sec ond 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 $40,000a patient.

The potential for even greater savings from pharmaceuticals has been masked by 93 94 THE FREEMAN • FEBRUARY 1996 the larger problem of third party healthcare payment, through Medicare, Medicaid, and tax-induced comprehensive private insur ance. 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 sys tem encourages reliance on more expensive, alternative treatments, like hospitalization and surgery. Analysts Gary and Aldona Robbins figure that' a consistent reimburse ment scheme would increase drug outlays by 45 percent but cut hospital expenditures by one-third. Overall, healthcare 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 develop ment of products that would save lives and lower overall healthcare 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 re leased 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 per formed its duties relatively expeditiously until 1962. Then Congress, after thalidomide use abroad generated birth defects, empow ered 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 author ity in pharmaceuticals from market mechanisms to a centralized regulatory authority. "

Lengthening Time Lag Unfortunately, the seemingly purposeless requirement that firms demonstrate effi cacy-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 nec essary to win approval of new drugs. By 1967 the average review time for a drug application had more than tripled. Con gress' sbias 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 prob lem, that the FDA has created an unneces sarily cumbersome and expensive regula tory process. Drug development costs, which now average $427 million, more than doubled between 1963-1975and 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 bur densome 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 diver sion of resources into unregulated efforts non-R&D expenditures, such as promo tion, 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 introINCREASING ACCESS TO PHARMACEUTICALS 95 duction 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 be tween 1962 and 1971 in only one nation, 77 were available in Britain. The FDA appar ently 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 con trasted with the experience of every other medically modern nation and with the ex perience of other divisions of the FDA." Between 1977 and 1987, of 204 new drugs introduced in America, 114were 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 devel opment times ran 100 percent and 75 per cent, respectively, higher in America than in other industrialized states. Of 150new 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. Suffering People The consequences of the FDA's bureau cratic 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 200,000Ameri cans over the past 30 years. That figure does not include deaths that might have been pre vented 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 pol icy 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 100,000lives. • The FDA's two-year delay in approv ing streptokinase, which sharply reduces death rates after heart attacks, probably cost 22,000 lives. • Even more bizarrely, the agency dith ered 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 Amer ica. 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 antibacte rial drug Depra. • The FDA delay in approving Interleu kin-2, for use in combatting once untreat able metastatic kidney cancer, probably left 3,500patients dead. The drug was available in nine European nations before America. • Between 8,000 and 15,000people prob ably died waiting for misoprostol, a drug to prevent gastric ulcers. The drug was first 96 THE FREEMAN. FEBRUARY 1996 available in 43 other countries, some as early as three years before the FDA's ap proval 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 Clora zil, useful in treating schizophrenics. As a result, as many as a quarter of a million people suffered despite the product's avail ability for 20 years in Europe.

• Even more people suffered and con tinue to suffer moderate inconvenience from lack of access to other drugs-anesthetics, antibacterial compounds, vaccines, asthma medications, and many others. Medical Devices Manufacturers of medical devices face similar problems as drugmakers. These products are often far more expensive than pharmaceuticals, but offer enormous bene fits to patients-like a noninvasive, virtual reality colonoscopy. Alas, band-aids, nu clear magnetic resonance machines, and more than 40,000 other products come un der the purview of the FDA. The agency also controls changes in existing products and even the manufacturing process, treat ing everything like a new product. Although federal rules are allegedly in tended to serve health purposes, Robert Higgs of the Independent Institute ob serves: "Medical device regulation in the United States during the past 30 years has been driven mainly by political forces, es pecially by the reaction of members of Congress and FDA officials to shocking or scandalous revelations widely disseminated by the news media." Decades after Con gress broadened the agency's authority to devices, the FDA had yet to finish setting standards to categorizeproducts by riskiness.

The FDA dawdled as huge application backlogs developed. The number of approv als 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 com plex 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 1994election did the FDA make a concerted effort to reduce approval backlogs. Ultimate Victims The ultimate victims of stifling FDA bu reaucracy again are patients. New and im proved 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 oflife; 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 recom mended 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 unnec essary deaths from the agency's hold-up of the shipment of Physio-Control (heart) de fibrillators, which had already been ap proved for sale. An implantation coil for treating benign prostate swellingis 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 Den mark and available around the world, in cluding Austria, where ambulances are re quired to carry it, and Chile, the device is banned by the FDA in America. Unnecessary deaths are probably running between 2,000 and 7,000annually. Complainsone analyst, it The Foundation for Economic Education Irvington-on-Hudson, New York 10533 Tel. (914) 591-7230 Fax (914) 591-8910 E-mail: freeman@westnet.com February 1996 Machiavellian Politics T he morality of an action depends upon the motive from which we act.

If we deny ourselves for the benefit of a needy person, we may experience the joys of charity. If we seek to impress our friends, we may act from ostentation and pride. If we seize income and wealth from some people and share the take with other people, we engage in Robin-Hood plun der. If we hasten to proclaim the giving to the world and expect to be rewarded with public acclaim and election, we are in poli tics. Politics is a term of many meanings and diverse connotations, referring to the art of political administration, the policies, goals or affairs of a government, the methods or tactics involved in managing an associa tion, and many other activities. Wherever there is government, politics makes its appearance. It is found in democratic soci eties as well as absolute monarchies and the most ruthless totalitarian states. In the latter the dictator is the sole politician; he dispenses spoils and privileges and metes out exaction and punishment according to his discretion. In a democracy every citi zen has the legal right to participate in poli tics. Politics is a game in which prizes are distributed and burdens are imposed according to skillful use of pressures and counterpressures. Importunity may pre vail over reason, expedience over evidence, and power over justice. Many politicians practice their craft according to rules and principles formulated by Machiavelli.

Niccolo Machiavelli was an eminent Italian author and statesman who in his best-known work, The Prince,described the means by which government may gain and maintain its power. His "ideal" government was ever scheming and calculating about political gain and authority. Machiavelli's persuasion differed materially from that of earlier writers: he rejected the ideal and moral and preferred the real and practical. He allowed the conclusion that politics has nothing to do with morals, ethics, and reli gion, and that it is incapable of observing all the rules of Judea-Christian morality. In the footsteps of Machiavelli many American politicians seek to gain the sup port of the electorate by any conceivable methods. They chatter, coax, and cajole, and if this is ineffective, they pretend, deceive, and promise the world. Promises are useful things, both to keep and, when expedient, to break. Since people are taken in by appearance, politicians appear devout and loyal; yet, in political theory, it is better to be a clever winner than to be a devout loser. Indeed, many American politicians are instinctively Machiavellian, denying the relevance of morality in politi cal affairs and holding that craft and. deceit are justified in pursuing and maintaining political power.

The Machiavellian inclinations of many American politicians seek and find intel lectual support from the people who would make government the arbiter of economic life. Many academics would place politicians and their appointees, gov ernment officials, in the center of the social and economic order, directing and regulat ing the production process, fixing prices and "redistributing" income. Once in power and at the levers of political control, MC1chiavellianpoliticians are likely to serve their own selfish ends. They seek success by saying what people believe, or can be made to believe, rather than what is demonstrably true. They think of the next election, rather than of the next generation. They look for the success of their party rather than that of their fellowmen. They grant benefits and confer entitlements to the most numerous class of voters, who in turn, pledge their votes for election and re election. At the same time they impose financial burdens on less numerous classes of citizens who can be ignored at the polls.

Posturing as concerned patriarchs, politicians guide and direct their elec torates to the benefit and entitlement troughs. They publicly defend the troughs and loudly cheer the imbibers. Many champion the cause of senior citizens who, in American political life, are first in line. Others plead for special favors for racial and ethnic minorities, for women, work ers, farmers, and many others. Unfortunately, it is not in the power of government to make everyone more pros perous. Government only can raise the income of one person by taking from another. The taking and giving are not even a zero net game; they require an elab orate apparatus of transfer that may con sume a large share of the taking. Both the giving and the taking may adversely affect the productive efforts of both the benefi ciaries and the victims; but even if they were robots and should remain unaffected by the process, the cost of the transfer apparatus alone would substantially reduce total economic wellbeing.

The transfer process does not follow a coordinated policy of income transfer. Each department and agency of govern ment pursues its own policy against the endeavors of the other departments and agencies. The Department of Labor seeks to raise wage rates and to lower living costs; the Department of Agriculture labors diligently to reduce agricultural production and raise food prices. Similarly, the Department of Commerce endeavors to reduce foreign imports and raise goods prices. The Department of Housing and Urban Development seeks to provide low-cost housing; both the Department of Labor and the Department of the Treasury significantly boost housing costs. The former imposes costly labor regula tions, the latter levies taxes on hous ing and thus raises housing costs or indulges in deficit spending that deprives the loan market of needed funds and raises mortgage costs. One agency of govern ment accuses big business of monopolistic tendencies, but others create public monopolies of their own and bring about conditions that invite monopolistic prac tices.

The various departments of government are vocal advocates of special interests and bitter enemies of the common interest. In its own way each department promises to provide benefits to its charges at the expense of all other people whom they do not represent. All departments together labor diligently to boost living expenses and lower levels of living. But above all, they all contend for and live the ways of Machiavellian mores which set politicians and government officials free from the code of morals that governs private con duct. Hans F. Sennholz Round Table Events for Spring 1996 D on't miss out on our new series of Spring Round Table Events! We've revamped the format (and our charges) to enhance your enjoyment as you listen to great speakers on exciting topics like freedom and artistic inspiration (March), drug and alcohol prohibition (May), and economic freedom and your personal prosperity (June). We'll start our evening at 5:00 with a buffet supper while you chat with friends, then move on to the presentation at 6:30; after a fascinating talk, the speaker will open the floor for discussion. Join us for great fun!

Charge: $25 per person per event; discounts for multiple reserva tions in any combination; buy the subscription and save even more! Mark your calendar for: March 2: Jim Powell on "Inspiration from Great Heroes and Heroines of Liberty" May 4: Murray Sabrin on "The Economics of Drug and Alcohol Prohibition" June 1: Mark Skousen on "Freedom, Economic Growth, and Stock Market Performance" Call or write: Dr. Barbara Dodsworth, Foundation for Economic Education, 30 South Broadway, Irvington-on-Hudson, NY 10533; phone (914) 591-7230 or fax (914) 591-8910. Recent Issues of for Classroom Use THEFREEMAN H ere's your chance to introduce students to The Freemanat little cost to you or your school. We are offering cartons of back issues of The Freemanfor the modest charge of $10.00 per carton (within the United States) to help defray our shipping and handling charges. Each carton contains over 100 copies.

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SpecialPriceson Two ClassicTitlesfrom FEE. .. Religion: Foundation of the Free Society by Edmund A. Opitz Introductionby the Right ReverendRobertC. Harvey Twenty essays eloquently explore the religious roots of American liberty and the free society, the role of the individ ual in society, and the relationship between religion and the free economy. The economic case for capitalism will not be heard and understood, the Reverend Mr. Opitz contends, until people "have given proper weight to the argument for the free society based on ethics, inherent rights, and free will." Edmund Opitz, an ordained Congregational minister, founded The Remnant (a fel lowship of conservative and libertarian ministers) and The Nockian Society, is a con tributing editor of The Freeman. He served as a member of the senior staff of FEE from 1955 until his retirement in 1992. Religion:Foundationof the Free Societyis vin tage Opitz, graced with his elegant style, subtle wit, and gentle erudition.

Second printing, February 1996 Regular Price: $14.95 272 pages, indexed Special sale: $11.95 paperback The Conquest of Poverty by Henry Hazlitt In this penetrating analysis, Henry Hazlitt unmasks a host of false solutions that lock the poor into the cycle of poverty. He clearly shows why production-not forced redistribu tion of income-is the key to helping the poor. Hazlitt's valuable insights include: - Malthus and his pessimistic predic tions of overpopulation. What was right and what was wrong with his analysis - How bureaucrats switch definitions of the poor for political purposes First published by Arlington House, 1973 Second FEE printing, February 1996 240 pages, indexed -Capitalism: has it really benefited the rich more than the masses? - How minimum wage laws hurt the poor -The real extent of welfare cheating - The most effective charity of all Regular price: $16.95 Special sale: $13.95 paperback Sale Ends February 29, 1996 Postage and handling: Please add $3 per order of $25 or less; $4 per order of $26-$50; $5 per order of more than $50. Send your order, with accompanying check or money order, to FEE, 30 South Broadway, Irvington-on-Hudson, New York 10533. Visa and MasterCard telephone and fax orders are welcomed: (800) 452-3518; fax (914) 591-8910.

INCREASING ACCESS TO PHARMACEUTICALS 97 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 technol ogy 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 overthe-counter pain reliever, the Lido Pain Patch, even though its dosage of lido caine 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 de fibrillators for preventing cardiac arrests caused by ventricular fibrillation [which] has resulted in numerous patients being unnecessarily subjected to open-heart oper ations, with the inevitable risks and mortal ity. " The agency blocked the use of spe cialized 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), re mains unavailable though produced in Can ada for nine years and sold around the world, including in Japan. The FDA classi fied 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 avoid able deaths.

Reform Alternatives 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 sys tem 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 profes sionals. 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. Sug gests Sam Kazman of the Competitive En terprise 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 re view safety and efficacy, but allow unapproved drugs, clearly labelled as such, to be available by prescription.

Such a system could allow patients, doc tors, 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 test ing 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 76,000goods), and issues six billion UL marks. Indeed, 60 percent of pharma ceutical purchasers today are corporate en terprises, like HMOs. They could choose to rely upon FDA or foreign approval, private endorsement, industry recommendations, or whatever. And healthcare providers could vary their decision based on the seri ousness of the disease or condition being treated. Normal malpractice and product 98 THE FREEMAN • FEBRUARY 1996 liability laws would apply. Making pharma ceutical purchases a private decision would not be ajump 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-officebrain transplants. "