Let Competition, Not Politicians, Bring Insulin Prices Down

After turning 26, Alec Smith could no longer be covered by his mother’s health insurance policy. He was also ineligible for coverage from his employer. This was a problem—for Smith was a type 1 diabetic.

Dependent on insulin to prolong his life, Smith faced out-of-pocket expenses of nearly $1,300 a month. To manage this cost, he began rationing his insulin doses, a deadly tradeoff between keeping up financially and maintaining his long-term health. Tragically, this caused him to go into a diabetic coma and die.

Many other diabetics are in similar financial situations. CBS News recently reported finding “horror stories every day” of diabetics reducing their insulin doses to cope with the astronomical prices. With over 100 million Americans living with diabetes or prediabetes and increasingly more needing insulin to manage their conditions, high prices can mean the difference between life and death for a considerable portion of the population.

Outraged and deeply concerned, many have called on the government to make insulin more affordable. Officials have answered the call. Recently, the Senate Finance Committee held its first of several planned meetings addressing the cost of insulin. As Sen. Charles Grassley (R-IA) stated in his opening remarks, “This is unacceptable and I intend to specifically get to the bottom of the insulin price problem.”

But how much success can we expect from politicians? The government’s many recent failures to lower drug prices provide little room for optimism.

In the past year the Trump administration issued an executive order to lengthen short-term healthcare plans, developed an international pricing index to keep foreign drug producers from overcharging, targeted drug rebates to prevent producers from strategically raising prices, signed legislation to allow health-care plans more power to negotiate with drug producers, proposed legislation to require producers to disclose product prices in TV advertisements,  and even threatened drug providers–via Twitter–if they increased prices.

These tactics don’t seem to be working.

The government’s failure to implement policies to lower drug prices extends back much farther. The Clinton administration and everyone since then have employed numerous tactics to lower drug prices with little success. The failure is bipartisan.

Perhaps most frustrating is that insulin has become so expensive because of government policy. Although insulin treatment was developed nearly 100 years ago, no generic versions are available in the United States. Because insulin is classified as a biological compound, its producers are able to extend their patents by slightly modifying recombinant DNA techniques. This process stifles competition, allowing three insulin producers to extend their patent protections for over 90 years and encompass 99 percent of the market.

That is the insulin price problem. The solution is competition.

In other countries, insulin producers do not enjoy similar protections from competitors. Consequently, they charge lower prices.  According to the Access to Insulin and Supplies Survey, almost anywhere that producers face less government protection from competition, insulin prices are lower for rapid-acting, short-acting, long-acting, and mixed forms of insulin. Although the global insulin market, like the U.S. market, is dominated by a few firms, competition requires them to lower their prices to stay in business.

Diabetes is a complex and taxing condition that requires discipline and access to medication. High insulin prices are an obstacle for millions trying to manage their diabetes, but things could be different.

Evidence suggests that competition, not politicians, would provide the best chance to help diabetics obtain their life-prolonging medication. With millions of lives at stake, we can no longer afford to eschew competition in favor of government policy.

Right-to-try Laws Help Patient with Terminal Brain Cancer

Earlier this month, a patient with terminal brain cancer gained access to a potentially life-saving experimental treatment. Suffering from glioblastoma, considered to be “the most aggressive and malignant type of brain cancer,” the patient faces little hope of survival with conventional treatment methods.

Fortunately, the patient was able to access a new and promising treatment option named Gliovac. Gliovac helps patients fight cancer by providing a vaccine-like treatment which helps their immune system attack, and even eliminate, tumors or cancerous cells.

However, Gilovac is currently unapproved by the Food and Drug Administration. The patient’s family persevered, contacting Gilovac’s drug provider Enhanced Recovery Company who, with the assistance of the University of California, Irvine, was able to administer treatment through national right-to-try legislation.

Signed into law in May, national right-to-try legislation allows patients with terminal illnesses to access experimental treatments with only the permission of their physicians and the drug provider. The law cuts the Food and Drug Administration out of the process. In doing so, right-to-try provides patients access to potentially life-saving treatment with less regulatory obstacles. A statement released to Cancer Updates, Research, and Education, by the University of California, Irvine notes, “It was believed that (Right to Try) offered a more expedited path to treatment, which UCI (University of California, Irvine) began after meeting regulatory and compliance requirements of state and federal Right to Try laws.”

Remarkably, this is the first time national right-to-try laws have been used to access experimental treatments. Yet it is difficult to imagine a better representation of what right-to-try represents.

The patient is being given a chance to prolong their life when other options to try experimental medication failed. Before utilizing right-to-try laws, the patient was unable to enlist in an ongoing clinical study due to their health.

Clinical trials often will not include terminally ill patients to avoid skewing statistical results. As Daniela Bota, medical director of the UCI Health Comprehensive Brain Tumor Program, explains, “The Right to Try laws may be the only alternative for many patients who may not qualify for clinical trials based on a variety of factors, including progression of disease, comorbidities, existing medications, physical limitations, and others.”

Perhaps more importantly, the patient was not the victim of the sluggish FDA approval process. Gilovac is currently in the second phase of the FDA’s approval, yet to enter the more time-consuming later phases. With more than 23,000 adults developing cancerous tumors in the brain or spinal cord each year, right-to-try provides hope for many in dire situations.

When treatments are unavailable, and prognoses are fatal, the best chance to prolong life is to consider all remaining options. National right-to-try laws recognize this and provide more options for terminally ill patients.

Now that one patient has used the process, more are likely to follow. Let’s hope for the best.

FDA Approves Record Number of Generic Drugs in 2018

In the 2018 fiscal year, the Food and Drug Administration set a record by approving and tentatively approving 971 generic drugs, including a record-breaking month with 110 generic drug approvals in October. This eclipses the previous record set in 2017 of 937 approvals.

Generics drugs play an important role in the U.S. pharmaceutical market by providing patients with an alternative, and often much cheaper, treatment options. With U.S. drug prices among the highest in the world, generics provide significant financial relief for millions using prescription drugs. As FDA Commissioner Scott Gottlieb recently announced, “Through our efforts, generic drugs entering the market from January 2017 through July 2018 saved consumers $26 billion through the lower prices they enabled.”

Much of these record-breaking totals can be attributed to earlier policy changes. In 2012, Congress passed the Food and Drug Administration Safety and Innovation Act, which allows drug companies to utilize the FDA’s Accelerated Approval Process to receive an expedited FDA review by paying a fee. This process has cut nearly one year off the average time it takes for generic drug approval and has greatly expanded the generic drug market. Before the act passed in 2012, the FDA faced a backlog of about 2,800 generic drugs seeking approval. As of January 2018, the backlog was in the low 100s.

Fortunately, President Trump signed the FDA Reauthorization Act of 2017, allowing the FDA to continue offering user fee programs for expedited approval. The reauthorization also provides an opportunity to “revise and extend the user-fee programs” to include a variety of other applications. And more drug providers are utilizing the process.

But much work remains to be done. While generic drug approvals are at record-breaking highs, new drug approvals languish behind with only 59 approvals in 2018 (the FDA approved 100 new drugs in 2017). Further, as an article from the Washington Examiner notes, only 12 percent of the FDA’s 2018 generic approvals were for complex drugs, which have comparatively less generic competitors (and often higher prices).

Perhaps most importantly, including quicker approval times for a fee only adds to an already extremely expensive approval process. The FDA’s efforts to “deregulate by regulating,” such as by charging more for a less burdensome approval process, are an improvement. Unfortunately, it is still a poor substitute for genuine deregulation. But with national right-to-try regulation enacted and other proposed regulatory changes gaining traction, changes to the FDA’s approval process could be coming.

The FDA should be praised for this accomplishment. I hope its New Year’s resolution is to break the record again in 2019.

Teen Vaping Is Bad, but the Alternative Is Worse

In July 2017, the Food and Drug Administration enacted a comprehensive plan to regulate tobacco and nicotine products. The goal of this plain was “to better protect kids [from nicotine addiction] and significantly reduce tobacco-related disease and death.” Although most of the FDA’s efforts involved creating educational materials and bolstering warning labels, recent proposed regulatory changes have been described as a “historic crackdown” of the nicotine and tobacco products market.

The vast majority of the FDA’s “crackdown” occurred in the e-cigarette market, where the FDA has fined over 1,300 e-cigarette retailers, demanded five e-cigarette companies provide it with convincing plans on how they will prevent minors from using their products, and raiding one e-cigarette company’s headquarters to confiscate documents.

The agency then proposed several heavy-handed regulations including banning flavored e-juices, prohibiting convenience stores from selling e-cigarettes, and requiring age-verification when buying e-cigarettes online. Most recently, FDA Commissioner Scott Gottlieb announced he plans to meet with several e-cigarette company CEOs to keep them in compliance with their previous commitments made to the FDA.

The agency is apparently willing to commit considerable resources to prevent teens from using e-cigarettes. In Gottlieb’s own words, “When I first announced our comprehensive tobacco framework plan in July 2017, I recognized my opportunity – an almost unprecedented opportunity – to use the tools that the FDA had been given…to bring about meaningful, lasting change to dramatically alter this cycle of disease and death.”

The FDA’s efforts to regulate the e-cigarette market have vastly overshadowed its efforts to reform the market for other nicotine and tobacco products. In addition to proposing new regulations for e-cigarettes, the agency also proposed banning flavored cigars and eliminating methanol from cigarettes to keep minors from becoming addicted to nicotine. The FDA also proposed to reduce nicotine levels in cigarettes by as much as 97 percent.

Although e-cigarettes, cigarettes, and other products containing tobacco or nicotine are far from healthy, e-cigarettes are much healthier than the latter. According to an evidence review published by Public Health England finds e-cigarettes are 95 percent less harmful than cigarettes. The review also notes e-cigarettes contain considerably less risk for developing heart disease, lung cancer, and strokes.

This health-risk disparity contains critical policy implications.

In his book The Economics of Prohibition, economist Mark Thornton reminds us that “Prohibition is a supply-reduction policy. Its effect is felt by making it more difficult for producers to supply a particular product to market. Prohibition has little impact on demand because it does not change tastes or incomes of the consumers directly.” Thus, the FDA’s regulations will change only e-cigarettes availability to teens, not teens’ willingness to consume them. Consequently, teens will likely switch to a similar nicotine product.

Considering that most lifelong smokers began smoking before they turned 18 years old, and that the product closest to an e-cigarette is a cigarette, attempts to regulate e-cigarettes away from teens likely encourages them to consume more dangerous and addictive cigarettes.

In addition to being healthier than cigarettes, e-cigarettes can also help cigarette smokers quit smoking. The United Kingdom’s National Health Service (the UK’s national healthcare system) makes this recommendation: “If you have already tried other methods of quitting smoking without success, you might want to give e-cigarettes a go.”  Canada’s national healthcare system (Health Canada) holds similar views.

Medical research finds that switching from cigarettes to e-cigarettes can be lifesaving. According to a study conducted at the Georgetown Lombardi Comprehensive Cancer Center, “Up to 6.6 million cigarette smokers will live substantially longer if cigarette smoking is replaced by vaping over a ten-year period… In all, cigarette smokers who switch to e-cigarettes could live 86.7 million more years with policies that encourage cigarette smokers to switch completely to e-cigarettes.”

The FDA’s efforts to reduce teen vaping rates will likely result in worse health outcomes by prompting teens to switch to smoking cigarettes. They will also deny teens and others a consistent and proven method to help them quit smoking. Neither will break the “cycle of disease and death.”

I am not writing to encourage using e-cigarettes or other tobacco and nicotine products. Like the FDA, I hope teens refrain from using tobacco and nicotine. But vice policies do not provide such utopian solutions. They only provide trade-offs. And the trade-offs we face to reduce teen vaping rates will only make an already difficult situation worse.

Can the FDA Prevent Teens from Vaping?

In four months the Food and Drug Administration went from investigating whether e-cigarettes motivated teens to smoke to declaring teen vaping an “epidemic” where “all options are on the table” to prevent “addicting a generation of youth on nicotine.” What followed has been described as a “historic crackdown” of the e-cigarette industry.

This crackdown included fining over 1,300 retailers for allegedly selling vaping goods to minors, demanding five vaping companies provide the FDA “with robust plans on how they’ll convincingly address the widespread use of their products by minors,” and seizing records from e-cigarette industry leader Juul’s headquarters. The FDA has also proposed a list of heavy-handed regulations, including banning flavored e-juices, banning convenience stores from selling e-cigarettes, and requiring age-verification for online e-cigarette sales. Although these regulations are still in the proposal phase, many producers are preparing for dramatic changes to the e-cigarette market.

I’ve argued in a previous blog post that these regulations will likely cause considerable harm to those they are intended to help. Others agree. However, few have asked, Can the FDA actually prevent teens from vaping?

I am, once again, skeptical.

Those calling for more oversight and regulation of the e-cigarette market seem to have overlooked that the market was regulated well before recent FDA efforts. In 2014, forty states had banned e-cigarette sales to minors. The FDA first passed regulation banning e-cigarette sales to minors in 2016. But the rate of underage e-cigarette use has increased since 2016, meaning previous regulations did not affect teen vaping and might have made the issue worse. Further, teen vaping rates were comparatively lower when states determined vaping laws.

The FDA’s efforts to mitigate obesity (also considered an epidemic) have also fared poorly. Beginning in 2004, the FDA launched an anti-obesity campaign that included requiring more detailed nutritional labeling and allowing low-calorie foods more freedom to advertise health claims. Since 2004, obesity rates have increased considerably, and a growing number of consumers feel tricked or confused by nutritional labels.

When we consider the FDA’s persistent history of gaining more influence while failing to achieve its objectives as well as its recent failures, we should be concerned when it gains “evolving regulatory powers” into e-cigarettes and other products. Epidemics are causes for concern, but before we declare regulation to be the cure, we should question who administers the treatment.

Deregulation Is the Only Cure for High Drug Prices

A recent CBS News article notes the struggle many people with diabetes face trying to afford insulin they need to manage their blood glucose levels. In the last twenty years, insulin prices have increased over 700 percent, forcing many diabetics to choose between buying food, paying bills, or filling their prescriptions. Some are forced to ration their insulin, often leading to diabetic complications (and even death).

Tragically, many others find themselves in similar situations. Those who rely on EpiPens to avoid fatal allergic reactions have seen life-saving medication prices increase by nearly 500 percent from 2009 to 2016. Others with less urgent needs for prescriptions drugs haven’t fared much better. According to the  2017 Health of America Report, Blue Cross Blue Shield members have increased their drug spending by 73 percent from 2010 to 2017.

With over fifty percent U.S. citizens taking at least one prescription drug, millions are desperate for lower drug prices. Although politicians have answered their call for help, they are providing little relief.

In the past year, the Trump administration has tried seemingly everything to lower prescription drug prices. A non-extensive list includes using an executive order to lengthen short-term healthcare plans, implementing an international pricing index to keep foreign drug producers from overcharging U.S. patients, targeting drug rebates between producers and middlemen,  giving  Medicare Part D plans more power to negotiate drug prices, and even threatening drug providers not to increase prices–via Twitter.

More recently, President Trump, working closely with Secretary of Health and Human Services Alex Azar, proposed a law requiring drug providers to display drug prices on TV advertisements for any drug which costs over $35 a month. Although the rule is still under discussion, many pharmaceutical companies are preparing for it to become law.

Trump and Azar hope that requiring drug producers to display drug prices on TV will pressure them enough to reduce prices. As Azar stated in a speech to the National Academy of Medicine, “Patients deserve to know what a given drug costs” and “We will not wait for an industry with so many conflicting and perverse incentives to reform itself.”

Although well intended, this law is unlikely to reduce drug prices for two reasons.

First, patients are already aware that drugs are expensive. A Consumer Reports survey finds nearly one out of seven prescriptions go unfilled because patients can’t afford them. Even if displaying drug prices on TV adds provides information, patients have very little bargaining power in a third-payer healthcare system. Further, patients who are especially cost-conscious can typically find drug price information online (where many drug providers voluntarily provide it).

Second, and more importantly, these policy proposals do not address why prescription drugs are so expensive to begin with: regulation.

According to the RegData database, the pharmaceutical and medical manufacturing industry had approximately 10,000 more restrictions than the median U.S. industry as of 2014. These regulations come at a tremendous cost. A producer will have spent between $50 million and $840 million to prepare a drug for FDA approval and an average of $1 billion during the approval process.

Even with the FDA’s lavish patent system, most drugs do not earn their producers profits. A white paper published by the Biotechnology Innovation Organization finds only 20 percent of FDA approved drugs cover their R&D and approval costs. Thus, even if political pressure to lower drug prices worked, many drugs would not be produced at all. It is difficult to see how making prescription drugs unavailable helps patients.

To lower drug prices, we need less regulation. The FDA’s influence in the prescription drug market remains the largest obstacle to deregulation. Policy efforts to lower drug prices which do not address the FDA are treating symptoms instead of the disease. And patients need relief quickly!

FDA Vaping Regulations Will Do More Harm than Good

Three months ago, the Food and Drug Administration began investigating how to reduce e-cigarette popularity among teens. Their initial efforts consisted of gathering information from e-cigarette producers and providing educational materials to teens on the health risks associated with vaping (which e-cigarette companies were already doing).

Shortly after, the FDA declared youth e-cigarette use to be of “epidemic proportions,” requiring immediate regulatory action. As FDA Commissioner Scott Gottlieb remarked, “all options are on the table” to avoid “addicting a generation of youth on nicotine through these products.”

The FDA did not hesitate to exercise these options.

Two weeks after issuing voluntary information requests to five e-cigarette companies, the FDA sent information request letters to twenty-one other e-cigarette companies which implied they were “considering enforcement action.” The FDA also demanded several e-cigarette companies provide it “with robust plans on how they’ll convincingly address the widespread use of their products by minors” within sixty days.

Well before the sixty days were up, the FDA raided e-cigarette industry leader Juul’s headquarters and seized over 1,000 pages of documents (at the time, Juul had already provided the FDA with over 50,000 pages of documents voluntarily). The FDA also warned and fined about 1,300 retailers for allegedly selling e-cigarette products to minors.

Most recently, the FDA announced its plans to introduce stringent regulations on the e-cigarette market. Among these regulations are banning many flavored e-juices, banning convenience stores from selling e-cigarettes, and requiring age-verification for online e-cigarette sales.

The FDA’s swift and heavy-handed efforts have been described as a “historic crackdown.” But are such actions necessary? And will they prevent teen vaping?

I’m doubtful.

First, as I have noted in a previous blog post, likening current teen vaping rates to an epidemic is highly suspect. The most current data available only demonstrates teen vaping rates have increased during the spring of 2018. However, teen smoking rates for all nicotine and tobacco products have been in decline since 2011, making recent increases a brief deviation from a longer-standing trend of decreased smoking rates for teens.

More importantly, many have failed to consider the serious harm proposed regulatory efforts are likely to inflict. Regulations placed on vices, even when they are well-intended, consistently work to exacerbate already difficult situations. FDA actions to prevent e-cigarette sales to teens are no exception.

Medical research and countless personal testimonials indicate that using e-cigarettes provides an effective way to quit smoking tobacco products, which are more harmful than e-cigarettes. When access to e-cigarettes is curtailed through regulation, e-cigarette users will likely consume more tobacco products. Further, tobacco product users are denied a healthier alternative as well as a reliable method to help them quit smoking.

Similar deleterious consequences have occurred when government attempts to regulate other vices.

Efforts to deter prescription opioid addiction give patients an incentive to seek illicit alternatives (such as heroin). To combat obesity, some policymakers call for taxing fast food meals. But an article published in the Journal of Health Economics finds that taxing fast food results in overindulgence of fatty foods at home, working to increase obesity rates. The ambitious efforts and tremendous resources devoted to fighting the War on Drugs have caused serious damage to American race relations and have significantly contributed to the prison overpopulation problem.

In each of these cases, well-intended regulation yielded harmful unintended consequences. Although there are no perfect solutions to mitigate the harm caused by vices (including vaping), it is clear that regulating them is a step in the wrong direction. The FDA is heading in this direction, and this might lead to a real epidemic.

To Help the Terminally Ill, the FDA Must Deregulate

In a recent press statement, Food and Drug Administration Commissioner Scott Gottlieb announced plans to improve and broaden FDA’s Expanded Access Program. Sometimes called the Compassionate Use Program, the Expanded Access Program provides terminally ill patients with access to experimental medications before they are fully approved.

Current proposed changes to the program include streamlining the submission process that physicians undergo to provide required documentation and allowing individuals (instead of the entire board) to approve treatment requests. The agency also previously commissioned an independent review board to assess aspects of the program needing improvement.

The program has had recent success in expanding access. From 2005 to 2014, the FDA provided approximately 9,000 patients with access to experimental drugs. It has granted access to an equal number of patients in the last five years.

Although expansion has improved and the FDA’s commitment to helping the terminally ill is praiseworthy, current access levels are a far cry from what is needed.

According to the Pew Research Center, nearly 42 percent of Americans have a friend or relative with a terminal illness or who is in a coma as of 2006. In her book The Right To Try, Darcy Olson notes over 25,000 patients with terminal cancer die each year while waiting for the FDA to approve potentially life-saving medication.

When we consider that the FDA has offered similar programs since the 1970s, and the shortcomings of its current program, it’s clear another way to access experimental medication is needed. Fortunately, there is one.

Last May, President Trump signed right-to-try legislation into law. Right-to-try laws allow patients with terminal illnesses to access experimental medication with only the approval of their physician and the drug provider. With limited treatments and time, cutting additional barriers to access (even streamlined ones) is critical.

Shockingly, no one has used the right-to-try process. Why? The most likely reason is the high cost of administering treatment caused by excessive regulation.

Even though drugs accessed through right-to-try are only required to pass the first phase of the FDA’s approval process, regulations dictating research, development, and clinical-trial standards can cost drug companies between $50 million and $840 million. Further, many insurance companies are unable or unwilling to cover unapproved drugs, making potentially life-saving drugs unaffordable for most patients.

In June, Brainstorm Cell Therapeutics Inc. attempted to become the first drug provider to offer terminally ill patients access to experimental treatment for amyotrophic lateral sclerosis (commonly shortened to ALS) through right-to-try legislation. However, even by charging $300,000 per treatment, the company was unable to cover the costs of offering treatment. Its treatment, name NurOwn, will likely be FDA approved in 2019 or 2020. This will be too late for many patients currently suffering from ALS.

To give the terminally ill the best chance to prolong their life, greater access to experimental medication is desperately needed. The Expanded Access Program, although helpful, falls short. Right-to-try can provide a much-needed alternative, and less bureaucratic, method. However, it will never reach its potential without deregulation.

When Healthy Policy Neglects Economic Principles, Patients Suffer

The healthcare sector of the U.S. economy is extraordinarily dynamic and complex, providing constant challenges for policymakers and regulators working to improve healthcare markets. However, recent research and policies suggest the greatest challenges for policymakers might be their misunderstanding of economic fundamentals.

Earlier this year, the Annals of Internal Medicine journal published a paper which found the prices increased for nearly 100 drugs while they were in a shortage between 2015 and 2016. The paper also notes these “price hikes” (price increases) were less severe in markets with comparatively more competitors (defined as more than three drug providers).

Although the authors consider these findings “mysterious,” they confidently offered policy recommendations to correct “the imbalance between supply and demand.” As they stated in their conclusion, “If manufacturers are observed using shortages to increase prices, public payers could set payment caps for drugs under storage and limit price increases.”

The situation described above, and the folly of its policy prescription, are no mysteries for anyone who understands basic economics.

FDA Still Hooked on Meddling in Nicotine Markets

Back in April, the Food and Drug Administration announced plans to reduce nicotine levels in cigarettes to help current smokers quit and prevent future generations from starting. In an op-ed I wrote for Inside Sources, I argued such efforts are unlikely to help and will likely cause considerable harm.

At the time, lawmakers also pressured the FDA to regulate e-cigarettes, worried they were steering younger generations into nicotine addiction. In the same op-ed, I warned that regulating e-cigarettes, like regular cigarettes, “will also lead to serious harm guided by good intentions.”

Unfortunately, more “good intentions” have followed.

In early September, the FDA began an anti-vaping campaign to deter teens from vaping and issued information requests to e-cigarette companies to determine how popular these products were among younger demographics. Two weeks later, the agency gave five e-cigarette producers 60 days to present it, “with robust plans on how they’ll [the producers] convincingly address the widespread use of their products by minors.”