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Understanding markets and medicine

Would you try an unproven drug to treat COVID-19?  The Food and Drug Administration (FDA) has understandably not approved any drug for this brand-new illness.  A willingness to try suggests seriously rethinking FDA regulation of drug effectiveness.

The FDA authority to regulate new drug saety dates to the 1930s, with effectiveness regulation added in 1962.  Regulation is pre-market: a company must prove safety and effectiveness to the FDA before marketing in the U.S.

Doctors can prescribe drugs already on the market, which have been demonstrated safe, to a patient for any purpose.  Drugs introduced for one purpose will sometimes work on other ailments.  For instance, Rituxan was introduced for one type of non-Hodgkin’s lymphoma but oncologists discovered it works on many lymphomas and some cancers.  Companies cannot promote any such “off-label” uses of drugs.

FDA regulation exists because many Americans fear that companies would market useless drugs to desperately ill patients.  The fear makes sense.  People lack the expertise to know if a medicine can deliver as promised.  Doctors may not treat enough patients to judge effectiveness themselves, and drug companies may offer financial incentives for prescribing.  Marketing could possibly offset research in boosting profits.

Yet economists have found otherwise.  Very few drugs on the market before 1962 were ineffective.  Why?  Insurance companies and hospitals provide an important check.  We may not remember how drug X was overhyped, but insurers will and may not pay for the manufacturer’s next drug.

One out of five U.S. prescriptions may be written off-label.  As economist Alex Tabarrok notes, off-label usage further demonstrates that the market can evaluate effectiveness without the FDA.

Proving effectiveness, however, is difficultand costly.  Two thirds of the $3 billion average cost of a new drug approval is spent showing effectiveness.  Some “effective” drugs might only work for 20 percent of patients, making a demonstration challenging.  Drugs eventually approved by the FDA are often available in Europe months earlier, demonstrating that our regulation generates unnecessary delays.

FDA regulation has slowed our response to COVID-19, beginning with tests for the virus.  U.S. law charges the Centers for Disease Control with developing a test for an emergency; non-CDC tests must receive FDA approval.  The FDA did not approve any others until late February and only approved the first serum anti-body test on April 3.

At least a dozen drugs are being tested for treating COVID-19. The FDA has allowed many Americans into these trials using emergency authorizations.  Machine learning using the novel coronavirus’ DNA and laboratory testing identified the most promising drugs, which quickly went into testing on patients.  This is part of a worldwide effort to find a treatment, not bilk desperate patients and their insurers.

FDA approval represents a major hurdle for any vaccine.  We have been told that a vaccine will not be available for one or two years, but this is largely due to the FDA’s approval process.  President George W. Bush planned to deploy a vaccine against a new influenza strain within six months; a swine flu vaccine was available in nine months.  Advances in biomedical research have developed potential vaccines for COVID-19 in record time, with at least three already in human safety testing.

Only a safe and effective vaccine will benefit us.  Nonetheless, an expedited approval process could still yield results.  One innovative proposal involves intentionally exposing immunized subjects to the novel coronavirus in “human challenge” testing, speeding up the process significantly.  The candidate vaccines may not work, but any delay of an effective vaccine due to bureaucratic paperwork should be intolerable.

COVID-19 starkly highlights two competing worldviews among economists and policymakers.  One sees the pursuit of profit imperiling people unless checked by government regulation.  The other believes that businesses earn profits over time by benefitting customers.  The former view drives FDA regulation.  If we trust doctors in treating COVID-19, we should reexamine the case for FDA effectiveness regulation.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision.  The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University.

About Dan Sutter

I am the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University.

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