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Ragout
A Spicy Stew of Economics, Politics, Data, Food, Carpentry, etc.
 
Tuesday, October 18, 2005

The Baker Plan to Eliminate Private Drug Development


Personally, I'm very sympathetic to the Baker plan to have the government get more involved the later stages of drug development. Progressive economist Dean Baker wants the government to start funding clinical trials and develop drugs that would then be released into the public domain. Although the government spends a lot on pharmaceutical research now, they mainly fund basic research and leave the private sector to take the drugs to market. I'd be happy to throw in a billion dollars of taxpayer money to fund Baker's plan.

I think that eventually, it would probably succeed well enough to justify spending 10 or 20 billion a year. But Baker seems keen to go whole hog, and eliminate private drug research and patents as soon as possible. And that scares me.

Patents have worked tremendously well for hundreds of years. The track record of Baker's system is what exactly? That it would probably succeed just isn't good enough to justify anything more than evolutionary change. The stakes are, after all, life and death. And keep in mind that the promised payoff from the Baker plan is a few hundred bucks a year per person.

And it's easy to think of reasons to be cautious about the Baker plan for eliminating all private drug research. The Christian right is currently fighting the "morning after" pill and even a vaccine that prevents cervical cancer, because they believe both will encourage sexual activity among women. If government were the only institution funding drug development, religious fundamentalists would have a much easier time killing drugs they don't like.

Similarly, if Baker or Marcia Angell were in charge, I'd imagine they'd stop research into the "me too" drugs they're constantly criticizing. Which might leave us with drugs like Vioxx (which causes heart attacks) and not the "me too" alternative Celebrex, which doesn't seem to have the same problems.

So, in the end, I think Baker has a good idea, but he tries to make it sound as radical as possible. Consequently his plan sounds a whole lot worse than it would if he were actually trying to pitch his idea and convince people. I really don't understand what Baker's game is here.
 

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Monday, October 17, 2005

Reforming Drug Research: First Do No Harm


Presswatching economist Dean Baker has an interesting post over at MaxSpeak, proposing that the government take over financing all drug research. Baker points out that the government already provides most funds for basic research. He thinks the feds could also do at least as good a job as the private pharmaceutical companies that currently fund drug development with the support of profit-raising patents:
Why shouldn't we believe that if we doubled [federal drug research spending], to replace the $25 billion that the drug industry claims to spend on drug research (two-thirds of which goes to research copycat drugs) that we would end up with at least as good progress in developing drugs as what we have at present?
It seems to me the current system works awfully well at producing lots of amazing new drugs. I think we ought to place a high priority on not messing up a good thing. "First, do no harm," as doctors like to say.

So why not start "small" at, say, a billion dollars a year? That would be enough to start developing at least a dozen new drugs, a few of which would eventually prove beneficial. If it looks like we're getting somewhere, we can up the funding in a few years. But it's crazy to start by eliminating patents, which I think is what Baker has in mind. Certainly that's his long-term goal, and he places great emphasis on the evils of patents in his writing.

Really, there's no choice but to start small. To put Baker's idea into action, we'd have to set up a nonprofit or a new government agency, and let them try their hand at picking drugs and running drug trials to test for safety and efficacy. I don't know of any existing institution (other than the drug companies) that can do this.

Baker and lefty Congressman Dennis Kucinich suggest that the NIH and universities could replace the pharmaceutical companies. But drug development is mostly a hard, unglamorous slog. It's not the kind of thing academic researchers want to do. And it involves a large administrativeapparatuss to recruit thousands of patients into drug trials and collect data. Again, the NIH and Universities just aren't set up to do this kind of thing.

So there's no way to start spending $25 billion a year tomorrow, or even in the next decade. We'd have to build entirely new institutions.

So instead of trying to score rhetorical points by proposing to turn the existing system upside down, why try something modest? There will be plenty of political points to be scored when something so obviously reasonable is killed by the right and the drug companies.
 

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Tuesday, September 13, 2005

The Washington Consensus: "Ideology, not Analysis"


Brad DeLong discusses a fascinating debate between a Harvard economist and a Yale economist about the sources of India's remarkable growth. A common view is that India's growth acceleration is due to the neoliberal reforms that began in 1991: free trade, lowering tariffs, deregulating business, rolling back the "license raj," and so on.

A typical purveyor of this view is Thomas Friedman, according to Harvard's Dani Rodrik and the IMF's Arvind Subramanian. They quote a Friedman interview with a prominent Indian industrialist, who described "the cumbersome bureaucratic rules and pervasive state ownership that suffocated the Indian private sector," until the 1991 reforms, when "Our Berlin Wall fell."
It was like unleashing a caged tiger. Trade controls were abolished. We were always at 3 percent growth, the so-called Hindu rate of growth--—slow, cautious, and conservative. To make [better returns], you had to go to America. Well, three years later [after the 1991 reforms] we were at 7 percent rate of growth.
As Rodrik and Subramanian point out in a compelling paper, the problem with this story is that India's growth in the 1980s wasn't at all slow. In fact, it was just as rapid as it's been since 1991. India's growth miracle began around 1980, long before the neoliberal "Washington consensus" reforms.

The Yale economist, critiquing the Harvard study, doesn't deny that the growth takeoff began long before the 1991 reforms, but argues that India's growth in the 1980s wasn't sustainable because it was driven by an expansion of the public sector. I think the Harvard side rebutted the "growth due to unsustainable deficits" theory in the original paper*, and I won't try to summarize the whole debate.

But I was particularly struck by just how weak some of the "unsustainable growth" arguments really are, despite having apparently gained widespread acceptance, from Friedman's spot on the Times' op-ed page to the hallowed halls of Yale.

The Yale guy says that India's expansion was "fueled by" the expansion of government, including "real wage expansion in the public sector." If you read his footnote, you learn that public sector wages grew a factor of 3.45, while prices grew by a factor of 2.37 during the 1980s. Do some division and take a 10th root, and you find that real government wages grew by 3.8% per year. Is that fast or slow? Well, in the economy as a whole, labor productivity growth was also just about 3.8% per year in the 1980s! (Rodrik and Subramanian Table 1).

So India's bureaucrats were just keeping up with their private sector counterparts! Wage increases just sufficient to keep pace with economy-wide productivity gains are hardly evidence of expanding government. So this Yale argument seems truly lame.**

With academic understatement, Rodrik and Subramanian nicely sum up the problem with their critics:
We suspect that there is a tendency to dismiss the growth of the 1980s because it makes the subsequent reforms less impressive ("since the system was not reformed, any growth that came out should have been unsustainable--—i.e., bad growth"). But that would be just ideology, not analysis.

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* Rodrik and Subramanian point out that the only way that "Keynesianism run amok" could cause the India's huge surge in productivity during the 1980s is by putting unused resources to work: raising capacity utilization in factors and lowering unemployment. But that didn't happen, they argue, at least not on a large enough scale to explain much of the productivity acceleration.

** This is just econ 101 stuff. The "law of one price" predicts that wages will tend to rise at the rate of economy-wide productivity. If private sector productivity and wages are rising, public sector wages have to rise too, even if government productivity isn't increasing. If public sector wages don't rise, bureaucrats will quit their government jobs and get higher-wage jobs in the private sector, as middle management in a factory, say. So basic economics predicts that public sector wages will tend to keep up with private sector wages, assuming the government doesn't want to see all its best workers leave.
 

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Wednesday, September 07, 2005

New Orleans Evacuees: "Sort of Scary"


How to explain the behavior of the authorities?

Why did FEMA turn away the Red Cross and many others who offered to help? Why were the Superdome and Convention Center locked down, and the evacuees forbidden to leave? "Worse than a prison," said one Superdome occupant. "We've virtually made them prisoners," said the Sheriff of neighboring Jefferson Parish, who had ordered his forces to surround a group of evacuees in an open field.

Why were people packed onto busses and planes without being told whether destination was Baton Rouge, Houston, or Utah?

Why were friends and relatives forbidden to enter the city and transport their loved ones to safety? Why were bridges out of town blockaded by armed police? I've seen relatively little about these hard-hearted practices in the mainstream press: the last two links are to horrifying first-hand accounts.

Presumably the authorities placed their first priority on preventing looting in the French Quarter or the wealthy neighborhoods of Jefferson Parish, both a short walk away from the Convention Center and Superdome. One National Guard General described his units' role as conducting "combat operations" against an "insurgency."

Preventing looting is a worthy goal, to be sure. But not a goal that justifies treating tens of thousands of people like animals. And not a goal worth people's lives.

How could the authorities decide to treat everyone in New Orleans as a potential looter, rioter, insurgent? The simplest explanation seems to be that they view poor black people with tremendous contempt and fear. An attitude nicely summed up by Barbara Bush's comment on the evacuees in Houston, "what I'’m hearing, which is sort of scary, is they all want to stay in Texas."
 

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Wednesday, August 31, 2005

Compare and Contrast


A while back, Jane Galt quoted a passage that caught her eye from a National Review article about Germany:
Indeed, to Schroeder's eye, there is hardly anything worth cutting, right down to the generous dental benefits. "“I do not want to return to an era when you can judge someone'’s wealth by the state of their teeth," ”he observed.
Galt thinks the poor get pretty fine dental care in the U.S., pontificating:
The reason that I comment on this is that one thing you can't tell people's wealth by, in the dog-eat-dog dystopia that is America, is their teeth. Their sports gear, their vacations, their choice of dinner spot, yes, but not their teeth, at least not where I am.
Instapundit Glenn Reynolds found the whole thing pretty funny. Galt's post caught my eye too, because it seemed pretty callous and uniformed. Out of sight, out of mind, say Galt and Reynolds. Last week, the unblinking Malcolm Gladwell supplied the perfect rebuttal in a fascinating New Yorker article about health care in America.
Several years ago, two Harvard researchers, Susan Starr Sered and Rushika Fernandopulle, set out to interview people without health-care coverage for a book they were writing, "“Uninsured in America."” They talked to as many kinds of people as they could find, collecting stories of untreated depression and struggling single mothers and chronically injured laborers--and the most common complaint they heard was about teeth. Gina, a hairdresser in Idaho, whose husband worked as a freight manager at a chain store, had "a peculiar mannerism of keeping her mouth closed even when speaking." It turned out that she hadn't been able to afford dental care for three years, and one of her front teeth was rotting. Daniel, a construction worker, pulled out his bad teeth with pliers. Then, there was Loretta, who worked nights at a university research center in Mississippi, and was missing most of her teeth. "They'll break off after a while, and then you just grab a hold of them, and they work their way out,"” she explained to Sered and Fernandopulle. "“It hurts so bad, because the tooth aches. Then it'’s a relief just to get it out of there. The hole closes up itself anyway. So it'’s so much better."”

....

If your teeth are bad, you'’re not going to get a job as a receptionist, say, or a cashier. You'’re going to be put in the back somewhere, far from the public eye. What Loretta, Gina, and Daniel understand, the two authors tell us, is that bad teeth have come to be seen as a marker of "“poor parenting, low educational achievement and slow or faulty intellectual development."” They are an outward marker of caste. "“Almost every time we asked interviewees what their first priority would be if the president established universal health coverage tomorrow,"” Sered and Fernandopulle write, "“the immediate answer was '‘my teeth.'"”
Like Galt and Insty, I also rarely (but not never) see people with really bad teeth. No doubt like them, the poorest people I regularly come into contact with are behind the cash register or sweeping the floors. I don't ride the early-morning bus with home health care aides or spend much time in slaughterhouses with poultry workers. But unlike Galt and Reynolds, I don't assume because I rarely see it in my day to day life that a problem doesn't exist.
 

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Monday, August 29, 2005

Vioxx: Excess Deaths, Excess Liability?


In the reporting about Vioxx, I've seen a lot of citations of epidemiological estimates of the excess deaths and heart attacks, which range from 35,000 to 160,000. I've also seen a lot of estimates of Merck's potential liability, which are said to range from a few billion dollars up to $50 billion. But I haven't seen any estimates of the figures you'd actually need to estimate the potential liability. It seems to me that the relevant figures are simply deaths, not "excess" deaths.

"Excess" deaths are something of a statistician's fiction. It's not like there's any clear method to distinguish someone killed by a Vioxx-induced heart attack from a Vioxx user who would have had a heart attack anyway. To see what I mean, consider the estimates of David Graham, the FDA whistleblower-scientist.

Graham finds that about Vioxx users suffered heart attacks (fatal and not) at a rate of about 8 per 1000 person-years. Those using other anti-inflammatory drugs had a rate of 5 per 1000 person-years. The difference, 3 per 1000, is an estimate of excess heart attacks (it's not actually the estimate Graham uses, but it's close).

Since, Vioxx was used for about 10 million person-years, we get:
80,000 heart attacks among Vioxx users
50,000 heart attacks among similar patients using other drugs
which implies 30,000 excess heart attacks.

The final number (30,000) is what the epidemiologists focus on, and what gets reported in the newspapers. But the total number of heart attacks (80,000) is the relevant count of legitimate lawsuits. It's not like the coroner can examine the blood clot clogging somebody's arteries and look for Vioxx molecules. Although randomized trials have shown that Vioxx raises the likelihood of heart attacks, they don't tell us which particular Vioxx user died because of the drug, and which ones would have died anyway. So Merck's potential liability is awfully big (I'm shorting their stock).

From the point of view of economic efficiency, I think Merck is going to end up paying too much, even leaving aside any bogus lawsuits that are filed. Merck ought to be liable for the excess heart attacks and other diseases they caused, not the illness that would have occurred if Vioxx had never been invented. But even though only about a third of the heart attacks suffered by Vioxx users were actually caused by Vioxx, there's no way to tell which are which. So Merck will probably end up paying for all of them.

I don't see any way around this, except for dividing the court awards by three, which might not be such a bad idea.
 

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Friday, August 26, 2005

Vioxx Verdict: AEI Cries "Junk Science"


Predictably, conservative "tort reformers" are now proclaiming that the Vioxx verdict -- finding the makers of the popular painkiller liable for the death of a patient -- is nothing but "junk science." It's testimony to the power of a conventional narrative that anyone can make this claim with a straight face.

As I blogged a couple days ago, there's pretty overwhelming evidence -- including two large, randomized trials (the VIGOR and APPROVE studies) -- that Vioxx causes heart attacks. Even a layperson can easily verify the medical consensus by reading editorials in the most prestigious medical journals, which express no doubt.

But the American Enterprise Institute's John Calfee claims to know better than the medical journal editors, writing, "junk science now threatens to reign supreme in drug litigation."
The lawyers had to surmount the views of FDA and Canadian expert panels that Vioxx was safe enough to return to the market; evidence that, to the extent that Vioxx was dangerous, it wasn't necessarily any more dangerous than other drugs; and the inconvenient fact that the deceased in the case had died of heart arrhythmia, a cardiac problem not associated with Vioxx.
But none of Calfee's claims are true. Yes, the FDA expert panel did vote 17-15 to return Vioxx to the market, but

"Many of the panel members who were among the narrow majorities approving continued marketing of Bextra and Vioxx did so only with the stipulation that severe restrictions be imposed on their uses," according to one panel member, who added that "he expected that the uses of the drugs would be confined to very limited patient populations."
The transcript of the meeting is online, so it can be easily verified that this is an accurate description of the discussion. Vioxx does have some advantages over other drugs, but the experts say its dangers mean that it should be used at low doses, for limited times, on patients with a low risk of heart disease. In other words, it should be a niche drug, not a multi-billion dollar blockbuster drug.

Yes, the FDA, possibly being overcautious, suggested that alternative drugs like Advil and Aleve might be just as dangerous as Vioxx, but this is just an educated guess, not something based on strong evidence. As Calfee himself points out, "Advil and older prescription and over-the-counter arthritis treatments...[have] not been subjected to long-term clinical trials like the one that seemed to reveal heart problems with Vioxx." If you look at the FDA panel transcript, you'll see that many panel members suggested that Vioxx should only be used after the over-the-counter remedies have failed.

Yes, the doctor who performed the autopsy did find the cause of death to be arrhythmia rather than a heart attack. But that same doctor ended up testifying for the plaintiff that it was a heart attack that triggered the arrhythmia! And University of Michigan pharmacology professor Benedict Lucchesi, "who has studied heart arrhythmias for more than four decades," testified that Vioxx "contributed significantly" to the death.

In other words, Calfee and the "tort reformers" think the views of a pharmacology professor at a top university, the FDA advisory panel, and the editors of major medical journals are "junk science." With the whole medical establishment in the wrong, it's hard to imagine where we can find any "sound science." At the American Tort Reform Association and the AEI?
 

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