Healthcare: Time, Money, and Details

Capitol Hill is filled with buzz about Obama’s rushed health care proposal, intended to overhaul the current system. But as politicians portray healthcare with broad rhetorical brushstrokes, they continue to overlook a plethora of details that unnecessarily inflate its cost. A less publicized news item from last week was the annannouncement that the FDA will delay their final decision on Ampligen – the leading drug for the treatment of Chronic Fatigue Syndrome (CFS) – until this fall. The FDA announced that the delay was due to staffing problems.

Submitting Ampligen’s application is Hemispherx, a small biotech company that has researched the drug for nearly 3 decades. Like a handful of similar companies, their future solely depends on the FDA’s forthcoming decision. All of the clinical trials are complete. The drug’s application was accepted for review just over a year ago, which would make the FDA’s turnaround time over a year and a half. Judging from Hemispherx’s annual operating costs, the FDA’s delay by itself will cost them a total of approximately $15 million.

The FDA’s mission is largely to protect the public from harmful drugs, however critics demonstrate that their overcautious ways do more harm to the public than good. Their delays have cost the public thousands of more lives than they have saved, along with making them unpopular among most practicing physicians.

Even if you believe in the FDA’s mission, then it is hard to overlook the sheer inefficiency and waste that they introduce to healthcare. Clinical trials for new drugs take about 10 years, but even after all the data is in – as is the case with Ampligen – it often takes up to 1 more year for them to make a final decision. FDA delays are not-too-unexpected, but they have still hit Hemispherx hard.

Following each FDA delay, Hemispherx announced new efforts to raise more cash. Currently they are operating like a bear in hibernation, placed on life-support.

Given the millions of dollars lost due to FDA "staffing issues", one strategy might be to give them more staff. They might have applicants pay directly for these staffing issues, but the FDA already receives hundred of millions of dollars worth of fees; supplemented with more money by Congress, fees from private companies consist of half of their drug approval budget. Why these fees aren't enough to reduce the decision time to under 12-months isn't clear.

But the real problem, as discussed above, is with the structure of the FDA and the responsibilities placed on them. As drugs like Vioxx prove to be more dangerous than people could have guessed, the FDA has taken part of the blame; in response they have received more money and power, but this hasn’t led to marked improvement, accuracy, or efficiency.

Determining the safety of drugs can be particularly tricky, but there is only so much that you can ask for: Did the clinical trials meet their endpoints? Were there side-effects? Is there any reason to believe that there might be additional risks? Even if it takes 10 years of research to answer these quesitons, it should not take an additional year to intrepret the results: Either the end points were met or they weren't; there are side-effects or there aren't; there are reasons to consider additional risks or there aren't. These questions are not black-and-white, but following 10 years of required research (and often more), an additional year to make the decision - supposedly filled with heated internal regulatory debate - is not likely to find anything new.

As with most jobs, the problem lies not so much with the staffing, but with the structure of the organization. The main question is whether their mission – to approve and oversee every single drug (and many foods) on the marketplace – would be feasible, even if they had a large army of scientists at their disposal.

Science, like anything in life, obeys laws of diminishing returns: Beyond a certain threshold, the more you study one particular thing, like a drug, the less return in greater knowledge you'll receive for your efforts. Going back to the Voixx example, how many more years of clinical trials, and how much more power and money granted to the FDA, would have better assured its safety?

The assumption being placed on the FDA is that more research and regulation is better, regardless of the specific types of research and regulation being carried out. This is the same mistake that has been applied to the SEC for years, whose added regulations over the years tends to favor red tape, paper work, and superfluous committee-creating over investigatory manpower.

Currently drugs like Ampligen wander through a maze like patients lost in the healthcare system, knowing where they want to go but not being able to get there. And likewise they incur quite a cost – in the case of Ampligen, an added 18 months and about $15 million, assuming, of course, that the drug is even accepted. On top of decades of research and piles of paperwork, does it really take an additional 18 months and $15 million to judge a drug? The frustrating part is that much of this could be avoided either by cutting back on new drug requirements; somehow lowering the cost to big pharma of drug approval; or at least greasing the FDA's wheels in any manner that would make them more - not less - efficient. As it is, patients along their way are forced to pay for these costs, which are often more attributable to regulatory stuckiness than to added value.

Any improvement in healthcare requires us to look at the factors driving up its cost, rather than further re-distributing costs that already exist. In this environment, small companies like Hemispherx - who can survive 30 years researching just one drug - exist not because of the current healthcare system, but in spite of it. Indeed, in what other private industries is it common for a company to go decades without a product? Such gargantuan human efforts are testament to our need for better healthcare, not for better government intervention.

-KJ

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Note: Long position held in HEB.

Media (in order of appearance)

Photo: (1)Day 20, 1/20/2009, Richard; (2)Ampligen PR; (3)Healthcare, hospital, doctor, 04/22/2009, Anoto Group; (4) corridor, 04/10/2005, sumit. Sphere: Related Content