There is growing interest in states regulating pharmaceuticals in ways that challenge the U.S. Food and Drug Administration’s (FDA) federal oversight. For example, in 2013 Maine enacted a law to permit the importation of unapproved drugs, reflecting concerns that federal requirements are too restrictive, while in 2014 Massachusetts banned an FDA-approved painkiller, reflecting concerns that federal requirements are too lax. This Article provides an account of this recent state interest in regulating drugs and considers its consequences. It argues that these state regulatory efforts, and the nascent litigation about them, demonstrate that the preemptive reach of the FDA’s authority extends into medical practice regulation in some circumstances. It then begins to explore implications outside of the preemption context, arguing that state regulatory efforts may also help to inform our general understanding of both the scope of the FDA’s jurisdiction and the relationship between the FDA and the states.
Not Quite the Same: Regulatory Intermediaries in the Governance of Pharmaceuticals and Medical Devices by Martino Maggetti, Christian Ewert, Philipp Trein :: SSRNDecember 5, 2016
This article compares the role of regulatory intermediaries in the governance of pharmaceuticals and medical devices in Australia and Switzerland. We argue that the creation, selection, and activation of specific intermediaries depend on the organizational capacity of the regulator and on the capture potential of the target. To limit the risk of capture of intermediaries where the regulated industries are powerful, regulators tend to keep intermediaries under their control. To do so, the regulator must be well-funded and well-staffed, or supported by its political principal. However, when the target has limited capture potential, regulators will rely more heavily on externalized intermediaries. These intermediaries typically consist of transnational organizations in charge of multiple regulatory issues in several jurisdictions, and can provide unique expertise in an efficient way. Four case studies of the Australian and Swiss regulatory regimes for therapeutic products support this argument.
The FDA is the object lesson I’ve focused on. But there is a wealth of object lessons all with their distinctive acronym: ACGME, ABIM, AHA, ABMS, ACS, CMS (MIPS, MACRA), HIPAA and there are many more in the alphabet soup. Others are known by their full name like The Joint Commission, a non-governmental agency that wields accreditation with power and authority causing some 20,000 health organization, particularly hospitals, to cringe and comply. Acronym or not, all these bearers of standards beg critical analysis. All have regulatory influence and all have fallen victim to regulatory capture to some degree.
Pharmaceutical companies use various strategies to protect their market monopoly. One of such practices is an acquisition of a patent developed by a third party. Such acquisitions allow pharmaceutical companies to strengthen their market power by extending the life of the product; for instance, by acquiring patents that cover alternative non-infringing versions of the monopolist’s own product, or acquiring the patent that covers an improvement of its current product. Both the US and EU case law condemn such practices as an abuse of monopoly power. This Article discusses patent acquisitions in the pharmaceutical industry focusing on two recent EU and US cases investigated by the competition authorities.
Safety, Effectiveness, and Patient Heterogeneity: Rethinking Risk-Risk Trade-Offs in Approving New Medical Treatments by Alan Randall :: SSRNNovember 24, 2016
Recent research challenges the foundations of regulatory policy for pharmaceutical drugs and medical treatments in a novel way: rather than a single risky treatment, the regulator should prefer a menu of treatments with ambiguous risks (Viscusi and Zeckhauser 2015). Then, patients would have opportunity to try treatments, eventually settling on the one that works best for them. I examine this argument and offer three conclusions. (1) Patient heterogeneity – i.e. patients respond differently to a given treatment – creates the matching problem that motivates trial-and-switch strategies, and provides the ambiguity that drives the potential gains therefrom. However, trial and switch is not an unmixed blessing. (2) Ambiguity-seeking policy, over and above that provided by patient heterogeneity, would be accomplished by reducing sample sizes and/or replications in pre-approval testing. The mean level of acceptable risk could be maintained, but confidence limits would expand, increasing the risk to individual patients. In effect, this is just another proposal for less regulatory caution regarding treatment risks and more attention to risk-risk trade-offs, as suggested by the quality-adjusted life-years, QALY, framework. (3) The case for risk-neutral regulation of treatment safety should be taken seriously in cases of devastating and life-threatening afflictions. Otherwise it fails, most obviously in the case of treatments for relatively minor ailments, which treatments dominate shelf space at drug stores and advertising in the media.
A Ricardian-Demand Explanation for Changing Pharmaceutical R&D Productivity by Mark V. Pauly, Kyle Myers :: SSRNOctober 29, 2016
This paper examines trends in the aggregate productivity of the pharmaceutical sector over the past three decades. We incorporate Ricardo’s insight about demand-driven productivity in settings of variable scarce resources, and estimate the industry’s responsiveness to changes in demand over this timeframe using therapeutic class-specific data. In contrast to many analyses, our empirical estimates indicate that the industry has “met demand” with remarkable consistency since the late-1980s. The growth in total R&D spending, and therefore R&D costs per new drug, appear to have been profitable and productive investments. While we identify a significant increase in the industry’s fixed costs – the intercept of the production function – we find no decline in the marginal productivity of industry investments that might suggest significant supply-side frictions. While we cannot diagnose in detail why average, but not marginal, productivity declined, the data suggests that firms have finally begun to compete down returns from the supranormal levels of decades past.
The Uncharted Waters of Competition and Innovation in Biological Medicines by Erika Fisher Lietzan :: SSRNOctober 29, 2016
Six years ago, Congress fundamentally changed how federal law encourages the discovery and development of certain new medicines and for the first time authorized less expensive “duplicates” of these medicines to be approved and compete in the marketplace. The medicines at issue are biological medicines, generally made from, or grown in, living systems. Many of the world’s most important and most expensive medicines for serious and life–threatening diseases are biological medicines. We have a profound interest in understanding and evaluating the impact of this legislation on innovation and competition. Scholars and courts considering this question may be tempted to reason from, or analogize to, experience with generic drugs. And the 2010 biosimilar law was similar to the 1984 generic drug statute in basic purpose and structure. But the biologic framework as a whole — the complete landscape within which innovation and competition in biological medicines take place — is profoundly different from anything that scholars and courts have seen before. This Article is the first to offer a high level description of the framework organized around the characteristics that define it and distinguish it from the conventional drug framework. It argues that unlike the drug framework, the framework for competition and innovation in biologics is variable and dynamic. And it argues that biologic framework separates and distinguishes patents, both conceptually and functionally, from the regulatory paradigm. As a result, although scholars and policymakers focusing on innovation incentives and competitive behavior with respect to medicines have decades of experience with the generic drug paradigm, there is a meaningful risk that this experience is mostly irrelevant when it comes to biologics. This article provides the basis for understanding both the specific differences and broader thematic divergence at play in the biologic paradigm.