Book review: Reasonable Rx: Solving the Drug Price Crisis by Stan Finkelstein and Peter Temin.
This book provides a mediocre analysis of what is wrong with drug prices, and presents a solution that is probably a nontrivial improvement on the status quo, but isn’t the most thoughtful solution I’ve seen.
The most important complaint of the book boils down to the fact that knowledge about drug safety and effectiveness is a public good, and the current method of rewarding drug companies for producing that knowledge is mediocre (although the book presents it less clearly than that and seems as interested in blaming drug companies’ lack of altruism as it is in analyzing the incentives).
For example, it is sometimes possible to identify biomarkers which indicate that a drug will be ineffective in a patient, but that would often reduce sales of the drug.
They complain that the current focus on producing a few very profitable drugs is an obstacle to creating personalized treatments. But they do little more than imply that drug companies are misjudging the available opportunities, without presenting any clear evidence that the authors’ have better judgment about what’s feasible.
Their proposed changes to the drug industry involve separating drug development and drug marketing/manufacturing into two different sets of companies, and using a combination of subsidies and contractual price controls (negotiated by a government sponsored nonprofit) to lower the prices of drugs.
They didn’t convince me that splitting drug companies will produce any significant benefits, although I also don’t see it producing harm.
The subsidies and price controls are likely to help mitigate some of the problems created by the patent system. Their attempts to show that this solution is better than Kremer’s patent buyout proposal suggest they don’t understand how much harm patent monopolies cause. Their subsidy mechanism isn’t clearly tied to benefits (unlike proposals for prizes based on Quality Adjusted Life Years). They claim drug prize proposals set arbitrary values for drugs and that their auction system produces a less arbitrary market price, but the subsidy part of their part of their system is at least as arbitrary, and their market based prices reflect the value of an arbitrary patent duration.
Their claim that Medicare savings will pay for their subsidies seems deceptive. When estimating the Medicare savings, they appear to rely on an assumption that prices of existing drugs will drop by a large amount. Yet when estimating the subsidy costs, they appear to count only the costs of subsidizing newly introduced drugs.
They are too quick to complain about drug companies medicalizing conditions that are mere inconveniences. E.g. they say Flomax does nothing more important than reduce sleep disturbances. This ignores the evidence that sleep disturbances cause significant health problems.
The chapter “Are Drug Companies Risky?” is pointless because it only evaluates the most successful companies (i.e. those whose gambles have already paid off).
Health
Book review: Counting Sheep: The Science and Pleasures of Sleep and Dreams by Paul Martin.
This book makes convincing claims that most people give too little thought to an activity that occupies a large fraction of our life.
It has lots of little pieces of information which can be read as independent essays. Here are some claims I found interesting:
- “sleepiness is responsible for far more deaths on the roads than alcohol or drugs”.
- Tired people rate their abilities higher than people who slept well do.
- Poor sleep contributes to poor health a good deal more than medical diagnoses suggest, but hospitals are designed in ways that hinder patients’ sleep.
- Idle time was apparently a status symbol up to a century ago, now being busy is a status symbol. This should have economic implications that someone ought to explore in depth.
- People in a vegetative state have REM sleep. This sounds like cause to re-evaluate the label we apply to that state.
While the book has many references, it doesn’t connect specific claims to references, and I’m sometimes left wondering why I should believe a claim. How can boredom be a modern concept? When he says “no person has ever gone completely without sleep for more than a few days”, how does he know he can dismiss people who claim to have not slept for years?
Bernie Sanders has introduced a bill to replace patent monopoly protection for drugs with awards based in part on Quality Adjusted Life Years added by the drugs.
This would eliminate the harm due to monopoly pricing. It might also cause some research to be redirected from “me-too” drugs to more innovative drugs. But I suspect that it’s common enough for what initially looks like a “me-too” drug to end up having valuable advantages that such an effect will be minor.
It would probably be a bigger help to people in developing nations than all the government spending misleadingly labeled as foreign aid.
Because politics will ensure that the idea is implemented suboptimally, I would prefer that something similar (e.g. patent buyouts) be implemented by a more responsible institution such as the Gates Foundation. But the patent system has enough problems that even this imperfectly written bill might improve on the status quo.
One strange effect of political reality is that the rewards are apportioned according to either benefits to U.S. patients or world patients, and the bill provides an awfully vague description of which rule will apply to which drug.
The bill allocates 10% of the rewards to orphan drugs, presumably because the lives of people with those diseases are worth more than those with common diseases.
The bill claims generics cost 85% less than patented drugs, but gets that figure from comparing overall generic prices with overall patented prices. If the cost of manufacturing drugs differs for old and new drugs, that will be misleading. The estimates I’ve found for same-drug price declines after generic competition starts suggest the price decline is more like 30% to 50%. So the bill’s claim that it can be financed by the reduced Federal government drug spending appear to be fiction.
Besides, if it were self-financing that way, wouldn’t it indicate a big reduction in the rewards to drug development? I want to see a good analysis of why $80 billion a year is adequate to substitute for patent exclusivity. My crude attempts at analyzing it suggests it’s too low, but not by a large amount.
(HT Alex Tabarrok)
A recent report makes surprising claims about the causes of the apparently impressive Cuban life expectancy data.
It says that shortages of cars, food, and reduced cigarette use had effects that were on balance healthy (I don’t see anything specific about whether a cigarette shortage caused the decline in smoking).
I had thought that there was strong evidence for the claim that increased wealth reliably correlated with increased health. It looks like I ought to examine the evidence on that subject more carefully.
Political Calculations has a post with an interesting table of life expectancy in OECD countries. In addition to the standard life expectancy numbers, there is an additional set that is standardized to eliminate differences in a category of deaths that is roughly described as accidents and homicide (those least likely to be connected to healthcare problems).
I haven’t found an online explanation of how they were standardized (it’s apparently explained in the book The Business of Health: The Role of Competition, Markets, and Regulation by Robert Ohsfeldt and John Schneider, which I haven’t checked), and I can’t evaluate the extent to which their desire to promote the U.S. medical system has biased their methods.
What surprised me most was that it implies that the differences in what we normally think of as health and healthcare explain a surprisingly small part of the difference between national life expectancies. The actual life expectancy shows a difference of 3.6 years between the highest (Japan) and lowest (Denmark), but the standardized life expectancy shows a difference of 1.2 years between the highest (U.S.) and the lowest (U.K.).
This implies that national difference in traffic accidents, homicides, and some similar (poorly identified) causes of death are a good deal more important than the following differences: healthcare systems, diet, serious vitamin D deficiencies (which I expect to vary by latitude), FDA rules, and litigation of medical outcomes.
On a loosely related note, the book A Farewell to Alms mentions a report that 16th century Japan had an unusual absence of disease (but no indication whether it’s possible to get any quantitative evidence of this). This made me think of the alleged high Cuban life expectancy. Could relatively isolated islands be healthier due to lower influx of disease? Not that this would make isolation nice, especially since it might mean increased vulnerability to disease when contact with the outside increases.
Book review: Mindless Eating: Why We Eat More Than We Think by Brian Wansink.
This well-written book might help a few people lose a significant amount of weight, and many to lose a tiny bit.
Some of his advice seems to demand as much willpower for me as a typical diet (e.g. eat slowly), but he gives many small suggestions and advises us to pick and choose the most appropriate ones. There’s enough variety and novelty among his suggestions that most people are likely to find at least one feasible method to lose a few pounds.
A large fraction of his suggestions require none of the willpower that a typical diet requires, but will be rejected by most people because their ego will cause them to insist that only people less rational than them are making the kind of mistakes that the book’s suggestions will fix.
Most of the book’s claims seem to be backed up by careful research. But I couldn’t find any research to back up the claim that approaches which cause people to eat 100 calories per day less for days will cause people to lose 10 pounds in ten months. He presents evidence that such a diet doesn’t need to make people feel deprived over the short time periods they’ve been studied. But there’s been speculation among critics of diet books that our bodies have a natural “set point” weight, and diets which work for a while have no long-term effect because lower body weights cause increased desire to return to the set point. This book offers only weak anecdotal evidence against that possibility.
But even if it fails as a diet book, it may help you understand how the taste of your food is affected by factors other than the food itself.
I had been skeptical of reports that low sodium diets produce health benefits (suspecting they were fighting the symptoms of high blood pressure rather than an underlying cause), but a new study has provided strong enough evidence to change my diet.
It’s time to switch from regular to low sodium soy sauce, and I’m going to reduce my seafood consumption (since I’ve started taking Omega-3 fish oil capsules and am eating more walnuts, my reasons for eating seafood have diminished).
I recently took a simple genetic test to determine whether I have genes for fast or slow caffeine metabolism. The result says that I’m a fast metabolizer, which indicates that caffeine use reduces my risk of heart attacks rather than increasing it.
This kind of testing is just becoming affordable, and it seems like many more tests of this nature should become common soon.
There has been a fair amount of research suggesting that beyond some low threshold, additional money does little to increase a person’s happiness.
Here’s a research report (see also here) indicating that the effect of money has sometimes been underestimated because researchers use income as a measure of money, when wealth has a higher correlation with happiness.
There’s probably more than one reason for this. Wealth produces a sense of security that isn’t achieved by having a high income but spending that income quickly. Also, it’s possible that people with high savings rates tend to be those who are easily satisfied with their status, whereas those who don’t save when they have high incomes are those who have a strong need to show off their incomes in order to compete for status (and since competition for status is in some ways a zero sum game, many of them will fail).
Book Review: The Last Well Person: How to Stay Well Despite the Health-care System by Nortin M. Hadler
There appears to be a large discrepancy between how effective most people think modern medical practices are and the evidence that experts have presented suggesting that it does very little to extend life. This book gives the impression of describing a pattern of ineffective or harmful practices that might be offsetting the benefits of the practices that are known to work. But there are enough flaws in his argument that I can’t decide how much of his conclusions I should accept.
He starts by saying he’s a Popperian, but often acts like he’s following some other, more dogmatic, philosophy. I’m particularly annoyed at his certain feelings of inevitability that we will die by about age 85:
I am aware of no data to support the premise that we can alter the date of death. … When high-functioning octogenarians decline, it is because their time is approaching.
He starts by making a plausible claim that many people get cardiovascular surgery when there’s no evidence that it will benefit them (and is likely to create some risks).
But starting in the next chapter it becomes easy to find flaws in his arguments. He raises some plausible doubts about the evidence for statins, but then tries to imply that if the imperfect evidence that’s available shows that less than 2% of people who are prescribed statins will benefit, then we should doubt that those people ought to take statins.
He presents evidence that prostate cancer treatments save fewer lives than is commonly thought. It appears that sometimes the treatment merely changes the cause of death to something else. Yet he concludes that the treatment is useless, when the data he presents indicate nontrivial benefits. He hints that the evidence doesn’t meet the usual standard of statistical significance, but feels comfortable concluding (without even saying how close it is to being statistically significant) that the lack of proof is strong evidence of ineffectiveness.
He has a somewhat interesting proposal that the final phase of drug testing be done by the FDA rather than by drug companies. If the FDA were run by angels, that would solve a number of problems with the existing regulatory incentives, but with an FDA run by humans it would replace them with new problems. For instance, the choice of which drugs to test is something that only a few special interest voters (i.e. mainly those working for large drug companies) would understand, so their interests would be likely to influence those choices to the benefit of those companies.