Thursday, October 16, 2014

Prices are Information, 21 CFR Part 312 Edition

Prices perform a dual function. They inform buyers of the relative scarcity of goods, and they let producers know the relative value their customers place on their wares. Prices eliminate dissembling, as they make explicit opportunity costs: to obtain X, I have to give up exactly this many Y.

For IND, the FDA has gazed upon the visage of the price function and rendered its Yelp review: "did not meet my expectations 2/5 would not use except in an emergency." (viz.)

First, charging should be allowed only to facilitate development of a promising new drug or indication that might not otherwise be developed, or to obtain important safety information that might not otherwise be obtained. The preamble to the 1987 charging rule made clear that there should be compelling justification for taking the unusual step of allowing charging for unproven therapy during its development, stating that ‘‘cost recovery is justified in clinical trials only when necessary to further the study and development of promising drugs that might otherwise be lost to the medical armamentarium.’’ (52 FR 19466 at 19472). FDA believes that philosophy should continue to apply to charging in a clinical trial in this final rule. Accordingly, § 312.8(b)(1)(i) requires that a sponsor wishing to charge for its investigational drug in a clinical trial provide some evidence of potential clinical benefit that, if demonstrated in clinical investigations, would provide a significant advantage over available products in the diagnosis, treatment, mitigation, or prevention of a disease or condition. Products that are likely to meet this criterion are also likely to be eligible for fast track development programs and priority review (see FDA’s guidance for industry on ‘‘Fast Track Drug Development Programs— Designation, Development, and Application Review’’ (January 2006) including the priority review policies for the Centers for Drug Evaluation and Research and Biologics Evaluation and Research in Appendix 3 of that guidance (available on the Internet at
Short version: prices can be used as a last resort to get pharma firms to make a drug. Apart from that, unproven remedies are snake oil until proven otherwise. It's unjust to charge for potentially useless treatments.

Is that true? Rather, it is true from afar? Assume that the patient knows that the drug is risky and that it might not work as advertised. Shouldn't she still be free to try, even if trying means that she should compensate the apothecary for the trouble? The moral intuition behind this seems like the same one that seeks to prohibit gambling: ex-post regret aversion. Not only could you still be sick, but you'll be poorer for your trouble. I suppose the corresponding risk that the drug never gets developed in the first place rests secure in Bastiat's unseen. Out of sight, out of mind.
Second, charging should be permitted only for a trial that is necessary for the development of the drug. Therefore, § 312.8(b)(1)(ii) requires that the sponsor demonstrate that the data to be obtained from the clinical trial would be essential to establishing that the drug is effective or safe for the purpose of obtaining initial marketing approval of the drug, or that it would support a significant change in the labeling of the sponsor’s approved drug. For example, the trial could be designed to provide data that would support approval of a new indication or generate important comparative safety information.
IOW, information is valuable. If the administration of the drug produces no clinically useful information, then the treatment is not valuable. I suppose if your name is "FDA", your attention is directed to the objects of your charter: pharmaceutical firms, rather than to patients. This is cold comfort if you're a patient.
Third, charging must be necessary to the conduct of the clinical trial. Under § 312.8(b)(1)(iii), a sponsor is required to demonstrate that clinical development of the drug could not be continued without charging because the cost of the drug is extraordinary. The cost of the drug may be extraordinary because of manufacturing complexity, scarcity of a natural resource, the large quantity of drug needed (e.g., due to the size or duration of the trial) or some combination of these or other circumstances. In response to comments, this extraordinary cost criterion for charging for the sponsor’s drug in a clinical trial has been revised to clarify that the resources of an individual sponsor are considered in determining whether cost is extraordinary.
Well that explains it. The FDA has 0 economists on staff. Or at least none with any meaningful input into the justification for rules such as these. Only a bureaucrat could look at the value of the alternatives uses of ingredients to determine the value of a product.

Good grief.

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Do you have suggestions on where we could find more examples of this phenomenon?