Category: Regulations

Idaho Cut or Simplified 95% of Regulations by a “Sunset” Review

In my Openness book, I argue that government regulations bind entrepreneurs and reduce innovation. As part of an antidote, I suggest that “sunset laws,” where regulations automatically expire, if not renewed. Later, at a small conference on Adam Thierer’s latest book, I was discouraged to hear a couple of participants grant the plausibility of the “antidote,” but report that in actual practice it does not work because almost all old regulations get renewed. Some hope returned when I read a report from James Broughel of a successful sunset review process:

Idaho has proved deregulation is possible. The state repealed and revised its administrative rules code through a sunset review process in 2019. The results were dramatic. Since then, 95% of state regulations have been eliminated or simplified. The sky didn’t fall. Most regulations, when subject to genuine scrutiny, fail to justify their existence.

I will keep my eyes open on this issue, looking for more evidence.

James Broughel’s commentary is:

James Broughel. “Recipe for a Regulatory Spring Cleaning.” The Wall Street Journal (Tues., Nov. 26, 2024): A13.

(Note: the online version of the commentary has the date November 25, 2024, and has the same title as the print version.)

My book mentioned above is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Adam Thierer’s book mentioned above is:

Thierer, Adam. Evasive Entrepreneurs and the Future of Governance: How Innovation Improves Economies and Governments. Washington, D.C.: Cato Institute, 2020.

A Fluoridate Water “Warning Sign”

When I was a child, my family opposed the government-mandated fluoridation of the water supply of South Bend, Indiana, my hometown. We were not anti-science. We believed fluoride was a poison and that individual citizens had a right to make their own judgement whether to consume it. I still believe we were right.

(p. D6) A small study published Monday [May 20, 2024] suggested that higher levels of fluoride consumed during the third trimester of pregnancy were associated with a greater risk of behavioral problems in the mothers’ children at 3 years old. The authors of the study, which was funded in part by the National Institutes of Health and the Environmental Protection Agency and published in the journal JAMA Network Open, believe it is the first to examine links between prenatal fluoride exposure and child development among families living in the United States, where fluoride is often added to community water supplies to prevent dental cavities.

The study’s authors and some outside researchers said that the findings should prompt policymakers to evaluate the safety of fluoride consumption during pregnancy.

“I think it’s a warning sign,” said Dr. Beate Ritz, an environmental epidemiologist at the U.C.L.A. Fielding School of Public Health.

For the full story, see:

Alice Callahan and Christina Caron. “Fluoridated Water and Pregnancy.” The New York Times (Tuesday, May 28, 2024): D6.

(Note: bracketed date added.)

(Note: the online version of the story has the date May 22, 2024, and has the title “Is Fluoridated Drinking Water Safe for Pregnant Women?”)

The small published study mentioned above is:

Malin, Ashley J., Sandrah P. Eckel, Howard Hu, E. Angeles Martinez-Mier, Ixel Hernandez-Castro, Tingyu Yang, Shohreh F. Farzan, Rima Habre, Carrie V. Breton, and Theresa M. Bastain. “Maternal Urinary Fluoride and Child Neurobehavior at Age 36 Months.” JAMA Network Open 7, no. 5 (2024): e2411987-e87.

Off-Label Drug Use Shows F.D.A. Phase 3 Trials Could Be Dropped, Adding New Cures and Lowering Costs

The F.D.A. allows physicians to prescribe drugs for “off-label” use. These drugs were originally approved for a different “on-label” use. For that approval the drugs had to pass through Phase 1 and Phase 2 clinical trials, mainly to show safety, and massively expensive Phase 3 clinical trials to show efficacy for the on-label use.

When off-label use is allowed, that shows that the F.D.A. is accepting drugs for a use where efficacy has NOT been shown.

This is a proof of concept for my suggestion (that I originally heard from Nobel-Prize-winner Milton Friedman) that F.D.A. regulation should be pared back to just Phase 1 and Phase 2, for safety. Since the Phase 3 trials are usually far more expensive than the Phase 1 and Phase 2 combined, this would allow far more new drugs to be developed.

If the development of new drugs was cheaper, Fajgenbaum and others would not need to spend N.I.H.’s 48 millions of taxpayer dollars to comb through already-approved drugs to see if one can be jury-rigged as a therapy for a different disease.

(p. A6) [Dr. David Fajgenbaum, an immunologist at the University of Pennsylvania and . . . Castleman patient who studies the disease] . . . has matched rare-disease patients with drugs that are already in pharmacies for other conditions for over 10 years, starting with himself.

. . .

Every Cure, a nonprofit Fajgenbaum helped found in 2022, received funding on Wednesday [Feb. 28, 2024] that could surpass $48 million from the federal Advanced Research Projects Agency for Health. Fajgenbaum and his team will spend the money to build a drug-repurposing database and algorithms that patients, doctors and researchers can use to find drugs for untreated diseases.

There are over 10,000 known rare diseases and most don’t have a drug approved to treat them. The FDA said it has approved over 19,000 prescription drugs.

The notion of finding new uses for existing drugs has been around for a long time. Once the FDA approves a drug, doctors can prescribe it off-label to patients with other conditions they think it will help. Ozempic, originally approved for people with Type 2 diabetes, is now used by millions of people without the disease for weight loss.

The National Institutes of Health and research institutions have invested over the years in drug repurposing, hoping it would be faster and less costly to find new uses for drugs that have already made it to market, a process that can take more than a decade and cost $2 billion. But systematically matching approved treatments to unmet needs has been hard.

. . .

“Our end goal is not FDA approval. Our end goal is giving patients maximum access to medications,” said Tracey Sikora, co-founder of Every Cure.

For the full story see:

Amy Dockser Marcus. “Repurposed Drugs Give People With Rare Diseases New Hope.” The Wall Street Journal (Thursday, Feb. 29, 2024 [sic]): A6.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date February 28, 2024 [sic], and has the title “This Doctor Found His Own Miracle Drug. Now He Wants to Do It for Others.”)

For more on Fajgenbaum’s story, read his autobiographical account:

Fajgenbaum, David. Chasing My Cure: A Doctor’s Race to Turn Hope into Action; a Memoir. New York: Ballantine Books, 2019.

Feds Set Up Medicare “Advantage” So Insurance Firms Earn Higher Profit When They Deny Prior Authorization of Medically Beneficial Services

Medicare “Advantage” insurers earn higher profits when they refuse to pay for medical services, whether the services benefit patient health or not.
This is what is known as a perverse incentive. The firms often respond to such an incentive, especially when the services are expensive.

The federal designers of Medicare “Advantage” plans thought the plans would both save taxpayers money and provide more services to patients. Instead they have done the opposite. To taxpayers and patients, such a plan is a disadvantage. Only to insurance firms is such a plan an advantage, handed to them members of congress, some of whom receive benefits from lobbyists and some of whom are well-intentioned, but ignorant of the plans’ perverse incentives and unanticipated consequences.

[In the first paragraph below it is perhaps misleading to say that the federal funds per patient are “fixed.” It is true that they do not vary based on actual medical services the patient receives (as is the case with traditional Medicare). So in that sense they are “fixed.” But they do vary based on the diagnostic codes assigned to each patient. So in that sense they are not “fixed.” Congress set the plans up so that insurance firms can make more profits either by assigning more diagnostic codes to patients, or by providing patients with fewer services.]

(p. D3) Medicare Advantage plans are capitated, meaning they receive a fixed amount of public dollars per patient each month and can keep more of those dollars if prior authorization reduces expensive services. “Plans are making financial decisions rather than medical decisions,” Mr. Lipschutz said. (Medicare Advantage has never saved money for the Medicare program.)

Such criticisms have circulated for years, bolstered by two reports from the Office of Inspector General in the Department of Health and Human Services. In 2018, a report found “widespread and persistent” problems related to denials of prior authorization and payments to providers. It noted that Advantage plans overturned 75 percent of those denials when patients or providers appealed.

In 2022, a second inspector general’s report revealed that 13 percent of denied prior authorization requests met Medicare coverage rules and probably would have been approved by traditional Medicare.

By that point, a KFF analysis found, the proportion of prior authorization denials overturned on appeal had reached 82 percent, raising the possibility that many “should not have been denied in the first place,” Dr. Biniek said.

. . .

Responding to the inspector general reports, and to a rising tide of complaints, the federal Centers for Medicare and Medicaid Services has established two new rules to protect consumers and streamline prior authorization.

. . .

“Medicare Advantage makes us jump through so many hoops,” said Dr. Sandeep Singh, chief medical officer of the Good Shepherd Rehabilitation Network in Allentown, Pa. “It’s created such stress in the health care system.” A few years ago, his organization had one “insurance verification specialist” whose job was to handle prior authorization requests and appeals; now, it employs three.

. . .

Will Medicare’s new rules make a difference? So far at Good Shepherd, “we continue to see the same level of resistance” from Advantage plans, Dr. Singh said.

Mr. Lipschutz, of the Center for Medicare Advocacy, said, “It’s clear the intention is there, but the jury’s still out on whether this is working.”

“It comes down to enforcement,” he said.

For the full commentary, see:

Paula Span. “Some Insurers Erect Roadblocks.” The New York Times (Tuesday, May 28, 2024): D3.

(Note: ellipses added.)

(Note: the online version of the commentary has the date May 25, 2024, and has the title “When ‘Prior Authorization’ Becomes a Medical Roadblock.”)

The 2018 report mentioned above is:

Levinson, Daniel R. “Medicare Advantage Appeal Outcomes and Audit Findings Raise Concerns About Service and Payment Denials.” Office of Inspector General, 2018.

The 2022 report mentioned above is:

Grimm, Christi A. “Some Medicare Advantage Organization Denials of Prior Authorization Requests Raise Concerns About Beneficiary Access to Medically Necessary Care.” Office of Inspector General, 2022.

High Cost of Sickle Cell Cure, Slows Insurance Reimbursement, Delaying Surcease of Sorrow

The high-cost of innovative treatments for dire diseases is largely driven by the high cost of government=mandated Phase 3 clinical trials. For relatively rare diseases, these costs must be spread over fewer patients, making the cost per patient astronomical. If mandates were repealed costs would fall, insurance would be more likely to cover them, and more patients would be cured more quickly.

Note also that one of the pharma firms developing a cure for sickle cell disease is Vertex. Vertex was chronicled in two books by Barry Werth. In the first Vertex was a mission-oriented startup. In the second it was growing by adding marketers, investment experts, legal experts, and regulator-whisperers–seemingly headed toward losing their mission and their passion.

How much of the original spirit of Vertex has managed to survive?

(p. A1) An estimated 100,000 people in the United States, most of them Black, have sickle cell disease.

Gene therapy dangles the prospect of normalcy for the estimated 20,000 people in the United States with the most severe forms of the disease — lives without constant pain and continuing damage to organs and bones and joints.

But all is not well in the world of sickle cell gene therapy.

Last December [2023], the Food and Drug Administration gave approval to two companies, Bluebird Bio of Somerville, Mass., and Vertex Pharmaceuticals of Boston, to sell the first gene therapies approved for sickle cell disease. After nine months, Kendric remains the first Bluebird patient to progress this far, with at least a few others advancing toward his pace.

. . .

(p. A20) “We all expected it to be much faster,” said Dr. Leo Wang of City of Hope Children’s Cancer Center in Los Angeles, which has so far sent cells from one patient to Vertex for the treatment, and is in the final stages of getting authorization from Bluebird.

. . . The treatment is labor intensive, requiring patients to spend at least a month in the hospital. City of Hope can treat at least one patient a month, Dr. Wang said. Other large medical centers said they could treat only 10 or fewer per year, and some say they can treat just five or six.

Then there is insurance.  . . .

“Authorization and reimbursement are not the same thing,” said Dr. Stephan Grupp at Children’s Hospital of Philadelphia, which has not yet infused patients with treated cells.

The hospital, he says, has to buy the treatment for $2.2 million per patient from Vertex or $3.1 million from Bluebird. It is reimbursed after the therapy is delivered to the patient. Hospitals get nervous, Dr. Grupp said, because they have to lay out a lot of money. “They want to see that reimbursement happen,” he said.

Some hospitals decided to treat one patient at a time, limiting how much they commit up front.

Making the process even more cumbersome, a hospital has to negotiate separately with each patient’s insurer, said Dr. Julie Kanter of the University of Alabama at Birmingham. Her medical center has not yet started treating patients.

Most hospitals, she said, “don’t want to approve the treatment until they know what the payment plan looks like.”

For the full story see:

Gina Kolata. “Vanguard of Sickle Cell-Free Patients Finds a Long, Hard Road.” The New York Times (Tuesday, September 17, 2024): A1 & A20.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the story was updated Sept. 20, 2024, and has the title “First Day of a ‘New Life’ for a Boy With Sickle Cell.”)

Werth’s account of the founding and early mission-orientation of Vertex is:

Werth, Barry. The Billion-Dollar Molecule: One Company’s Quest for the Perfect Drug. New York: Simon & Schuster, 1994.

Werth’s account the later growth and risk of loss of mission-orientation is:

Werth, Barry. The Antidote: Inside the World of New Pharma. New York: Simon & Schuster, 2014.

Feds Set Up Perverse Incentives for Health Insurance Firms that Offer Medicare “Advantage” Plans

In an earlier blog entry, I made the following comment that is also relevant to this entry:

Notice that the federal government has set up the incentives of the Medicare Advantage program so that insurers will receive benefits, but no costs, for diagnosing patients with certain conditions, that the patients have not asked them to treat. The nurse home visits aimed at harvesting diagnoses, do not benefit patients, but instead waste patients’ time and taxpayers’ money. Is UnitedHealth Group the most despicable organization for shamelessly exploiting the perverse incentives, or is the federal government the most despicable organization for creating the perverse incentives?

(p. A1) Private insurers involved in the government’s Medicare Advantage program made hundreds of thousands of questionable diagnoses that triggered extra taxpayer-funded payments from 2018 to 2021, including outright wrong ones . . ., a Wall Street Journal analysis of billions of Medicare records found.

The questionable diagnoses included some for potentially deadly illnesses, such as AIDS, for which patients received no subsequent care, and for conditions people couldn’t possibly have, the analysis showed. Often, neither the patients nor their doctors had any idea.

Medicare Advantage, the $450-billion-a-year system in which private insurers oversee Medicare benefits, grew out of the idea that the private sector could provide healthcare more economically. It has swelled over the last two decades to cover more than half of the 67 million seniors and disabled people on Medicare.

Instead of saving taxpayers money, Medicare Advantage has added tens of billions of dollars in costs, researchers and some government officials have said. One reason is that insurers can add diagnoses to ones that patients’ own doctors submit. Medicare gave insurers that option so they could catch conditions that doctors neglected to record. The Journal’s analysis, however, found many diagnoses were added for (p. A12) which patients received no treatment, or that contradicted their doctors’ views.

The insurers make new diagnoses after reviewing medical charts, sometimes using artificial intelligence, and sending nurses to visit patients in their homes. They pay doctors for access to patient records, and reward patients who agree to home visits with gift cards and other financial benefits.

. . .

The Journal consulted more than a dozen experts, including academics, actuaries and policy analysts, about its analysis of the Medicare data, who said the methodology was sound.

. . .

In the Medicare Advantage system—conceived as a lower-cost alternative to traditional Medicare—private insurers get paid a lump sum to provide health benefits to about half of the 67 million seniors and disabled people in the federal program. The payments go up when people have certain diseases, giving insurers an incentive to diagnose those conditions.

To find out how insurers use home visits to add diagnoses, the Journal interviewed nurses, patients, home-visit managers and industry executives and reviewed hundreds of pages of internal documents from home-visit companies. They described a system that used nurses, software and audits to generate diagnoses.

“They do the job with a purpose, and it pays off for the Medicare Advantage plans,” said Francois de Brantes, a former executive at Signify Health, a company that does home visits for insurers. “Identifying the diagnoses, that’s the job.”

. . .

The Journal reviewed the Medicare data under a research agreement with the federal government. The data doesn’t include patients’ names, but covers details of doctor visits, hospital stays, prescriptions and other care. The Journal identified the patients named in this article through their doctors.

Some diagnoses claimed by insurers were demonstrably false, the Journal found, because the conditions already had been cured. More than 66,000 Medicare Advantage patients were diagnosed with diabetic cataracts even though they already had gotten cataract surgery, which replaces the damaged lens of an eye with a plastic insert.

“It’s anatomically impossible,” said Dr. Hogan Knox, an eye specialist at University of Alabama at Birmingham. “Once a lens is removed, the cataract never comes back.”

Another 36,000 diabetic cataract patients didn’t receive any medical services or prescription drugs related to diabetes.

About 18,000 Medicare Advantage recipients had insurer-driven diagnoses of HIV, the virus that causes AIDS, but weren’t receiving treatment for the virus from doctors, between 2018 and 2021, the data showed. Each HIV diagnosis generates about $3,000 a year in added payments to insurers.

Everyone with HIV should be on antiretroviral drugs, the only effective treatment, and nearly all Medicare patients whose doctors diagnosed the virus took the drugs. Less than 17% of patients with insurer-driven HIV diagnoses were on them, the Journal found.

“It seems like almost all of those people don’t have HIV,” said Jennifer Kates, HIV policy director at KFF, a health-research nonprofit. “If they did, that would be substandard care at a pretty severe level,” she said.

. . .

When Congress conceived of the Medicare Advantage program decades ago, the hope was that insurers would make Medicare more efficient. In traditional Medicare, doctors and hospitals get paid for each service they provide, an incentive to provide more. The idea behind Medicare Advantage was to pay private insurers a lump sum to cover all services, giving them an incentive to keep patients healthier.

To protect insurers from the risk of winding up with sicker-than-average patients, the government allowed bigger payments for certain serious health conditions.

Partly because of that, Medicare Advantage has cost the government an extra $591 billion over the past 18 years, compared with what Medicare would have cost without the help of the private plans, according to a March report by the Medicare Payment Advisory Commission, or MedPAC, a nonpartisan agency that advises Congress. Adjusted for inflation, that amounts to $4,300 per U.S. tax filer.

Academic researchers and government investigators have raised questions about high rates of insurer-driven diagnoses in Medicare Advantage. In a 2021 report, the inspector general that oversees Medicare found the agency spent billions of dollars based on insurer-driven diagnoses for which patients received no care from doctors.

. . .

“Any time you base a system like this on diagnosis codes, there’s going to be rampant abuse of the system,” . . . [John Gorman, a former Medicare official and founder of two companies that review records and conduct home visits on behalf of Medicare insurers] said. Insurers “will find something else to make up the revenue.”

For the full story see:

Christopher Weaver, Tom McGinty, Anna Wilde Mathews and Mark Maremont. “Medicare Paid $50 Billion To Insurers for Untreated Ills.” The Wall Street Journal (Tuesday, July 9, 2024): A1 & A12.

(Note: ellipses, and bracketed words, added.)

(Note: the online version of the story was updated July 8, 2024, and has the title “Insurers Pocketed $50 Billion From Medicare for Diseases No Doctor Treated.” In the passages quoted above, I have omitted some subheadings that appear in the online and some, often different, subheadings that appear in the print, versions of the article.)

Covid Citizen Scientists Provided Quick and Useful Knowledge

The essay quoted below claims that patients can provide useful knowledge about the symptoms of the diseases that afflict them. I agree, but would go even further. One source of knowledge that all humans have, and even non-humans to some extent, is the observation of patterns. Patients can observe which behaviors, medicines, circumstances make their disease better and which make their disease worse. Of course sometimes patients can be biased, can fool themselves. That can be a reason that patients disagree about what works. But another reason that patients can disagree is that patients have different bodies so that what works for one patient may not work for another. Researchers and clinicians are increasingly recognizing this when they advocate and practice “personalized” (aka “precision”) medicine.

And the academic and popular literatures have exaggerated the extent to which biases undermine our observation of patterns. The exaggeration is partly because bias is bad news, and bad news sells. The usual reliability of observed patterns has been persuasively defended in Gary Klein’s The Sources of Power.

Note another point in the passages quoted below. Patients have a sense of “urgency” that scientists often lack. Sometimes quick imperfect conclusions are actionable, while slow peer-reviewed conclusions are too late to be actionable. And sometimes peer-reviewed conclusions give us conclusions that are both slow and imperfect. Ioannides argues that “most published research findings are false” (2005). I am currently reading Piller’s Doctored that discusses highly-cited papers from the Alzheimer’s literature that illustrate Ioannides’s claim.

(p. C3) A month after her Covid-19 diagnosis last March [2020], Lisa McCorkell wanted to know why she was still struggling with a cough, shortness of breath and other debilitating symptoms. Her doctors didn’t have answers, so she and a group of other Covid patients took matters into their own hands. They formed a research group on a Slack channel and launched their own study.

“I was looking for validation, that my experience was reflected in the others,” said Ms. McCorkell, 28, of Oakland, Calif., who was finishing her graduate studies in public policy when she was diagnosed.

. . .

Covid citizen scientists generated information about symptoms, such as neurological issues, that didn’t garner a lot of attention at the start of the pandemic. They highlighted the overlooked challenges faced by people whose symptoms last longer than 28 days. The studies were limited by drawing largely from patients who joined online support groups, but they gained the kind of recognition by professional scientists that citizen science doesn’t always get.  . . .

The pandemic has created an opening for citizen scientists, because even now clinicians don’t fully understand the virus. Early clinical trial data comes mainly from studies involving hospitalized patients, whose experiences may not apply to those who are suffering but don’t end up in the emergency room.

. . .

Patients who want to lead Covid research projects often must navigate tension between their sense of urgency and the traditional scientific process, which typically requires a long peer review process before publication in a journal, said Emily Sirotich, a Ph.D. student at McMaster University in Canada. On March 12, the day the WHO declared Covid a pandemic, Ms. Sirotich joined a Twitter conversation between rheumatology patients and doctors, who were on equal footing when it came to Covid: No one understood the disease. “Everyone was worried,” she said.

. . .

Patients wanted to share the survey data right away, but the researchers argued that the scientific community wouldn’t use the information to inform patient care without the validation of going through peer review. “It has to be accurate,” said Ms. Sirotich.

The two groups tried to strike a balance, Ms. Sirotich said. Patients created overview summaries of the raw data that they immediately disseminated to support groups for use in personal decision making. The physicians and patients also co-wrote and submitted articles with more detailed data analysis to peer-reviewed journals and conferences.

“Covid gave us the opportunity to show that patients can produce valid data and reliable information about what they are experiencing,” Ms. Sirotich said.

In December [2020], the Patient-Led Research for Covid-19 group posted a paper based on analyzing data from over 3,700 patients to the MedRxiv public server, which professional scientists have used throughout the pandemic to quickly make results available to the wider community before peer review. The group also plans to submit the paper to a scientific journal.

Eric Topol, director of the Scripps Research Translational Institute in La Jolla, Calif., and a proponent of patients tracking their own health, tweeted the results. “There is a dearth of information about Covid,” Dr. Topol later said. As a professional scientist, he added, “The paper provided invaluable new insights to me.”

For the full essay see:

Amy Dockser Marcus. “Patients Are Doing Their Own Covid-19 Research.” The Wall Street Journal (Saturday, Jan. 30, 2021 [sic]): C3.

(Note: ellipses, and bracketed years, added.)

(Note: the online version of the essay has the same date as the print version, and has the title “Covid-19 Patients Are Doing Their Own Research.”)

Marcus’s essay is consistent with the theme of her book:

Marcus, Amy Dockser. We the Scientists: How a Daring Team of Parents and Doctors Forged a New Path for Medicine. New York: Riverhead Books, 2023.

The Gary Klein book I praise in my comments is:

Klein, Gary A. Sources of Power: How People Make Decisions. 20th Anniversary ed. Cambridge, MA: The MIT Press, 2017.

The Ioannidis paper that I quote above is:

Ioannidis, John P. A. “Why Most Published Research Findings Are False.” PLoS Medicine 2, no. 8 (Aug. 2005): 696-701.

The Piller book that I praise in my comments is:

Piller, Charles. Doctored: Fraud, Arrogance, and Tragedy in the Quest to Cure Alzheimer’s. New York: Atria/One Signal Publishers, 2025.

F.D.A.’s Project Optimus Adds to Complexity and Length of Mandated Clinical Trials, Further Burdening Innovative Startups

One of Joseph Schumpeter’s profound subtle points in the key chapter 7 of Capitalism, Socialism and Democracy is that the kind of thinking and rules that aim for optimization, restrict the kind of creative, inspired thinking or improvisational pivoting that results in the greatest and fastest progress and flourishing. (My interpretation of Schumpeter.)

Great leaps forward have tended to originate from small startups. But increasing the size, length, and costs of mandated clinical trials, as the F.D.A. is doing with “Project Optimus,” will make it harder for small startups to survive, let alone flourish.

(p. B2) For years, Food and Drug Administration officials have expressed concern that cancer drug doses are often too high, leading to unnecessary side effects. An FDA program launched in 2021, Project Optimus, requires companies to re-examine how they set doses of cancer treatments.

This typically involves larger clinical trials to test doses to find those that optimally balance safety and efficacy. Entrepreneurs support the aim, but some fear the initiative will add time and cost to drug development, putting startups at a further disadvantage to larger competitors.

“I don’t think anybody disagrees with the idea that we’re trying to find the best thing for the patient,” said David Bearss, chief executive of biotechnology startup Halia Therapeutics. “I hope it doesn’t have unintended consequences of actually suppressing innovation.”

. . .

Because Project Optimus is still relatively new it will take a while for its full impact to be known. But it will likely add six to 12 months to the drug-development process, said Tara Raghavan, a pharmaceutical patent lawyer and partner with law firm Benesch Friedlander Coplan & Aronoff.

For the full story, see:

Brian Gormley. “FDA Drug Initiative Vexes Startups.” The Wall Street Journal (Friday, Aug 30, 2024): B2.

(Note: ellipsis added.)

(Note: the online version of the story has the date August 29, 2024, and has the title “FDA Wants Safer Cancer Drugs, but Some Startups Fear Unintended Consequences.”)

In my comments I mention Schumpeter’s chapter 7 on creative destruction that can be found in his messy, inspired masterpiece:

Schumpeter, Joseph A. Capitalism, Socialism and Democracy. 3rd ed. New York: Harper and Row, 1950.

Mail-Order Drugs and Supplements Degrade in Transit Heat

Researchers have identified many chemicals that should be beneficial to health in a variety of ways. For instance some should help fight cancer, others should reduce heart disease. Often researchers present plausible stories about the mechanism through which the positive effects occur. But one puzzle is that empirical (observational) evidence often suggests that the positive effects occur when the chemicals are consumed in foods, but not when it is consumed in pill, capsule, powder or liquid supplements. One speculation is that sometimes the chemicals in food are complemented by other as-yet-unidentified chemicals that enable or enhance the main chemical’s effects. These other chemicals are as-yet-unidentified “adjuvants.”

But the evidence in the story quoted below stimulates an alternative speculation. Consumers know when food has gone bad by its taste, smell, texture, and appearance. inform consumers when the food has gone bad and should not be consumed. With pills, such direct evidence is harder to perceive. So consumers are more likely to swallow pills that have gone bad than they are to swallow food that has gone bad.

When the F.D.A. approves a drug, after expensive testing, we assume that the drug is good for us. We let down our guard and trust the drug. If instead we operated under the caveat emptor rule, we would buy our drugs and supplements from physical stores that have a reputation for logistical excellence (for instance Walmart and Costco).

The F.D.A. is not good at protecting us, and because we trust them, we are no longer good at protecting ourselves.

(p. A1) Mail-order pharmacies say that their packaging is weather resistant and that they take special precautions when medication “requires specific temperature control.” But in a study published last year, independent pharmaceutical researchers who embedded data-logging thermometers inside simulated shipments found that the packages had spent more than two-thirds of their transit time outside the appropriate temperature range, “regardless of the shipping method, carrier, or season.”

. . .

(p. A17) The Times spoke to more than a dozen patients who had received medications they suspected were damaged by heat and humidity during transportation, some of whom experienced serious medical issues after consuming the drugs. Most said they had received their medications in manila envelopes or plastic shipping bags with no additional insulation. They spoke about finding pill bottles in metal mailboxes or tossed onto their front porches, leaving them unsure of how long the drugs had been baking in the sun. Others said they routinely stayed home to watch for drop-offs but found that the medications arrived already warm to the touch.

. . .

In Missouri, Loretta Boesing received a shipment of a liquid immunosuppressant medication for her son, who had a liver transplant, in 102-degree weather in only a plastic envelope. Soon after, his health began waning, and his body began to reject the liver. During a two-week hospital stay, he began receiving the medications from the hospital pharmacy instead and began to recover.

Several years after the ordeal, Ms. Boesing’s insurance changed, and the new services were administered by CVS Caremark. She filed several appeals to the company to allow her to continue picking up the medication at the hospital pharmacy. But the request was denied, she said, and the medication again arrived without an ice pack, warm. She said her son’s liver lab tests had begun to elevate again.

She wept on a call with a CVS Caremark representative, which she recorded and shared with The Times. “I am begging you right now: Please do not let me lose my son,” she says on the call.

Michael DeAngelis, a spokesman for CVS Health, said he was not able to comment on the specific case because of patient privacy laws but added that the company customizes its packaging using a “sophisticated algorithm” that accounts for both F.D.A. and manufacturer data.

“There are hundreds of different possible packaging combinations that we can use to help mitigate weather and temperature issues,” he said.

Ms. Boesing went on to start the nonprofit group Unite for Safe Medications.

Rebecca Nierengarten, 39, of Maplewood, Minn., was in medical school when she fell ill with a dangerous autoimmune disease that causes extreme muscle weakness. She said her insurance company had forced her to switch from hospital infusions of an immunoglobulin product called Privigen to home delivery of the drug, and every summer, her condition worsened so drastically that she could not stand up from a chair without assistance and struggled to swallow.

“It’s a protein medication — proteins denature with heat,” she said. “If you have a biology degree, you know that.”

. . .

Researchers have been aware of potential effects of heat exposure on medications since at least the 1990s. Between June and August of 1996, United States Pharmacopeia — the nonpartisan group that sets national standards for drug handling — packaged and mailed electronic temperature and humidity indicators to various parts of the country to determine whether drugs were being subjected to worrisome conditions.

The results, shared with a task force of the National Association of Boards of Pharmacy, showed that more than 90 percent had exceeded the appropriate temperature range and that more than a quarter of those had been exposed to what was considered “excessive heat,” above 104 degrees Fahrenheit. The packages were also exposed to significant spikes in humidity.

But representatives from the Pharmaceutical Care Management Association, which lobbies for the pharmacy benefit managers that oversee drug benefits for many insurance plans, were present at the meeting, and the task force decided against acting.

In the more than two decades since, global temperatures have risen, and so have the number of people who receive medications by mail through the big pharmacy benefit managers, many of which are owned by companies that also own mail-order pharmacies.

For the full story see:

Emily Baumgaertner. “An Unanticipated Consequence Of Rising Heat: Melted Medicine.” The New York Times (Wednesday, August 14, 2024): A1 & A17.

(Note: ellipses added.)

(Note: the online version of the story has the date Aug. 13, 2024, and has the title “Hot Summer Threatens Efficacy of Mail-Order Medications.”)

The published academic article documenting the harm to medicines from heat during transit, and mentioned above, is:

Chowdhury, Danial A., Min Sun Jeong, Lakhini Vyas, Jonathan Kim, Leon E. Cosler, Devon J. Lash, Joseph A. Barone, Michael Toscani, and Lucio R. Volino. “Evaluation of Temperature Excursions from USP <659> Recommendations During Mail Transit.” Journal of the American Pharmacists Association 63, no. 3 (2023): 847-52.

The Hurdles to Getting Paxlovid Reduce Its Use

Requiring prescriptions for most drugs is defended as a way to protect patients. But getting a quick physician appointment, making the appointment, and then getting the prescription filled, can all take nontrivial amounts of time and effort, especially burdensome for the poor or for those with work or family duties. Many drugs, such as Paxlovid for Covid, only work if taken in the early days of the disease. As a result, few people end up taking Paxlovid.

How does that protect patients?

If we respected the right of adult patients to make their own decisions, as soon as they had symptoms of Covid, they could go to a pharmacy and purchase Paxlovid.
Showing respect would both be moral, and would be more effective against the disease.

(p. A19) . . . Paxlovid seems to reduce the chance of hospitalization and death from Covid by more than 85 percent, . . .

. . .

But having drugs, especially highly effective ones like Paxlovid, is critical. And for these medications to succeed they must be taken correctly. People need to start them within five days of an infection, and because of the deficiencies of our testing system and other problems in health care, beginning treatment that quickly is difficult.

. . .

If you test positive, you can’t go straight to a pharmacy for the drug therapy like you did for the test. You need a prescription for the medication, which often requires a doctor’s visit. That presupposes that you have a doctor (many people don’t), and that there’s an appointment available. Before the pandemic, fewer than half of people in the United States could get a same-day or next-day appointment with their provider when they were sick.

If you’re lucky enough to traverse this gantlet successfully, though, you now need to get your prescription filled. Most insurance will restrict where you can get your medications paid for, and it’s hit or miss whether that pharmacy will have pills in stock. If not, hopefully they’ll be in a few days later, but those are precious days.

Too few people understand that much of the U.S. health care system is set up to make it harder for people to get care — an attempt to drive down overall health care spending. That’s why your insurance likely has higher deductibles than it used to, and more visits come with co-pays or coinsurance. But poorer people have a harder time covering these costs, so this worsens disparities and makes it harder for those who need help the most to get it.

We see this play out with Covid-19 treatments. A recent study looked at how efficiently and effectively Medicare beneficiaries (all of whom were elderly) received monoclonal antibody therapy from 2020 to 2021 for Covid. It found that those at highest risk were the least likely to be treated, in large part because it was difficult to navigate these hurdles within the 10 days from infection that treatment requires.

It doesn’t need to be this way.  . . .  Pharmacists could be more empowered to talk to patients about whether the pills are safe for them and distribute pill packs without a prescription if patients qualify.

For the full commentary, see:

Aaron E. Carroll. “Covid Drugs Might Work Well, but Our Health System Doesn’t.” The New York Times (Monday, February 14, 2022 [sic]): A19.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Feb. 13, 2022 [sic], and has the title “Covid Drugs May Work Well, but Our Health System Doesn’t.”)

Disintermediate Healthcare

Many of the problems of our broken healthcare system could be fixed if insurers and healthcare providers were competing directly and transparently for the dollars of patients. But their are middlemen between patients and providers–mostly employers and governments. The goals and knowledge of the payers overlap, but are not the same. The payers may prioritize lowering their costs and may not care as much, or even know, the full costs to the patients.

The patients have a much better knowledge of the value of the healthcare or insurance that they are receiving, but they are very constrained in their ability to switch to insurers or healthcare providers who provide better services, or do so more efficiently. For many workers healthcare and health insurance are bundled with their work. They can leave their work, but other components of the bundle matter.

And nothing is transparent.

The fancy word for cutting out the middleman is “disintermediation.”

(p. 1) Weeks after undergoing heart surgery, Gail Lawson found herself back in an operating room. Her incision wasn’t healing, and an infection was spreading.

At a hospital in Ridgewood, N.J., Dr. Sidney Rabinowitz performed a complex, hourslong procedure to repair tissue and close the wound.

. . .

But the doctor was not in her insurance plan’s network of providers, leaving his bill open to negotiation by her insurer. Once back on her feet, Ms. Lawson received a letter from the insurer, UnitedHealthcare, advising that Dr. Rabinowitz would be paid $5,449.27 — a small fraction of what he had billed the insurance company. That left Ms. Lawson with a bill of more than $100,000.

“I’m thinking to myself, ‘But this is why I had insurance,’” said Ms. Lawson, who is fighting UnitedHealthcare over the balance. “They take out, what, $300 or $400 a month? Well, why aren’t you people paying these bills?”

The answer is a little-known data analytics firm called MultiPlan. It works with UnitedHealthcare, Cigna, Aetna and other big insurers to decide how much so-called out-of-network medical providers should be paid. It promises to help contain medical costs using fair and independent analysis.

But a New York Times investigation, based on interviews and confidential documents, shows that MultiPlan and the insurance companies have a large and mostly hidden financial incentive to cut those reimbursements as much as possible, even if it means saddling patients with large bills. The formula for MultiPlan and the insurance companies is simple: The smaller the reimbursement, the larger their fee.

Here’s how it works: The most common way Americans get health coverage is through employers that “self-fund,” meaning they pay for their workers’ medical care with their own money. The employers contract with insurance companies to administer the plans and process claims. Most medical visits are with providers in a plan’s network, with rates set in advance.

But when employees see a provider outside the network, as Ms. Lawson did, many insurance companies consult with MultiPlan, which typically recommends that the employer pay less than the provider billed. The difference between the bill and the sum actually paid amounts to a savings for the employer. But, The Times found, it means big money for MultiPlan and the insurer, since both companies often charge the employer a percentage of the savings as a processing fee.

In recent years, the nation’s largest insurer by revenue, UnitedHealthcare, has reaped an annual windfall of about $1 billion in fees from out-of-network savings programs, including its work with MultiPlan, according to testimony by two of its executives.

. . .

(p. 18) In some instances, the fees paid to an insurance company and MultiPlan for processing a claim far exceeded the amount paid to providers who treated the patient. Court records show, for example, that Cigna took in nearly $4.47 million from employers for processing claims from eight addiction treatment centers in California, while the centers received $2.56 million. MultiPlan pocketed $1.22 million.

. . .

In examining MultiPlan’s dominant role in this secretive world, The Times reviewed more than 50,000 pages of confidential corporate records, legal filings, claims information and other documents. The Times also interviewed more than 100 patients, doctors, billing specialists, advisers to employer health plans and former MultiPlan employees.

. . .

Mary Reinbold Jerome had been diagnosed with ovarian cancer at age 62 and received treatment at Memorial Sloan Kettering. Because the hospital was outside her plan’s network, she was billed tens of thousands of dollars.

. . .

She stood beside Andrew M. Cuomo, then the attorney general, as he announced his office’s blistering conclusions: A payment system riddled with conflicts of interest had been shortchanging patients, and at its core was a data company called Ingenix. Insurers used the company, a UnitedHealth subsidiary, to unfairly lower their payments and shift costs to patients, the probe found.

. . .

But amid the triumph, a key detail in the attorney general’s agreements with insurers largely escaped notice: The companies were required to use the nonprofit database for only five years.

When that term expired in 2014, MultiPlan was well positioned to capitalize.

For decades, the company, founded in 1980, offered a traditional approach to managing out-of-network claims by negotiating rates with doctors. Insurers got discounts and assurances that patients would not have to make up the difference.

But after MultiPlan’s founder sold it to private equity investors in 2006, the company pursued a more aggressive approach. It embraced pricing tools that used algorithms to recommend lower payments, and no longer protected patients from having to pay the difference, documents show.

Meanwhile, private equity ramped up investments in physician groups and hospitals and, in some instances, began billing for extraordinary sums. Once insurers were no longer obligated to use the nonprofit database, FAIR Health, they began looking for ways to combat that billing and other charges they considered egregious.

. . .

Internal documents show that UnitedHealthcare began a campaign to persuade employers to switch from FAIR Health. In a 2019 email, a UnitedHealthcare senior vice president emphasized creating a “sense of urgency” and helping companies still using FAIR Health “understand they don’t want to be on that program anymore.”

UnitedHealthcare had a big incentive to encourage this change. When it processed claims from employer plans using FAIR Health, the insurer collected no additional fee, according to legal testimony. But when it used MultiPlan, documents show, it typically charged employers 30 to 35 percent of the difference between the billed amount and the portion paid.

MultiPlan, too, charged a percentage of the savings, meaning it could make more by recommending lower payments. (FAIR Health charged a flat fee.)

. . .

(p. 19) Some providers said they had begun requiring payment upfront or stopped accepting patients with certain insurance plans because appealing for higher payments can be time-consuming, infuriating and futile. Others have tried to sue insurers or MultiPlan. Dr. Rabinowitz, who repaired Ms. Lawson’s incision, hopes to collect the remaining balance from UnitedHealthcare in an ongoing case.

Surprise bills for some types of care are no longer an issue, insurers said, thanks to the law that went into effect in 2022. Brittany Perritt didn’t realize the anesthesiologists at her 3-year-old’s brain tumor treatments in 2020 were out-of-network until the claims went to MultiPlan. If that care occurred today, she likely would be spared the calls from debt collectors, because she didn’t go out of network by choice.

But MultiPlan assured investors shortly before the law’s passage that it was likely to have “limited impact” on the company. In fact, MultiPlan said, 90 percent of its revenue involved out-of-network claims that wouldn’t be affected.

. . .

Even when patients figured out where to direct complaints — the Employee Benefits Security Administration — they described the process as draining and mostly fruitless.

. . .

Insurers can set negotiation parameters for MultiPlan, including not negotiating at all, records and interviews show. Multiple providers and billing specialists said that in recent years they had increasingly been told their claims weren’t eligible for negotiation.

“It wasn’t this bad before,” said Tiffany Letosky, who oversees a small practice specializing in surgeries for endometriosis and gynecologic cancers.

Former MultiPlan negotiators said their bonuses had been linked to their success at reducing payments, incentivizing a hard-line approach.

Ms. Young, the former negotiator critical of the process, said she had occasionally called a provider from a cellphone — knowing that her work line was recorded — and advised against accepting her own offer.

Another former negotiator said the pressure to get bigger discounts had made her physically ill. “It was just a game,” she said. “It’s sad.”

For the full story see:

Chris Hamby. “Patients Hit With Big Bills While Insurers Reap Fees.” The New York Times, First Section (Sunday, April 7, 2024): 1 & 18-19.

(Note: the online version of the story was updated April 9, 2024, and has the title “Insurers Reap Hidden Fees by Slashing Payments. You May Get the Bill.”)