Political Economy of the Medical Products Industry Tom Hazlet Survey of Biomedical Regulatory Affairs Spring 2008 Menu Definitions medical products political economy Commodities drugs devices biologics veterinary medicine dietary supplements Actors manufacturers regulators consumers self-pay insurers governmental insurers Issues cost of... drugs industry performance speculations re devices 1 Sneaky approach to making it all fit together. 2 defn: medical products defn: political economy The Food and Drug Administration (FDA) announced a broad initiative to help make innovative medical technologies available sooner, and to reduce the costs of developing safe and effective medical products while maintaining FDA's traditional high standards of consumer protection. This is an FDA-wide initiative, involving all four of FDA's medical product review centers (drugs, biologics, devices, and veterinary medicine). FDA intends to achieve this goal through new actions in three major areas: Reducing the delays and avoidable product development costs by avoiding multiple cycles of FDA review when possible, through early communication and other steps to improve the quality of new product applications Improving the quality and efficiency of the review process, by adopting a quality systems approach to medical product reviews Facilitating new product development, by providing clearer up-to-date guidance for particular diseases and for emerging technologies Political Economists are concerned with the allocation of scarce resources in a world of infinite wants and needs. In order to allocate these resources, politics are used within a state to provide for the people. Political economy is the study of the relationships between individuals and society, and more specifically, the relationships between citizens and states. Political economy is a study of philosophy and ideology that studies the evolution of political and economic ideas. Political economy is a mixture of politics, economics, sociology, philosophy, and history, which all bring together evidence to the study of how humans exist within societies. Political economists study political ideology, economic structure, human interaction, human nature, and theories in philosophical thought. It is a study that studies not only the mechanics of a particular structure, but also the reasoning behind why a structure is regarded to be the best by various people with different beliefs. http://www.fda.gov/bbs/topics/news/2003/new00867.html 3 http://en.wikibooks.org/wiki/political_economy/contents; accessed 061007 4
more Medical Products Political Economy A Framework in Econ-Speak (after Comanor) Free Market Model Economics is a practical science. Since its inception as an independent discipline, it has probed the major policy issues of the day. The topics that aroused the interests of its practitioners have generally been those that presented government officials with critical choices. The modern literature on the economics of the pharmaceutical industry is no exception. a free market is a market where trades are morally voluntary and therefore free from the interference of force and fraud 1 market failure remedies Competition & Monopoly R&D determinants of expenditures scale economies costs & returns from R&D 1 http://en.wikipedia.org/wiki/free_market Comanor WS. The Political Economy of the Pharmaceutical Industry. J Econ Lit 1986;24(30):1178-1217 5 6 framework - 2 framework - 3 Advertising & Promotion volume of industry outlays impact on competition effect on information Impact of regulation patent policy regulatory scrutiny [product liability] drug lag effects on price and market share costs & benefits of regulation Social returns form R&D USC CFR Range gross regulatory divisions 7 8
Commodities: drugs (CDER) 21USC: 321, 351-360 [Act 201, 501-573] 21CFR: 200-400 Range over-the-counter (OTC) prescription (legend Caution: Federal law ) after 38 Act; 51 Durham- Humphrey Amendment controlled substance commodities: medical devices (CDRH) 21USC: 321, 351-360 [Act 201, 501-573] 21CFR: 800 s, 900 Device Class and Regulatory Controls Class I General Controls With Exemptions Without Exemptions Class II General Controls and Special Controls With Exemptions Without Exemptions Class III General Controls and Premarket Approval 9 10 commodities: biologicals (CBER) commodities: veterinary medicine USC: FD&C + Public Health Service Act 1944 42USC Chapter 6A 201-300gg CFR: 600 Blood, blood products, IVDs associated with blood, vaccines, allergenic extracts, body parts(?); areas of expertise 21USC321, 351-360 [Act 201, 501-573] 21CFR: 500 s in the food chain Fido note: licensed at the Secretary s pleasure; cf. approved 11 12
commodities: dietary supplements Actors (aka stakeholders ) 21USC Chapter IV 401-415 (343-350d) 21CFR 100 s, 573, 582 specified in the Dietary Supplement & Health Education Act of 1994 defined both of the terms "dietary ingredient" and "new dietary ingredient" as components of dietary supplements. In order for an ingredient of a dietary supplement to be a "dietary ingredient," it must be one or any combination of the following substances: a vitamin, a mineral, an herb or other botanical, an amino acid, a dietary substance for use by man to supplement the diet by increasing the total dietary intake (e.g., enzymes or tissues from organs or glands), or a concentrate, metabolite, constituent or extract. A "new dietary ingredient" is one that meets the above definition for a "dietary ingredient" and was not sold in the U.S. in a dietary supplement manufacturers brick & mortar virtual companies campaign manufacturers regulators FDA international equivalents virtual regulators standards organizations USP/NF ICH ISO UL; equivalent organizations in Canada, EU insurers; special interest groups before October 15, 1994. 13 14 actors - 2 consumers self-pay often pays the most insurers networks to assure access; contractual relationships with providers governmental insurers federal Medicare; federal employees; (Medicaid) state varies widely; Medicaid; BHP, UMP (WA) Issues cost of medical products a free market? patent structure monopolies drugs generics biologics immortal medical devices some double-speak if it s substantially equivalent price discrimination vs. cost shifting product life cycle and barriers to entry price controls 15 16
Issues 2 Role of governmental investment in innovation http://www.cbo.gov/ftpdocs/76xx/doc7615/10-02-drugr-d.pdf 17 18 issues -- 3 Industry performance 19 20
speculation regarding Medical Device Industry... it depends many products evolve incrementally rather than by blockbuster reimbursement much more diffuse product cycle much shorter 5 years much less information about industry; much less scientific literature about products 21 22 questions Points of emphasis Interplay between manufacturers, consumers, regulatory bodies Markets, market failure, remedies Cost of medical products; market segmentation 23 24