Regulatory trends worsen the economy’s prognosis

President Obama spent much of a town hall meeting on Monday trying to rebut the charge that he is anti-business.  However, his administration’s treatment of the pharmaceutical and medical device industries gives the lie to those denials.

Both the president himself and his appointees to senior positions at regulatory agencies such as FDA and EPA seem to be clueless about what businesses need — transparent, consistent, reasonable regulatory policies.

During the Obama administration’s tenure, the FDA’s long-standing risk-aversion has reached new heights.  There are innumerable examples, but nowhere is the phenomenon more evident than in the FDA’s imposition of Risk Evaluation and Mitigation Strategies (REMS), which the agency can impose at will on new drugs.  These REMS include a list of punitive “elements to assure safe use” of the drug, which encompass: restriction of the drug to specified patient populations, distribution only by certain specialty pharmacies, required laboratory findings and monitoring in all patients who get the drug, advertising permitted only to certain categories of physician specialists, and patient enrollment in a central registry.

The REMS restrictions and requirements, which amount to “limited,” or “conditional,” approvals of new drugs, constrain the prescribing and use of medicines and thereby diminish the potential market for drugs.  Does FDA over-prescribe them?  Here’s a hint: A former head of the agency quipped, “Dogs bark, cows moo, and regulators regulate.”

Even these limited approvals number each year only about half the numbers seen in the mid-1990s. And what makes these trends particularly ominous is that only 2 in 10 marketed drugs recoup their development costs.  This situation is not sustainable.

In addition, the FDA is moving toward far more stringent regulation of medical devices such as pacemakers, defibrillators and artificial joints.  In particular, they are reevaluating an abbreviated review process known as “premarket notification,” which requires a lesser degree of evidence of safety and efficacy than “premarket approval” and so is far cheaper and faster; only about 10 percent of these expedited applications contain data from clinical trials.  The notification route to marketing a product, which is intended for products that are “substantially equivalent” to products already on the market, has generally worked well for more than 30 years, and its availability is one reason the United States has led the world in the development of medical devices.

The makers of medical devices that do require clinical data are complaining bitterly that the FDA frequently reneges on agreements: Even after clinical trials are completed successfully, regulators frequently move the goalposts and demand additional studies.  In addition, medical device manufacturers are also being subjected to new “user fees” — discriminatory taxes — just to get FDA to review their applications.

Because the developers of medical devices are typically small and cash poor, this uncertainty and added expense can threaten their very survival.  At the very least, these trends are raising the time and expense to develop and test medical devices and limiting the number of new products that are introduced.  At a conference last week, Eamonn Hobbs, the chairman of the Medical Device Manufacturers Association, called the current regulatory situation “a perfect storm” marked by “some of the worst things I’ve seen in 30 years.”