The Concise Encyclopedia of Economics

Drug Lag

by Daniel Henninger
About the Author
The modern history of drug regulation in the United States has been marked by the simultaneous pursuit of two goals—safety and efficacy. Since passage of the 1962 amendments to the Food and Drug Act, most members of the medical and regulatory establishment have regarded those two goals as complementary. By the early seventies, however, critics had begun to charge that the Food and Drug Administration (FDA), in its pursuit of these goals, was delaying or preventing the timely introduction of promising new drugs for seriously ill patients.

With the 1962 amendments, Congress gave the FDA authority to judge a drug's efficacy—whether it produced the results for which it had been developed. Formerly the agency had monitored only safety. Indeed, from 1938 until 1962, the FDA had just sixty days to disapprove the application of a new drug. If it did not, the drug could be marketed. The system worked without significant incident. But in 1962 the thalidomide tragedy hit the world.

A sedative used to prevent miscarriage, thalidomide caused the birth of several thousand deformed babies in Europe. Thalidomide was not so major a tragedy in the United States, however, because the existing safety regulations allowed the FDA to catch it early. Ironically, the publicity generated by pictures of deformed newborns in Europe led Congress to amend the U.S. drug laws to add an efficacy requirement to the existing safety rules, even though the problem with thalidomide was safety, not efficacy. Congress gave the FDA the authority and latitude in judgment to decide whether a new drug did what it claimed it could do. It was not long after this expansion of regulatory responsibility that the phrase "drug lag" entered the lexicon.

Some critics charged that the efficacy requirement was extraneous to the agency's central mission to monitor safety. The often complicated procedures created for assessing a drug's efficacy added to the years required to get a new drug into general use. A 1974 study by University of Chicago economist Sam Peltzman concluded that since 1962 the new rules had reduced the rate of introduction of effective new drugs significantly—from an average of forty-three annually in the decade before the amendments to just sixteen annually in the ten years afterward. Peltzman also found that the regulations also made it difficult for companies to introduce drugs that competed with existing drugs, thus reducing competition in the industry.

The drug lag controversy intensified with the rise of the AIDS epidemic. On October 12, 1988, a large group of AIDS activists staged a demonstration at the FDA's headquarters in suburban Washington, chanting, "No more deaths!" They were protesting the snail's pace at which the FDA was approving new drugs to combat AIDS. These and other critics, who complained about the agency's handling of drugs to treat cancer and heart disease, posed a new and controversial question about drug delays: was not the federal agency charged by Congress with protecting ill Americans from harmful or useless drugs actually causing great harm to patients, precisely for exercising its congressional mandate?

Have patients in other countries gained access to new drugs sooner than patients in the United States? The Center for Drug Development at Tufts University studied forty-six new drugs approved by the United States in 1985 and 1986 and found that 72 percent were available on average 5.5 years earlier in foreign markets. Other studies, comparing drug approvals back to 1972, have suggested a similar time lag in the United States. Meanwhile, the costs of development rise. The cost of developing a new drug in the United States is estimated to have risen to $231 million today from $54 million in 1976 (all in 1987 dollars), with the approval time from earliest development to final marketing typically about twelve years.

The FDA responded to complaints about drug lag and the availability of promising experimental drugs by introducing a number of reforms. The most notable was "fast track" approval of the AIDS drug AZT, which was cleared for use within two years after it was discovered to be effective against the HIV virus. Other reforms allow patients access to promising experimental drugs. Unfortunately, to qualify to provide experimental drugs, administering physicians must meet burdensome paperwork requirements, such as the need to draft a "treatment protocol" for submission to an institutional review board, a practice more common to university-based clinical investigators. Also, because insurers will often resist payment for unapproved drugs, the rules limit the amount manufacturers may charge to "cost recovery," loosely defined as excluding charges that would constitute "commercialization" of the drug. Manufacturers, therefore, have little incentive to provide the drugs.

The severest criticism leveled at the drug lag is that without access to a drug available elsewhere, seriously ill patients will suffer or even die. Peltzman raised the subject in his 1974 study. He noted pharmacologist William Wardell's estimate that because the relatively safe hypnotic drug nitrazepam was not cleared for use in the United States until 1971, five years after it was available in Britain, more than 3,700 Americans may have died from less safe sedatives and hypnotics. After earning the Nobel Prize for chemistry in 1988, U.S. drug researcher George Hitchings of Burroughs Wellcome Company said of an antileukemia drug he helped develop before the 1962 amendments: "We went from synthesis to the commercial drug in three years. That is absolutely impossible today."

The issue of lost lives became more widely discussed with the controversy over the availability in the United States of drugs known as beta blockers. Beta blockers, administered to reduce risk to patients who have experienced a heart attack, were available in Europe in 1967 but not in the United States until 1976, primarily because of the FDA's concerns that long-term use might cause malignant tumors. When the agency ordered long-term animal studies to investigate this risk, critics argued that in risk-benefit terms, the agency's delay was unjustified, because beta blockers were estimated to save at least ten thousand lives annually. Similar arguments over delayed approvals have erupted over the FDA's handling of anticancer agents and drugs that dissolve blood clots in heart attack victims.

Those attempting to explain the FDA's cautious approach often cite one factor peculiar to the American system: politics. A 1972 remark by former FDA commissioner Alexander Schmidt aptly describes political pressures on the agency:

The times when [congressional] hearings have been held to criticize our approval of new drugs have been so frequent that we aren't able to count them.... The message to FDA staff could not be clearer. Whenever a controversy over a new drug is resolved by its approval, the agency and the individuals involved likely will be investigated.... The congressional pressure for our negative action on new drug applications is, therefore, intense.

With the FDA facing such incentives, drug lag is inevitable.

To a great extent the FDA's caution in approving new drugs has reflected prevailing political and social attitudes toward risk in the United States. An analogous example of zero-risk policy-making in this period is the Delaney Amendment of 1958, which mandated the banning of any substance that caused cancer in one type of animal, even if the doses are extreme and the substance does not cause cancer in other animals.

In the eighties scientific and public attitudes toward risk began to change. Researchers, for example, developed more sophisticated methods of detecting levels of toxicity and carcinogenicity in chemicals, which, in turn, caused regulators to reassess the kind of absolute prohibitions imposed by Delaney. In 1986 the FDA said that based on state-of-the-art toxicological testing, it intended to reclassify certain dyes as safe to use in cosmetics. It noted that a scientific review panel of the U.S. Public Health Service had calculated the risk of cancer in humans from orange dye no. 17 to be, at worst, 1 in 19 billion. A court challenge from Public Citizen, an advocacy group founded by Ralph Nader, prevented the agency from following through with its plan, but the debate over zero-risk regulation continues. Studies by analysts such as Aaron Wildavsky (see Riskless Society) also have popularized the idea that in assessing the value of a drug, chemical, or technology, its benefits ought to be balanced against apparent risks.

The AIDS crisis forced the FDA and the rest of the medical establishment to consider these evolving attitudes toward risk. Many of the compounds under study to treat AIDS were unfamiliar, and some were known to be highly toxic. Under traditional regulatory practice the agency would have approached these therapies with time-consuming caution. Activist groups representing AIDS patients, however, argued that individuals with a terminal illness would willingly assume levels of risk higher than those normally allowed by the FDA. To press their claims, AIDS groups engaged in acts of civil disobedience, such as smuggling unapproved drugs into the United States from Mexico, disrupting important conferences of AIDS researchers, and picketing the FDA's headquarters. Press coverage, historically supportive of the agency's bias against risk, became supportive of these new concerns from patients.

This pressure led to a significant reassessment of the entire system of developing and approving drugs in the United States. AZT was approved in record time even though it was highly toxic and often produced severe side effects during clinical trials. Though the U.S. drug-approval system responded positively to the AIDS crisis, whether the system will undergo lasting, institutional change remains unknown. Patients' demands that they determine for themselves the risks they find acceptable often conflict with the FDA's long history of making decisions for patients in spite of their desires.

Moreover, even if regulators, patients, and researchers settle on a system that gives greater weight to benefits in setting acceptable levels of risk, the question of legal liability remains. FDA approval does not fully protect a drug manufacturer from liability claims, and however much society's sympathies may evolve in the direction of benefits, a single lawsuit on behalf of one plaintiff can expose manufacturers to enormous claims.

After settling 450 cases, G. D. Searle, in 1986, took its Copper-7 IUD off the market because the costs of defending a product ruled safe by the FDA had become prohibitive. Perhaps the most notorious case of a safe drug driven off the market by personal-injury litigation is Merrill Dow's Bendectin, a remedy for morning sickness in pregnant women. Though 33 million women had used the approved drug between 1956 and 1983, and though Merrill had never lost a case filed against it, the prospect of litigating some 700 cases filed by plaintiffs' attorneys caused the company to drop the drug.

Ultimately, the political process will decide whether U.S. regulatory practices should be changed to accommodate the desires of patients and to shorten the lag between approvals here and in Europe. Normally, political decisions about regulatory practice are made among a small community of specialists. Today, the intense interest in curing, or at least ameliorating, diseases such as cancer, AIDS, heart disease, arthritis, and Alzheimer's means that the outcome of the debate over the drug lag is likely to reflect the values of an unprecedentedly large community of public interests.

About the Author

Daniel Henninger is the deputy editor of The Wall Street Journal's editorial page. He wrote most of the Journal's editorials on drug regulation that appeared in the 1980s.

Further Reading

Henninger, Daniel. "Will the FDA Revert to Type?" The Wall Street Journal, December 12, 1990, A16.

Kaitin, K. I., B. W. Richard, and Louis Lasagna. "Trends in Drug Development: The 1985-86 New Drug Approvals." Journal of Clinical Pharmacology 27 (August 1987): 542-48.

Kazman, Sam. "Deadly Overcaution: FDA's Drug Approval Process." Journal of Regulation and Social Costs 1, no. 1 (September 1990): 35-54.

Kessler, David A., M.D., J.D. "The Regulation of Investigational Drugs." New England Journal of Medicine 320, no. 5 (February 2, 1989): 281-88.

President's Cancer Panel. National Cancer Program of the National Cancer Institute. Final Report of the National Committee to Review Current Procedures for Approval of New Drugs for Cancer and AIDS. August 15, 1990.

Report of the Presidential Commission on the Human Immunodeficiency Virus Epidemic. February 1988.

Wildavsky, Aaron. Searching for Safety. 1988.

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