FDA states cost 'not considered in any of our reviews'

Monday, August 9, 2010

WASHINGTON - America's ongoing healthcare debate has put the matter of medical costs at center stage. While the Obama administration and its critics sharply disagree over whether the reform act will increase or decrease costs, virtually all parties agree that cost reduction is a primary goal.

Except, it seems, for the Food and Drug Administration (FDA).

In a recent interview with Newsweek, two high ranking FDA officials stated that the agency does not consider cost when reviewing new drugs or devices:

Newsweek: ...as part of that deliberation process, when you guys are considering whether to approve a device or not, do you take into account the cost that would impose on companies or the general impact on the industry?

AG: No. No. Our review does not, no, we don't take into account cost.

EM: And Mary, that cuts agencywide. That is not considered in any of our reviews.

These statements apparently reflect actual FDA practice, as they were made by senior staffers Alberto Gutierrez, Director of the Office of In Vitro Diagnostics and Elizabeth Mansfield, Director of the Personalized Medicine Staff.

When presented with language on the FDA's website that appeared to demand cost-benefit analysis, Gutierrez and Mansfield countered that cost is only considered before a new rule or regulation is enacted, rather than on an ongoing basis while it is enforced. The officials further claimed that significant expansions of FDA authority, such as the recent proposal to regulate tens of thousands of clinical labs, are not covered under the narrow legal definition of "new rule or regulation" and therefore also not subject to cost-benefit analysis.

However, these claims appear to contradict official agency policy, which states: "we estimate both the incremental benefits and costs associated with increasing the stringency of regulation and the incremental foregone benefits and cost savings associated with decreasing the stringency of regulation."
Alberto Gutierrez, Director of FDA Office of In Vitro Diagnostics

In a Newsweek interview, FDA's Alberto Gutierrez stated "we don't take into account cost."


Gutierrez and Mansfield's declaration appears to validate the longstanding concerns of many libertarian-leaning FDA watchers, who generally fault the agency for not taking the impact of regulation on prices into account when approving new drugs and devices. Over the years, these critics have included Nobel Laureates Gary Becker and Milton Friedman as well as academics like Alex Tabarrok of GMU and former FDA official Henry Miller.

But the declaration also plays into an emerging narrative in which the FDA has increasingly run afoul of cost-conscious liberals, by opposing prescription drug re-importation and claiming that the Obama Administration's efforts to reduce costs by digitizing medical records require FDA oversight.

"[FDA Official] Jeffrey Shuren's campaign to expand the domain of CDRH [Center for Devices and Radiological Health] to encompass electronic medical records has met significant resistance from people who care deeply about using IT to reduce healthcare expenditures", noted a member of the Health IT Standards Committee. "The revelation that the FDA is statutorily prevented from considering cost is simultaneously breathtaking and unsurprising."

Several sources in Washington predicted a strong reaction to the comments.

"[Journalist] Michael Kinsley's definition of a gaffe is when a politician tells the truth", said a former FDA official from the Clinton administration. "By that measure, Gutierrez and Mansfield have committed quite a gaffe."

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In wake of FDA offensive, genomics entrepreneurs look overseas

Sunday, August 8, 2010

WASHINGTON - The US Government invested more than three billion dollars in the Human Genome Project, in part on the expectation that the investment would create jobs for American scientists and engineers. Over the last decade this expectation was largely met, as the vast majority of pioneering companies in the sector — including innovators like ABI, 454 Biosciences, and Illumina — were based in the United States.

That may be about to change.

From Silicon Valley to San Diego to Boston, academics, entrepreneurs, scientists, and venture capitalists have begun to look overseas in the wake of what they call a heavy-handed crackdown by Congress and the FDA on the nascent personal genomics sector.

"As the situation stands today, [genomics] companies and their investors live in a climate of unprecedented regulatory uncertainty, causing delays in the introduction of new products and rendering an already inhospitable economic climate for both fundraising and sales even more challenging", said Daniel Vorhaus of Genomics Law Report. Mr. Vorhaus, a graduate of Harvard Law School, is the legal advisor to Harvard Medical School's Personal Genome Project and a prolific commenter on regulatory matters.

In recent weeks, the FDA has sent 19 letters to genomics companies large and small, warning them that their products, sold for years, may now run afoul of the agency's new interpretation of its jurisdiction.

While the letters are disproportionately concentrated on the direct-to-consumer or "DTC" genetic testing market, their scope is far broader and constitutes the opening salvo in an ongoing FDA campaign to begin regulating tens of thousands of US clinical laboratories.

The companies which the FDA seeks to regulate include high-profile startups like Google-backed 23andMe, genome interpretation providers like Knome, and even multinational sequencing giant Illumina. Several of these companies attracted tens of millions of dollars in venture capital investment and served as a magnet for talented graduates of top genomics programs.

23andMe's direct-to-consumer (DTC) genetic test was Time's Invention of the Year in 2008.


Federal regulators were favorably disposed to the industry at the outset. Before launching their product, 23andMe met with then FDA Commissioner Andrew von Eschenbach, who "encouraged [them] to proceed". Several more startups were even approached by senior FDA officer Lawrence Lesko to officially collaborate on a study of genetic influences on drug response. Lesko, the Director of FDA's Office of Clinical Pharmacology, gave a presentation at Temple University where he mentioned 23andMe's potential to improve "access to genetic testing" and enable a "new, educated generation of health care providers and patients."

In 2008, FDA's Lawrence Lesko hailed 23andMe for helping to "enable personalized medicine". Today the agency has stated its intent to regulate 23andMe for making medical claims.


Now the FDA appears to have sharply reversed course.

"I do expect the industry to survive; but if the regulators have their way, it won't be in the US",
remarked Daniel MacArthur, a Cambridge academic known for his work on the genetics of athletic performance. "Instead, the startups and entrepreneurs that are building the technologies required for the new era of genomic medicine will quietly pack up their tools and move to Singapore and Hong Kong...[the] opportunity to build a scientifically-based, socially responsible personal genomics industry in the US will be gone".

The FDA's U-turn on personal genomics was punctuated by a July 22 Congressional hearing on genetic tests, in which a theatrical undercover mission by Government Accountability Office (GAO) employees culminated in a report stating that "the [genetic] test results we received are misleading and of little or no practical use to consumers."

However, leading scientists strongly criticized the GAO report itself for misleading claims. "The GAO report did a poor job distinguishing companies with reprehensible business practices from those doing legitimate science...I think this is a critical time for personal genomics and its uptake in the clinic could be irreversibly hurt by bad publicity", said Keyan Salari, originator of Stanford Medical School's instructional program on interpreting genetic tests.

Another Stanford scientist, Konrad Karczewski, stated that while "there are legitimate scientific differences on how to interpret [genetic] data...this need not stop information from genetic tests from entering the clinic. A general practitioner may not be able to keep up with the latest advances in neurosurgery, but that's where the specialist system thrives."

A recurring theme was that the hearing intentionally conflated legitimate and illegitimate businesses, to tar all genomics companies by association. "Baby[,] meet bathwater...[C]onsumer genomics will be driven underground and/or overseas. In my view, that would be a shame", said Misha Angrist, Professor of Genome Sciences and Policy at Duke University. "This dog and pony show ... was an opportunity for politicians to scream 'snake oil' and fret about the possibility of their constituents 'jumping off a building' as much as it was an attempt to bring about constructive change to a nascent industry's practices."

Even defenders of the FDA offensive admitted that the Congressional hearings were flawed. "Yes, the GAO report is partly theater. It's not fair, it's not balanced and it's certainly not an effort to tell the whole story. It's an effort to substantiate a narrative of corporate recklessness and misbehavior", said Mya Thomae, a regulatory consultant who stands to profit from increased FDA oversight. Similarly, fellow FDA proponent Steve Murphy stated that if proposed FDA regulations take effect "mom and pop labs will get crushed" and "respectable companies will have to become international to avoid reg[ulations]."

Executives and venture capitalists in the biotech sector echo similar thoughts privately, but are generally unwilling to speak on the record for fear of FDA retaliation. Remarked one well known investor, "After this charade, no one at [VC firms] Sequoia or Kleiner will even consider investing in an American genomics startup again. We still believe this is a growth sector, but the growth will happen outside the United States."

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