Insurance Costs Are Just the Tip of the Iceberg: Time to Reform the FDA

The collapse of the House Republicans’ healthcare bill presents the White House and Congress with an opportunity to redirect reform toward more fertile ground. The Food and Drug Administration (FDA) is an ideal place to start, with the potential to attract bipartisan support.

Healthcare is an iceberg. Insurance system costs rise above the water line. Beneath the surface lie 90 percent of the costs — payments to doctors, nurses, hospitals, laboratories, drugs and devices. The above-water portion attracts our attention but — despite fevered arguments to the contrary — the below-water costs are largely immune to any reforms that take place above water.

The now-defunct American Health Care Act (AHCA), like the Affordable Care Act (ACA) and other post-World War II initiatives, focused on insurance, not on the care that insurance buys.

The ACA transferred wealth and care from higher to lower income brackets. The AHCA would have partially reversed this transfer. But, rhetoric aside, neither was designed to significantly alter the cost or structure of care itself.

Enter the FDA. President Trump has nominated Scott Gottlieb to head the agency. His Senate hearings and presumptive tenure at FDA will offer a unique insider-outsider perspective. While a critic of federal bureaucracy, Gottlieb was previously Deputy FDA commissioner.

He is a practicing medical doctor, a clinical professor of medicine and a seasoned policy analyst at the American Enterprise Institute. Where could Commissioner Gottlieb turn his attention?

First, shift from regulation to certification: The FDA and its predecessor agencies date from the early 20th century, when command-and-control regulation was possible, popular, and novel. The conditions of that time no longer prevail. In the 21st century, drug and device innovation occurs rapidly.

Powerful medical innovations can be designed in garages, financed with pocket change and distributed by internet or by hand. As the FDA’s capacity to micromanage drugs and devices weakens, the agency could, as our colleague Adam Thierer has written, reorient itself toward certification — educating patients and providers about risk. Commend and cajole in place of command and control. 

Second, dial back the risk-aversion: Caution is a crucial role for the FDA, but the FDA’s risk-aversion has grown excessive — focusing more on preventing hypothetical worst-case scenarios than promoting best-case solutions.

Third, return to a safety-only posture: One way to accelerate the introduction of life-saving and life-enhancing drugs and devices is to return the FDA to its original mission of safety, leaving efficacy to the market. We already do this with off-label use of prescription drugs.

Fourth, grant approval in stages: Currently, FDA approval is binary. A drug or device is approved or it’s not. An alternative would grant approval in stages. Patients with time-critical illnesses could gain access before a drug was approved for general usage, for example, through right-to-try rules expediting access to terminally-ill patients. Data from these users could inform later stages of the process.

Fifth, introduce foreign reciprocity: The FDA could speed the approval process by granting some measure of reciprocity to trusted foreign regulatory agencies and private bodies. Devices and drugs that meet European Union standards, for example, could be made available to U.S. patients.

Sixth, restructure: Ultimately, with congressional approval, the FDA could be restructured for more rapid, cost-effective approvals. A good model to consider is that employed by the European Union. There, a variety of entities (somewhat similar to Underwriters Laboratories) serve as private, competitive FDAs with mutual reciprocity. The result is still safe, but with faster results.

Finally, become more predictable: Above all, the FDA could move immediately toward a regime of greater clarity and predictability in its standards. Innovators rightfully complain that the FDA’s rules shift erratically via administrative rulings and uneven enforcement.

As innovation costs have plummeted for decades in information technology (described by Moore’s Law), the opposite has happened in the FDA’s sphere. Eroom’s Law (Moore spelled backwards) says the cost of developing a new drug doubles every nine years.

The drug and device industries stand poised to radically reshape healthcare for the better. Ultimately, better care for more people at lower cost requires us to shift some elements of care from physicians to less-expensive providers, machines and to patients themselves. All the ideas presented here have promise, and none is especially partisan.

For those willing to learn from the ACA’s failings and the AHCA’s failure, there is a powerful message. The politicized, zero-sum focus of insurance reform is a Sisyphean approach to healthcare reform. Dr. Gottlieb, the Trump administration and both parties in Congress can make far greater headway by beginning to turn the FDA around.