While the science of medical innovation is difficult, policy is relatively simple.
By Jeffrey Clemens • September 21, 2020
The current COVID-19 pandemic, the largest public health crisis in a
century, threatens the health of people across the globe. The U.S. has had the
most diagnosed cases – surpassing 6 million – and more
than 190,000 deaths.
But six months into the pandemic, the U.S. still faces shortages of personal protective
equipment for both front-line medical workers and the general public. There is
also great need for widely available inexpensive, rapid tests; the infrastructure
to administer them; and most importantly, safe, effective vaccines.
Moving forward, medical innovation can play a substantial
role in controlling and preventing infection – and treating those who have
contracted the virus. But what’s the best way to catalyze and accelerate public
health developments? Research and history show that the federal government can
play a major role in spurring private-sector innovation.
Lessons from the Civil War
Governments play far-reaching roles in health care. The U.S.
Food and Drug Administration approves new treatments. Public and private
insurance administrators determine what treatments to cover. The Medicare
program sets prices that have effects across the heath care system. By
determining if and when competitors can enter the market, the U.S. patent system
shapes pharmaceutical prices, which impacts companies’ financial returns. The
National Institutes of Health and the National Science Foundation allocate
funding for both basic and applied medical research.
Taken together, the government has substantial influence on
medical innovation. That’s because private industry requires well-defined
quality standards and clear financial incentives to speed forward – performance
depends critically on the government agencies that often make the rules and set
the payments.
In my research as an economist, I investigate the
effects of government insurance programs on patient care, pricing and
innovation across the health system. My colleague Parker Rogers and I
recently analyzed innovations in the design and
manufacture of artificial limbs during the U.S. Civil War. The example
resonates because wars, like pandemics, create dramatic, unanticipated needs
for medical innovations.
With advances in weaponry, destructive Minié bullets and a
lack of surgical experience among doctors, many Civil War soldiers with leg or
arm wounds required amputation. Roughly 70,000 veterans who survived the bloody,
four-year conflict lost limbs.
As disabled veterans returned home, the government launched
the “Great Civil War Benefaction” to provide prostheses. Officials examined
and certified inventors’ prototypes, and wounded veterans then
chose from approved products, which the government then acquired at preset
prices: US$75 per leg and $50 per arm.
The program’s cost-conscious approach shaped inventors’
efforts, leading them to emphasize simplicity in design and low-cost
production. While prosthetic arms and legs remained quite primitive by modern
standards, inventors emphasized improvements in comfort and modest gains in
functionality. In total, 87 patents for prostheses were granted from 1863
through 1867, compared with 15 new patents between 1858 and 1862.
Production responded dramatically to the unprecedented
needs. Just prior to the war, in 1860, five manufacturers sold an estimated 350
prostheses in the U.S. By 1865, production had increased tenfold. That year,
the Union Army furnished some 2,020 artificial legs and
1,441 artificial arms to its soldiers. By 1870, there were 24 manufacturers in the industry.
The economics of medical innovation
Most research into the economics of medical innovation has
focused on pharmaceuticals. This research has showcased the power of
incentives.
For example, with the introduction of guidelines, mandates
or other government policies that increased projected profits, vaccine
development accelerated. Clinical trial activity increased
during the years immediately following these changes.
Additional evidence has shown that the introduction of Medicare’s
drug benefit (passed in 2003 and enacted in 2005) sped
pharmaceutical research for diseases that impact the elderly. Diseases that
offer robust or expanding drug markets receive
particular attention. Economists have also found that drug
development responds to incentives created by the patent system. Finally, when insurers begin to
exclude drugs for a particular disease, R&D for that disease tends to slow.
Failures during the COVID-19 pandemic
During the COVID-19 pandemic the U.S. government has,
unfortunately, not provided the sort of certainty required for medical innovation
to flourish as well as it could. By creating uncertainty, the federal
government discouraged both states and private companies from acting on their
own initiative, which has delayed our national response.
Early on, for example, the federal government equivocated
over contractual commitments to companies that came forward to produce ventilators. State officials who
prudently expanded stocks of personal protective equipment were unsure
whether supplies would be commandeered by the federal government.
Federal actions also impacted testing. The FDA thwarted
efforts to implement new testing infrastructure supported
by the Gates Foundation. The error was compounded
by the botched early rollout of testing kits and
rejection of tests manufactured in other countries. The result: Months into the
pandemic, tests can still be difficult to obtain, and results are often backlogged to the point
of uselessness.
A recipe for progress
So what is the best way forward for spurring private
industry to fight the pandemic? To me it’s clear that the government has a
straightforward role to play in setting the stage.
As a narrow example, governments can increase demand for
masks by issuing clear guidance and informing the public. The resulting demand
creates strong financial incentives for companies to innovate and expand
production.
Further, the federal government can propel the development
and distribution of tests and vaccines through “advance purchase commitments” that guarantee a
market for newly approved products. The U.S. government has taken a major step in this direction by
committing to purchase large quantities of COVID-19 vaccines upon approval.
While the science of medical innovation is difficult, policy
is relatively simple: Set clear standards, establish clear incentives and let
the scientists and entrepreneurs do their work. Vaccine development, rapid
testing and widely available protective gear all have important roles to play
in saving lives and getting the economy back on its feet.
Jeffrey Clemens, Associate Professor of
Economics, University of California San Diego. This
article is republished from The Conversation under a Creative Commons
license. Read the original article.
No comments:
Post a Comment