Relevant and even prescient commentary on news, politics and the economy.

Generic drugs Part 1

The New England Journal of Medicine provides a look at the future of generics here:

Today, generic drugs account for 63% of all U.S. prescriptions for drugs (see Figure 1). Since generic drugs sell at substantially lower prices than their brand-name counterparts, they save consumers and purchasers of prescription drugs tens of billions of dollars per year. Moreover, their expanded role has been linked to an attenuation of overall price increases for prescription drugs. Between 2007 and 2010, roughly 110 drugs will lose their patent protection — including well-known products such as Norvasc (amlodipine), Imitrex (sumatriptan), Fosamax (alendronate), and Risperdal (risperidone). Estimates suggest that these 110 drugs are currently responsible for $50 billion a year in sales — so competition from generic drugs could generate large additional savings.

The FDA Orange Book has a listing of brands and generics.

This website carries a lot of good information.

However, it should be noted that current regulations permit a variation of approximately 20% either way in the bioavailability of the active ingredient. (The specifics of the permitted variation in bioavailability hinge on the FDA’s technical definition of bioequivalence, which requires that there be no statistically significant difference in bioavailability. For the FDA’s definition, see the agency’s Guidance for Industry document, which sets out guidance on confidence intervals for test to reference comparisons across different types of medications, as well as the FDA’s Code of Federal Regulations 320 document on bioavailability and bioequivalence requirements. Also see this 1999 Food and Drug Law Institute overview of the Hatch-Waxman Act of 1984.) In one study (Borgheini 2003), a full 31% variation was found in the blood plasma levels of a particular medication after a patient switched from a branded to a generic product. (Why does this happen? It may be accounted for by differences in the manufacturing process yielding different particle sizes that are absorbed at different rates, as well as other factors.)

This does NOT necessarily mean that purchasing generic medications in preference to branded counterparts is a bad idea — in fact, in most cases it is probably still a very good idea! — but this does mean that the issue is not quite as clear cut as it might otherwise seem as a medical issue, if not price for the end user.

The FDA describes it stats creation thusly:

The statistical methodology for analyzing these bioequivalence studies is called the two one-sided test procedure. Two situations are tested with this statistical methodology. The first of the two one-sided tests determines whether a generic product (test), when substituted for a brand-name product (reference) is significantly less bioavailable. The second of the two one-sided tests determines whether a brand-name product when substituted for a generic product is significantly less bioavailable. Based on the opinions of FDA medical experts, a difference of greater than 20% for each of the above tests was determined to be significant, and therefore, undesirable for all drug products. Numerically, this is expressed as a limit of test-product average/reference-product average of 80% for the first statistical test and a limit of reference-product average/test-product average of 80% for the second statistical test. By convention, all data is expressed as a ratio of the average response (AUC and Cmax) for test/reference, so the limit expressed in the second statistical test is 125% (reciprocal of 80%).

For statistical reasons, all data is log-transformed prior to conducting statistical testing. In practice, these statistical tests are carried out using an analysis of variance procedure (ANOVA) and calculating a 90% confidence interval for each pharmacokinetic parameter (Cmax and AUC). The confidence interval for both pharmacokinetic parameters, AUC and Cmax, must be entirely within the 80% to 125% boundaries cited above. Because the mean of the study data lies in the center of the 90% confidence interval, the mean of the data is usually close to 100% (a test/reference ratio of 1). Different statistical criteria are sometimes used when bioequivalence is demonstrated through comparative clinical trials pharmacodynamic studies, or comparative in-vitro methodology.

Generic drug manufacturing is the predominate method of saving money in the market for pharmaceutical drugs. As the market changes we have to consider trends.

1. Many insurance companies mandate the use of the generic form of a drug, with the user picking up the cost of using a brand name. Hence it appears to be a quick remedy and will continue to be a force in this market.

2. When manufactured in the US, quality control was excellent. Any run in production that did not meet specs was sold overseas. That did not mean it was a bad run necessarily, but did not meet specs. I do not know what was done with product that simply was medically sub-par.

3. Currently there are few drugs manufactured in the US anymore, generic or brand name. There are more than a couple dozen countries that have manufacturing facilities in their jurisdiction.

4. For different reasons sometimes generic drugs are not the equivalent to the brand name for a patient. In MA generic drugs are mandatory unless specifically requested by the doctor, and in MA have tripled in co-pay from Dec 2007, and will continue to rise.

The FDA has turned to hiring private inspectors that are certified by them in the country of origin to inspect manufacturing plants. The same is true for medical devises, where few are made in the US.

Given this basis, part 2 will develop the theme.

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What is this ownership mess? Who else pays the bills?

The foreclosure crisis for some cities like Cleveland is a tsunami of 16,000 homes. Some communities have a foreclosed house or two on every block. There a lot of links to other cities as well if you google.

What I see that has not been discussed is what happens when the problem becomes large enough to tip some sort of balance in an area, and what happens to normal procedures and ownership rules in such situations. No one here has mentioned what other costs get pushed onto the public sector that private markets will probably avoid as best they can.

1.Such costs are the extra costs of police and fire protections for the property.
2.Upkeep of the property is abandoned by the borrower, and then if the house either becomes unprofitable due to damage/repair considerations or simple loss of value, the bank abandons the property as a write-off. (In some areas the plumbing is stripped out for copper, along with windows etc and resold in extraordinary times)
3. Taxes cannot be collected either way…liens are less effective for such a house for anyone, bank or city.
4. The act of forclosure is stalled because actual owners of the mortgage can be hard to determine. (12 months in some places)
5. The impact of having an abandoned house on the block that is not protected or kept up lowers the value of all the other houses nearby as well and lowers the tax rate collections eventually.
6. Demolition is paid by the city.

When such issues hit a city, who bails them out. City pockets often are less deep than some of the big guys.

Hence, Cleveland has some credibility when it questions what ownership actually is for a house. The borrower has the title, but the mortgage holder has power to evict. This is also a ‘controlling interest’ and as a ‘right of control’ that defines ownership for a borrower may be applied to the mortgage holder given enough pain. While unlikely to win, when does it become big enough to need a change in law?

You do not own the house until the mortgage is paid. You have ‘rights of use’. Under extraordinary circumstances, who does own the house?

Update: Foreclosure proceedings jump and new house sales plummet.

Update 2: Calculated Risk’s Tanta writes a defining post on the ins and outs of ‘walking away’ from a loan.

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OODA Loop applied?

The OODA Loop is described in short at the link.

OODA Loop Theory [OODA is an acronym that stands for a rapid, repeated cycle of Orient, Observe, Decide, Act.]

Go and read about the OODA Loop, and come to understand how he applied it to high-speed aerial combat, and then how he applied it to ground combat (his work was embraced by the US Marine Corps), and then how he briefed the Secretary of Defense on his theory just before Desert Storm, and how that theory was successfully applied to the initial knock-out punch thrown at Saddam in Kuwait.

And when you come to a higher understanding about the OODA Loop, and how it uses information gleaned from the opponent and the environment and thrust into the decision-making loop rapidly so that you may stay one step ahead of your opponent, then I want you to remember that Dick Cheney was briefed on it.

And then I want you to ponder, for a minute, the use of Total Information Awareness campaigns, data-mining, and various intelligence-gathering methods available to the US government; these are the sources for information that are pumped into the complex loop.

And then I want you to remember that Cheney was briefed…

And then I want you to consider how this OODA loop has likely been used for domestic political purposes….

And then I want you to consider, given the explosive theories suggested by Ruppert and Singh relative to the war games, and the use of very sophisticated software (PROMIS and PTECH), how the OODA loop may have played a role on 9/11.

I went out this weekend and bought the biography of Boyd (Boyd: The Fighter Pilot Who Changed The Art of War, Robert Coram, Back Bay Books/Little, Brown & Co., 2002, ISBN 0-316-79688-3). I’d read it previously and have dozens of articles in my PC related to it.

….

The OODA loop appears to be a relatively simple cycle. However, given the multiple feedback loops, it is actually very complex. The best practitioner learns to simplify it and apply it instinctively and intuitively…literally, to fly by the seat of their pants…

From Boyd: The Fighter Pilot Who Changed the Art of War, Robert Coram, Back Bay Books, Little Brown & Co., Boston 2002, p. 335-6:

“Understanding the OODA Loop is difficult. First, even though it is called a “loop”, it is not. A drawing of the Loop shows thirty arrows connecting the various ingredients, which means hundreds of possible “loops” can be derived….Even Boyd’s Acolytes do not always agree with what Boyd meant by the OODA Loop… The OODA Loop briefing contains 185 slides. “

The OODA loop is based on Boyd’s earlier thesis entitled “Destruction and Creation”, which links Godel’s Proof, Heisenberg’s Uncertainty Principle, and the second law of thermodynamics.

“…Boyd spent four years researching and writing and then distilling his [thesis] down to eleven pages; the result has the specific gravity approaching that of uranium. It is thick and heavy and ponderous, filled with caveats and qualifiers and arcane references that span theories never before connected. To read [it] is to fully appreciate the term “heavy sledding”. [Page 323]

You can download the pdf of Boyd’s “Destruction & Creation”
here.

An important part of the thesis is an elaboration on the idea that a relationship exists between the observer and what is being observed. This idea is not original, but the author presents a new explanation of how we perceive physical reality. Several people can look at the same process or same event and each might see it in an entirely different fashion. A crowd streaming into a college football stadium is seen in significantly different ways by a fraternity member, a TV cameraman, the beer distributor, the security officer, and the college president. Furthermore, each process of observation changes what is being observed. The people in the football stadium, knowing that they are being recorded by a TV camera, might wave or shout or begin a spontaneous demonstration. The same crowd, knowing that security officers are monitoring them, might become subdued, or perhaps confrontational. If we are aware of the changes that take place during a dynamic interaction, we can and must reassess and recalculate our own relationship with that which we are observing; the process not only shapes what is being observed, but feedback reshapes the observer’s outlook. The TV cameraman searches out people who are not waving. Security officers become more vigilant because they know people in the crowd are disguising their behavior. A cycle begins, and it is repeated over and over again.

The OODA loop is used to create “the fog of war”.

“The act of observation is, of course, filtered. We usually see what we expect to see, not what is actually taking place. And what we do manage to observe is colored or tinted by our past experience. Once we actually observe something, our brain attempts to orient itself to the new information. Does it match our past experience, or our cultural background, or our genetic make-up? If not, is it powerful enough to significantly change our view of the world? One way or another, it becomes part of our new reality.”
Source: ISOBE

And our past experience, in a media-driven world, is colored by the images, stories, headlines, pronouncements and “leaks” given to us repetitively and programmatically.

Suggestion is a powerful tool. Keep that in mind when you listen to a car salesman.

He could shoot anyone down in simulated aerial combat simulations, an had done so for real as well. If this is the model, plus cell structure in departments of government, much can be accomplished. A bureaucracy operates in a very different way. And the good or bad intentions one expects from normal people has little room in this scheme.

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State tort law and ‘what is the idealology’?

The American Constitutional Society has published a white paper about real action versus professed belief of administrative fiat. Transparency is not part of either.

The Bush Administration has been quietly waging a campaign to dramatically reconfigure American tort law by claiming that routine regulatory action taken by federal agencies has the effect of preempting state law damages claims. The campaign has been remarkable not just because of its scope, but also because it has attracted virtually no public attention.

Why has the campaign gone essentially unnoticed? Because the Administration does not seek to change tort law through transparent means, like the enactment of a federal law or the adoption of regulations. Instead, it has resorted to simply including statements in lengthy and obscure preambles in Federal Register notices that regulatory action taken by an array of federal agencies — the Food and Drug Administration, the National Highway Traffic Safety Administration, the Consumer Product Safety Administration, to name a few — broadly preempts state law. One commentator has aptly dubbed this campaign “preemption by preamble.”

The concern here is not with agencies expressing their position on the preemptive effect of their regulatory actions. That is unobjectionable, and, in many instances, unavoidable. What is objectionable is that agencies are making substantive preemption determinations in a way that is neither transparent nor democratic, and are doing so because the Administration has determined that insulating big business from tort litigation is right as a matter of federal policy. Invariably, in making these pro-preemption determinations, the agency is repudiating longstanding agency policy to the contrary.

This White Paper is intended to serve two purposes: First, to inform readers that this campaign is well-underway and sketch out, albeit briefly, some of the serious policy implications that it raises; and second, to explain why making preemption determinations by regulatory fiat raises serious separation of powers and agency capture concerns.

1. What is happening to our flamer’s favorite remedy?
2. Agency capture is an interesting term.
3. Who is swallowing whom?

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Some legislators saw the dilemma

Slate has an article on AARP designed legislation in Georgia.

Under the Georgia Fair Lending Act, however, players in the secondary mortgage market could face serious liability if they so much as touched a predatory loan. The AARP, which drafted the model legislation that formed the basis for the Georgia law, explained that imposing liability on downstream owners would “reduce significantly the amount of credit that is available to lenders who are not willing to ensure that the loans they finance are made in accordance with the law.”

The secondary market has an extraordinarily difficult time, however, distinguishing predatory loans (bad) from appropriately priced subprime loans (good). Even if the line could be drawn with confidence, the market lacked the resources to gather the necessary information. As the General Accounting Office noted in its comprehensive review of predatory-lending legislation, “even the most stringent efforts cannot uncover some predatory loans.”
Inevitably, then, the secondary mortgage market in Georgia’s subprime loans ground to a halt. And that was the point: If buyers couldn’t satisfy themselves that the loans they bought weren’t predatory, they should take their money elsewhere. Georgia understood that impeding the capital flow to subprime loans might raise the cost of borrowing for some state residents—those who, for one reason or another, had poor credit but could and would repay high-priced loans. But Georgia judged that this was more than balanced by protection for its most vulnerable from the scourge of predatory lending and the wrenching costs associated with overpayment and eventual foreclosure. New York, New Jersey, and New Mexico made the same judgment and within two years had enacted their own versions of laws exposing downstream owners of loans to fines if they bought predatory loans.

The OCC is a somewhat conflicted agency: While its primary regulatory responsibility is ensuring the safety and soundness of the national bank system, almost its entire budget comes from fees it imposes on the banks—meaning that its funding depends on keeping them happy. It was unsurprising, then, that the OCC leapt to attention when the national banks asked it to pre-empt the Georgia-like subprime laws on the grounds that they conflicted with federal banking law.
While the banks’ legal arguments were thin, the OCC issued regulations in early 2004 nullifying the state laws as they applied to national banks. In part, the OCC reasoned that the states just got it wrong: As the then-comptroller explained in a speech to the Federalist Society, “We know that it’s possible to deal effectively with predatory lending without putting impediments in the way of those who provide access to legitimate subprime credit.” With the state laws nullified, national banks were free to engage in the sharp practices the states were hoping to stamp out. (Indeed, Georgia scuttled its law because it didn’t want to give national banks a competitive advantage over its state institutions.)

Legal interest per centage rates can go up to 36% on credit cards. Aren’t these guys just exuberant?

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PTSD for kindergarten kids

Pediatrics also included a short description of work done in the field on treatments for children age 4-7. Nothing earth shaking, but a reminder of who else gets scared in theater, wherever that occurs.

Adler Center for Research in Child Development and Psychopathology, Department of Psychology, Tel Aviv University, Ramat Aviv, Israel
OBJECTIVE. The goal was to assess stress reactions in young children during and after war and the effects of a new brief intervention.

METHODS. Two separate studies were conducted. In study I, we assessed war exposure and stress reactions of 74 children (2–7 years of age) in a sheltered camp during the second Israel-Lebanon war (July to August 2006). Their exposure to war experiences and their stress reactions were assessed through parental reports during the last week of the war. In addition to standard care, 35 children received a brief intervention (Huggy-Puppy intervention) aimed at encouraging them to care for a needy Huggy-Puppy doll that was given to them as a gift. The effects of the Huggy-Puppy intervention were assessed in a follow-up interview 3 weeks after the war. Study II assessed the efficacy of group administration of the Huggy-Puppy intervention to 191 young children, compared with 101 control subjects. The effects of the intervention on stress-related symptoms after the war were assessed in telephone interviews with the parents.
RESULTS. Study I indicated that, during the war, most children had significant exposure to war-related experiences and had severe stress reactions. The Huggy-Puppy intervention was associated with significant reductions in stress reactions in the postwar assessment. A higher level of attachment and involvement with the doll was associated with better outcomes. The results of study II indicated that group administration of the Huggy-Puppy intervention was associated with significant reductions in stress reactions.

Childhood stress and trauma affect kids, and often how it is handled at the time or shortly after is important. Like any trauma, how often it happens, how catastrophic and sometimes life threatening the event appears to be or how intense the reaction is, how it is framed by surrounding trusted adults plays a role in impact on a child.

This is anecdotal and in theater triage, but I think it gives the adults as much structure and focus to help kids and selves as it is the kids responding to the focus and human messages involved. Perspective, feeling protected and protecting, and having someone or thing to take care of is important.

Children who have ptsd can lose their normally easy to find sense of safety and intimacy, and are hyper-sensitive to perceived threat. When they grow up is another story needs telling.

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Dirty statistics

Hat tip to Healthy Rivers, my favorite site to follow dirty statistics, offers a new public health tracking program locally to shed light on a problem that has been mostly ignored to date.

I had a close friend here in Milwaukee who got really sick this summer from swimming in the lake while sailing after a dry weather overflow. She had no idea an overflow event had even occurred. This is pretty commonplace, and unfortunately, it’s really difficult to correlate sewage overflows with illnesses contracted by recreational use, because so few people seek medical attention or make the connection that the water made them sick. There’s a huge need to study that connection, but the records pretty much don’t exist.
That’s why the study we [Friends of Milwaukee’s Rivers and the Emergency Department, Medical College of Wisconsin, Milwaukee, Wisconsin] focused on the drinking water connection, which freaked everyone out. It is highly likely that many of the kids in our study could have gotten sick from recreational use as well. We weren’t able to isolate their exposure, but the hospital is now using questionnaires so we can try to get at that question in the future.

Pediatrics, a peer reviewed medical journal, recently published an article on our study of increased visits to a pediatric emergency room for gastrointestinal illnesses after releases of partially treated, or “blended” sewage, here in Milwaukee.

Here’s the abstract of the report as it appeared in the journal Pediatrics.

Pediatric Emergency Department Visits for Diarrheal Illness Increased
After Release of Undertreated Sewage

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Shoot the dog first as a warning

The Guardian reports a letter signed by five notable military persons sent to their respective governments concerning preemptive nuclear attack.

The risk of further [nuclear] proliferation is imminent and, with it, the danger that nuclear war fighting, albeit limited in scope, might become possible,” the authors argued in the 150-page blueprint for urgent reform of western military strategy and structures. “The first use of nuclear weapons must remain in the quiver of escalation as the ultimate instrument to prevent the use of weapons of mass destruction.”

Is there something odd about the phrasing, much less the intent? What kind of person advertises that he might shoot his neighbor if he thought the neighbor might have a gun in the house, meanwhile practices shooting in his own backyard? Or give the neighbor on the other side of the first neighbor a hand gun? Or maybe he will just shoot your dog and cat to keep it to a limited scope of warning first time round if suspicions are raised.

I know it is more complicated, but official policy is different than implied threat? Where is that line drawn before it becomes the new reality? And based on what kinds of information, and who is allowed access to that information?

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A nation of savers and investors does what?

An Inconvenient Truth from John Bogle via Fool.com cautions investors. In my opinion the exuberance of playing even mutual funds, much less stocks, in the grand scheme of average investors is telling.

I recently came across a chart that John Bogle, founder of the Vanguard Group, posted on his blog. This blog highlighted some startling information.

The return data is a few years out of date, but the point remains clear. While the S&P 500 earned an annualized 12.2% return from 1984 to 2002, the average equity mutual fund only earned 9.3%.

But what really stands out is that the average mutual fund investor only earned 2.7% a year during that time.

This means that the profit from a $1,000 investment made in the S&P 500 in 1984 would have been $7,910 at the end of 2002, whereas for the average equity fund, it would have been only $4,420.

And the profit for the average mutual fund investor during that time? A measly $660.

There is a study on 401k behavior as well. Amazing. This included the roaring 90’s!

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Pharma research versus ‘admin/marketing’ costs


A review of costs in the Pharmaceutical industry for comparison between research and ‘marketing and administration’ budgets was done for 2004. Posts on the issue have argued the point. A quick review of this source looked reasonable, but needs a more careful study. There are better minds to do this than I, but offer the study for review. (Hat tip to Scent of Violets). I haven’t the time, but appreciate a look.

In the late 1950s, the late Democratic Senator Estes Kefauver, Chairman of the United States Senate’s Anti-Trust and Monopoly Subcommittee, put together the first extensive indictment against the business workings of the pharmaceutical industry. He laid three charges at the door of the industry: (1) Patents sustained predatory prices and excessive margins; (2) Costs and prices were extravagantly increased by large expenditures in marketing; and (3) Most of the industry’s new products were no more effective than established drugs on the market [1]. Kefauver’s indictment against a marketing-driven industry created a representation of the pharmaceutical industry far different than the one offered by the industry itself. As Froud and colleagues put it, the image of life-saving “researchers in white coats” was now contested by the one of greedy “reps in cars” [2]. The outcome of the struggle over the image of the industry is crucial because of its potential to influence the regulatory environment in which the industry operates.

Fifty years later, the debate still continues between these two depictions of the industry. The absence of reliable data on the industry’s cost structures allows partisans on both sides of the debate to cite figures favorable to their own positions. The amount of money spent by pharmaceutical companies on promotion compared to the amount spent on research and development is at the heart of the debate, especially in the United States. A reliable estimate of the former is needed to bridge the divide between the industry’s vision of research-driven, innovative, and life-saving pharmaceutical companies and the critics’ portrayal of an industry based on marketing-driven profiteering.

IMS, a firm specializing in pharmaceutical market intelligence, is usually considered to be the authority for assessing pharmaceutical promotion expenditures. The US General Accounting Office, for example, refers to IMS numbers in concluding that “pharmaceutical companies spend more on research and development initiatives than on all drug promotional activities” [3]. Based on the data provided by IMS [4], the Pharmaceutical Research and Manufacturers of America (PhRMA), an American industrial lobby group for research-based pharmaceutical companies, also contends that pharmaceutical firms spend more on research and development (R&D) than on marketing: US$29.6 billion on R&D in 2004 in the US [5] as compared to US$27.7 billion for all promotional activities.[4]

In this paper, we make the case for the need for a new estimate of promotional expenditures.

From this new estimate, it appears that pharmaceutical companies spend almost twice as much on promotion as they do on R&D. These numbers clearly show how promotion predominates over R&D in the pharmaceutical industry, contrary to the industry’s claim. While the amount spent on promotion is not in itself a confirmation of Kefauver’s depiction of the pharmaceutical industry, it confirms the public image of a marketing-driven industry and provides an important argument to petition in favor of transforming the workings of the industry in the direction of more research and less promotion.

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