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

Hydroxychloroquine update

A clinical trial of hydroxychloroquine with 30 patients (15 treated 15 controls) has been completed in Shanghai. It is the first genuine randomized trial. It reports no evidence that hydroxychloroquine works at all.

It is true, that given the principal outcome measure defined in advance, the trial has no power. Not low power, 0 power. In a hypothetical, if all patients treated with hydroxychloroquine became healthy immediately with no symptoms and no detectable virus, then the report would be that there was not a statistically significant diference in the principal outcome measure for the treated and control subgroups.

The principal outcome measure was “can virus be detected 7 days after treatment starts”.
the answer was yes for 2 people in the treated group and 1 person in the control group.

Given that 14 out of 15 people in the control group had no detectable virus, the best outcome for hydroxychloroquine would have been 15 out of 15 in the treated group. Again a hypothetical, what if all the treated patients were assessed as cured after a week (best possible value of the principle outcome measure). This would reject the null that the probabilities were the same against the 1 sided alternative that treatment was better at the 50% level. It would reject the null against the two sideded alternative at the 100% level (not a typo).ù

So exactly zero power. Not low 0, zero, nada, niente.

With the benefit of hindsight, the researchers write that they could have designed the trial better. This does not mean that mistakes were made. When in a crisis, one has to act and must not make sure that one doesn’t do anything which is clearly suboptimal with the benefit of hindsight. That would imply sitting around thinking. They didn’t have time for that.

The secondary outcome measures provide statistically insignificant evidence that one is better without hydroxychloroquine. As noted by the authors, none of this evidence is strong enough to affect best practice of medicine (I still think that all patients without counterindications should be given hydroxychloroquine (I am not a doctor)).

The trial

At the clinical trials register, it is tagged “completed”, but the results are not yet uploaded (given the absolutely rigid standard format this takes the time of someone who is probably very busy).

The results are reported here.

p.s.

googling for the link above, I found Hydroxychloroquine Is Ineffective In Treatment Of Patients Hospitalized With Covid-19, According To Small Controlled Trial From Shanghai

To that headline I say no No NOOOOOOO. Failure to reject the null is not a finding that the null is the truth. that would only be the case if all tests had power 100%. Since this test happens to have power 0%, the error is extreme. The error of rejecting the null is universal. It is a simple mistake – a failure to understand the Neyman Pearson framework.

Since I am a big fan of the alternative in this case, it is a delicate time to point out that the headline is simply incorrect. But it is.

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Business interruption insurance and pandemics

Not surprisingly, many business owners are upset to discover that their business interruption policies do not cover losses due to pandemics.  Although it is easy enough to understand their frustration, it is important to understand the underlying economics.  (Full disclosure, I worked in the property casualty industry for many years.)

The main business of insurance companies is risk pooling.  They take premiums from (say) large numbers of drivers, and then use those premiums to pay claims for the small number of drivers who have accidents each year.  What is essential to the viability of this business model is that risks are uncorrelated or independent:  the chance that you have an auto accident must be largely independent of the risk that your neighbors do.  If everyone has an accident at the same time, the premiums everyone pays will not come close to covering the accident losses.  To some extent, of course, losses are correlated, and this can result in losses to insurance companies and their investors.  For example, when it snows accidents go up and losses rise.  Insurance company investors can bear these risks.  Some losses that are correlated locally can be spread globally.  This is what happens with the losses caused by hurricanes and earthquakes – they are pooled across the globe by reinsurance companies.  But if losses are too widespread, large, and highly correlated they cannot be insured using the standard logic of insurance.  My guess is that pandemic losses from business interruption fall into this category.

I haven’t seen an analysis, but I suspect that an effort to force companies to pay business interruption claims would impair or bankrupt many insurers and reinsurers.

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Patent Protection vs Orphan Drug Market Exclusivity

Massive Scandal or a Massive Misunderstanding of Regs and Laws for Orphan Drugs

Most of you know, I have been writing on healthcare for a long time and much of it has been negative about healthcare and the costs. I am not defending Gilead’s marketing of Remdesivir; but, a few articles (Common Dreams, The Intercept, etc.) written and the pundits amongst us appear to have misunderstood the issue for Remdesivir’s status.

I can understand why people would become excited and upset with the actions by the FDA to “designate” Remdesivir an orphan drug “candidate (note the quote notation).” In the past, I have found myself to be distracted by headlines (Intercept) which lead me to believe something bad was to come about only to find out it was not as serious as described in the headlined article. With all the issues we are faced with from COVID 19, the half attempt to mandate a lockdown of us in our homes, people “still” clustering, and our government led by a jackass; it is easy to get agitated.

Some thoughts; Given the pandemic, COVID 19 appears to be the exact opposite of a rare disease and describing a new drug for it as an orphan-drug does sound absurd.

A Little History

The seventies found incentives for profit-making drug companies not aligning with the needs of people having rare diseases. Drug Development of new drugs was expensive even 40 years ago. Companies concentrated on needed new therapies and pharmaceuticals potentially having high customer demand yielding increased profits rather than focusing  on those therapies and pharmaceuticals needed by a handful of patients. In 1983, the Orphan Drug Act was passed to encourage R&D for these drugs.

The FDA was given the power to grant a drug “orphan” status and to compounds without patent protection. If a company got its product “approved” as an orphan drug, it gained a period of market exclusivity of seven years. No one else was allowed to sell the same product to treat that specific disease. Additionally, the costs associated with developing that orphan drug including payroll for scientists, and miscellaneous costs were subject to a tax credit. Under the Orphan Drug Act, more than 800 orphan drugs and biologics have been approved by the FDA out of more than 5,300 applications. The Whys and Whats after the leap   .   .   .

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The corporate bailout

The Senate economic rescue package contains $500 billion for bailouts of large corporations.  Much commentary has focused on the lack of accountability, but the bigger issue is simply the massive waste of taxpayer dollars.  From the WAPO:

In a Tuesday interview on Fox, Boeing chief executive Dave Calhoun said he would not be willing to give the government an equity stake in the company in exchange for a bailout, implying the company would only accept assistance on its own terms. President Trump has said he would support the idea, suggested by his economic adviser, of taking an equity stake in companies that receive assistance in the package.

“If they force it, we just look at all the other options, and we’ve got plenty of them,” Calhoun said.

Why are we giving them money?

It’s not clear how the bailout provisions will work, at least to me.  There will be loans and perhaps some equity investments.  But Delta stock is up 50% over two days; Boeing is as well.  Between the two of them this represents roughly $35 billion in market capitalization, a gift to their shareholders.  Maybe some of this is based on optimism about the general economic benefit of the stimulus, but the $35 billion number may also be an understatement of the true give-away, because part of the Senate bailout package was priced in more than two days ago, and some of it may not be fully priced in yet.  Much will depend on the terms and conditions attached to loans and investments; it is not clear to me that the law will require the government to drive a hard bargain or even has enforceable provisions regarding disclosure.

And let’s be clear that there are no benefits at all for taxpayers from these bailouts.  We have a well-functioning bankruptcy system in this country that would prevent a failure of either company from harming the broader economy.  If we don’t trust the bankruptcy system, or want to protect unionized workers, we could allow existing shareholders to keep a small fraction of the value of the companies and let the government own the rest, in exchange for an equity investment in these companies.  These bailouts represent a giveaway to powerful constituents, pure and simple.

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Insider trading by members of Congress

The recent insider trading by members of Congress (notably but not exclusively by Senator Burr) is appalling.  One policy response – advocated for by Elizabeth Warren – would prohibit MOCs from investing in the stock of individual companies, requiring them instead to invest in mutual funds.  This would prevent the type of corruption evident in the Chris Collins case.  However, under this proposal MOCs could still have cashed out of stock funds and moved into bond funds based on their advance knowledge of the coming epidemic.

An alternative or complementary approach would be to require MOCs to place their buy and sell orders in advance – say, 6 or 12 months in advance.  This would prevent them from trading on private information, such as classified briefings about the likely economic impact of the covid-19 epidemic.  A similar rule could also be imposed on corporate insiders to (largely) eliminate insider trading and perhaps reduce incentives to manipulate financial statements.  (Executives would still have an incentive to pump up the stock price prior to an announced sale date and to lower it prior to an announced purchase, but at least other investors would be aware of their incentive to do so.)

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AFL-CIO has a Plan

AFL-CIO has a Plan

From the AFL-CIO website:

PRIORITIES OF THE LABOR MOVEMENT TO ADDRESS THE CORONAVIRUS:

PROTECT FRONT-LINE WORKERS
  • Streamline approaches for allocating and distributing personal protective equipment to working people in greatest need.
  • Issue a workplace safety standard to protect front-line workers and other at-risk workers from infectious diseases.
  • Provide workplace controls, protocols, training and personal protective equipment.
  • Provide clear, protective federal guidance for different groups of workers with different needs.
  • Increase funding for the Occupational Safety and Health Administration and Mine Safety and Health Administration for additional inspectors and health specialists, and for developing and implementing an infectious disease standard.
MITIGATE THE BROADER PUBLIC HEALTH CRISIS

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Coronavirus dashboard for March 24

Coronavirus dashboard for March 24

Here is the update through yesterday (March 23)

In order to succeed in containing the pandemic, I believe that the US needs 2 weeks of China (nearly complete lockdown) followed by at least a month of South Korea (very aggressive and widespread testing). At minimum, that means at least 50% of the US population under lockdown and a ratio of 15:1 in tests to results showing infection. The recent exponential growth of about 35% per day must be stopped. Those three most important metrics are starred (***) below.

Number and rate of increase of Reported Infections (from Johns Hopkins via arcgis.com)
  • Number: up +11,226 to 46,450 (vs. +8,477 on March 23)
  • ***Rate of increase: day/day: 32% (vs. 34.6% baseline and vs. 32% on March 22)
I am using Jim Bianco’s excellent exponential projection of 34.5% growth from March 10 as my baseline. Hopefully “social distancing” strategies as well as State-mandated partial and total lockdowns will begin to put a dent in this by the end of this week; the deceleration to 32% d/d for the past 2 days may mark the beginning of this.
Number and rate of increase of testing (from COVID Tracking Project)

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Meanwhile, another DOJ move from Barr

Meanwhile while we are pre-occupied with corvid-19 comes this news from  Rolling Stone:

The Trump Department of Justice has asked Congress to craft legislation allowing chief judges to indefinitely hold people without trial and suspend other constitutionally-protected rights during coronavirus and other emergencies, according to a report by Politico’s Betsy Woodruff Swan.

The DOJ has requested Congress allow any chief judge of a district court to pause court proceedings “whenever the district court is fully or partially closed by virtue of any natural disaster, civil disobedience, or other emergency situation,” according to draft language obtained by Politico. This would be applicable to “any statutes or rules of procedure otherwise affecting pre-arrest, post-arrest, pre-trial, trial, and post-trial procedures in criminal and juvenile proceedings and all civil processes and proceedings.” They justify this by saying currently judges can pause judicial proceedings in an emergency but that new legislation would allow them to apply it “in a consistent manner.”

Norman L. Reimer, executive director of the National Association of Criminal Defense Lawyers, told Politico the measure was “terrifying,” saying, “Not only would it be a violation of [habeas corpus], but it says ‘affecting pre-arrest.’ So that means you could be arrested and never brought before a judge until they decide that the emergency or the civil disobedience is over. I find it absolutely terrifying. Especially in a time of emergency, we should be very careful about granting new powers to the government.”

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