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How Market-Based Science Can Improve Drug Innovation And Public Safety


Before I tested positive for COVID-19, I spent hours looking for a testing site to verify the source of my concerning symptoms. Many of the free testing sites were either too far away (which would mean I had to take public transit) or booked up days in advance. 

There were no good low-cost options. This stands in stark contrast to some European nations, where rapid at-home tests were widely available. 

A ProPublica report showed how Europe’s medical regulators let at-home tests go to market much quicker, compared to the Food and Drug Administration (FDA), which demanded extraordinarily stringent trials that delayed rollout for months. 

The lesson from the FDA’s failed response to at-home testing reveals a more fundamental problem with the agency’s approach to innovation in public emergencies: Markets are sometimes better than the FDA’s usual process to roll out a new medical innovation. 

Doctors and manufacturers need permission to sell cutting-edge treatments as soon as they are ready and safe. Insurance companies need guidance on how to update their evidence-based coverage policies in real-time from actual patient experiences.

Unfortunately, the core of the FDA is a much slower process of “Pre-Market Approval”, where drug and device manufacturers often spend over $100 million and roughly a decade on small, invite-only clinical trials to prove that a new treatment is both safe and effective. 

That is, for the FDA, markets come after the scientific process.

Yet, free markets have a number of unique qualities that improve both innovation and public safety. First, they’re extraordinarily quick. In a public health emergency, people need rapid access to treatments wherever they live. 

Second, unless a treatment affects nearly all of humanity in the exact same way (like a vaccine), it’s very difficult to get a truly representative sample in pre-market clinical trials; trials are often just a few dozen participants. Once the treatment is out in the wild, however, we can learn how everything from individual genetic variations, to pregnancy status and the quality of the administering provider can determine whether a treatment is effective. In other words, FDA approval based on pre-market trials can give a false sense of safety.

This is not the case with all countries. For instance, in Japan, stem cell innovators are allowed provisional commercialization after demonstrating that a treatment is safe for human use. Rather than restrict access, innovators are given a limited timeframe to prove the benefits of a new treatment, and more importantly, access to the ongoing research is available on the open market. As a result, Japan has become a hub for promising discoveries, partnerships with American universities, and medical tourism of patients looking for otherwise unapproved treatments.

Indeed, in our last post, we talked with a patient who had to fly to Japan for life-saving cancer treatment prescribed by his American doctors and then take legal action against his insurance company for coverage. This patient was fortunate enough to get a settlement for coverage and be able to travel for treatment, but many aren’t as lucky.

Japan is just one example of an elegant policy solution that combines the realism and speed of commercialization with the safety and transparency of a clinical trial: pilot projects.

With a pilot, businesses can quickly go to market, but this permission is time-limited; businesses must ensure that patients understand the risks through enhanced informed consent requirements and they must also provide data on outcomes so that policymakers can determine whether treatment should become an insurance-reimbursable procedure. 

Pilot projects take a variety of forms; regulatory sandboxes have emerged as a promising pilot design. In a ‘sandbox’, a government agency oversees business applications to sell products under a regulatory exemption, ensures compliance after the application is accepted, and organizes reports for policymakers after the pilot is complete.

Sandboxes are used all over the world, from insurance in Utah to telehealth in Singapore

Politically, pilot projects are safer because they allow policymakers to propose ideas as experimental projects rather than a permanent law that would require legislation to reverse. 

If a pilot is successful, one of the potential effects is that the state can include the treatment on its list of reimbursable services. 

Transparency, efficiency, and experimentation are all foundation principles that can make the government a helpful partner in advancing public safety and innovation through free markets. 

For more details on policy templates for regulatory sandboxes, please contact us at the Cicero Institute.