Send in the Frowns

Nature Magazine, owned by London-based Macmillan Publishers Ltd., is considered one of the world's leading science journals. As a first-time, non-academic author, I should be honored that they chose "The $800 Million Pill" for its lead book review in this week's issue. I've really been looking forward to my first review by someone who comes from the world of science and understands the interplay of scientific and economic realities discussed in the book.

But one has to wonder about what has happened to standards in the scientific publishing world when they asked a "scholar" from the American Enterprise Institute -- an avowedly conservative think tank in Washington, DC that takes considerable funding from the drug industry -- to write the review. Funding for John Calfee's own research, which he discloses at the end of the review, comes in part from pharmaceutical firms.

The editors must have known there no possibility that the review would be positive when they sent it out to Calfee. As they say in England, that hardly seems cricket.

Despite the many positive things Calfee says about my writing and understanding of science and medicine, the review was largely a stale rehash of industry arguments that I debunk in the book. I won't repeat those discussions here.

Rather allow me to point out that Calfee breaks the cardinal rule of fairness in book reviewing. You may quarrel with a person's argument, but you should at least accurately present it at the outset of the review. He failed this basic test by misrepresenting my analysis of the $800 million cost-per-drug figure put out by industry-paid researchers.

He says my analysis largely rests on a Public Citizen analysis and a study by the Global Alliance for TB Drug Development. My narrative does go over those studies and the arguments they've engendered (the industry trade group hired the accounting firm of Ernst and Young to debunk the Public Citizen study). But my own analysis relies on the fact that at least half of industry R&D is wasted on drugs that add nothing to physicians' armamentarium for fighting disease, and thus can more properly be categorized as corporate waste. He also says I "defy sound economic reasoning" by ignoring the "opportunity cost" question of R&D expenditures. In fact, I discuss that at length (I argue it's an expense funded by current drug consumers) and quote academic experts to bolster my argument.

Calfee doesn't mention either of these discussions. He describes my arguments as rehashes of others' studies. Indeed, he ignores the fact that I specifically state at the end of the chapter that if you take these factors into consideration, the $800 million industry figure would be "similar to the Global Alliance" figure. That's hardly "relying" on or "accepting" the results of their study.

There are other points in the review where Calfee makes basic mistakes (he calls Gleevec a biotechnology product) and inaccurately describes what I wrote. But suffice it to say here that when reading reviews by partisans in a debate -- even in the pages of a prestigious journal -- consider the source.

Here's the relevant paragraph from the June 24, 2004 Nature review:

"Relying mainly on non-scholarly critics such as Public Citizen (a lobby
group in Washington DC founded by Ralph Nader) and the Global Alliance for
TB Drug Development, Goozner argues that DiMasi and colleagues grossly
overstated the true costs of developing useful drugs. He accepts instead the
Global Alliance's estimate that discovering and developing a new
tuberculosis drug would cost only US$115-240 million. Essentially, Goozner
argues that the editors and reviewers of the Journal of Health Economics
overlooked some basic methodological flaws in the paper. His argument is
unpersuasive, though, partly because it defies sound economic reasoning on
opportunity costs. It also ignores important limitations in the Global
Alliance's study of developing a hypothetical drug for a single condition
(tuberculosis) and using relatively small clinical trial sizes, non-market
cost data and highly conjectural failure rates."

Rising Prices, Rising Rates

This week’s large jump in retail and wholesale prices caught my eye. The smart money on Wall Street today was betting that the Federal Reserve board will raise interest rates at least a half point when it meets at the end of June. My guess is that it’s just the first of many increases to come.

Amid all the bad news out of Iraq, the Bush administration's next gift to the American people will be the unprecedented phenomenon of a wartime economy heading for a slowdown.

Not that it's been much of a boom. Despite his massive tax cut for the rich, massive fiscal stimulus through war spending and massive fiscal stimulus through negative real interest rates, the unemployment rate has barely budged. And while hiring finally picked up in recent months, employers will pull the plug as soon as interest rates begin their inevitable upward ascent.

Why no more hiring? Rising rates will put an end to the home refinancing and home equity loan booms, which allowed consumers to spend like banshees through a period when their real incomes stagnated. Moreover, some economists (like my friend Dean Baker at the Center for Economic and Policy Research) are predicting a massive collapse of housing prices as rates rise. But even if home prices only stagnate for a few years, the economy will lose its major prop.

Another indicator signaling higher rates is the dollar. Right now, generous Europeans and East Asians are financing the U.S.’s massive budget and trade deficits. But in the past year, the dollar has declined about ten percent against the yen and euro. It’s turned overseas investors’ ultra safe Treasuries (3-4 percent rates) into a depreciating asset. The outlook for the coming year is another ten percent decline in the value of the dollar. The only way to finagle those feckless foreigners into continuing to finance Bush’s war and tax breaks will be through higher interest rates.

Can Greenspan postpone the inevitable, say, beyond the election? I doubt it. The outlook for the next twelve months is pretty much set: Rising interest rates, a falling dollar and rising prices. Unfortunately for Democratic candidate John Kerry, unemployment is a lagging indicator. The denouement of all this bad news -- rising unemployment -- won't hit until about nine months after rates start rising, which is well beyond Election Day.

A Note on Reagan

Had enough of the ill-informed, hagiographic coverage of President Ronald Reagan's passing? The insipidness of the American press needs no further elucidation here. But I can't let the moment pass without pointing out two of my own most vivid recollections of his presidency, issues that have received little notice this past week.

In the early 1980s, I was a reporter covering the South Side of Chicago and northwest Indiana. It was home to the U.S. steel industry's largest concentration of factories and workers, an ethnic melange of Eastern European ethnics, blacks and Hispanics. Though integrated at work, the workers lived in segregated communities that were mirror images of each other. They owned small but comfortable homes, downed beers by the six-pack and believed their backbreaking labors had earned them a small but cherished place in the American mosaic.

But by early 1983, sky high interest rates enacted by Federal Reserve Board chairman Paul Volcker and an accelerated depreciation tax policy enacted by the incoming Reagan administration had encouraged companies to monetize their aging factories. Instead of spending the cash on modernizing the mills, they shut most of them down and invested elsewhere.

This deliberate dismantling of a huge swath of the U.S.'s aging industrial base drove unemployment in the region to 25 percent -- a level not seen since the Great Depression. Layoff notices arrived not in batches of hundreds or thousands but in the tens of thousands. Over a two-year period, an urban landscape that had once been home to a great civilization became a barren wasteland.

You'd think that a president confronted by a human tragedy of such mammoth proportions would at least pay a visit to the area, express his concern for those whose jobs had been destroyed, shine the light of his fabled optimism on the nightmare that their lives had become. Fuhgeddaboudit. It never happened. Nor did his government ever come up with a single program beyond paltry trade adjustment assistance and superficial job training programs to ameliorate their plight.

The second great tragedy I witnessed during the Reagan years was the AIDS epidemic, a plague that was first identified in 1981 when five young homosexual men in Los Angeles came down with a rare form of skin cancer. By the mid-1980s, HIV/AIDS was killing tens of thousands of Americans per year. The obituary pages of the nation's leading newspapers read like a dirge for the worlds of high fashion, literature and the arts, where many gay men had made their careers.

What was the Reagan administration's first response to this crisis? In 1983, Presidential press spokesman Larry Speakes made a tasteless joke about "gay cruising" when a reporter dared ask about Reagan's response to the epidemic. His government did not begin appropriating money to NIH to begin studying the disease until 1985. It took until 1987 -- one year before leaving office -- before the president made his first public utterance about AIDs.

If the test of a country is how it treats its least fortunate citizens, then the U.S. has gotten low marks throughout much of its history. But Ronald Reagan's response to the two great domestic tragedies of his presidency set a new standard for callousness, one that we live with to this day.

Spitzer on drugs

New York Times readers with troubled kids must be very confused today. Yesterday, a front page story claimed that antidepressants worked wonders on children. Then, 24 hours later, the paper of record gave similar front page treatment to news that New York State Attorney General Eliot Spitzer had sued GlaxoSmithKline for failing to reveal clinical trial data showing its antidepressant didn't work in kids.

Why the discordant messages? The first story reported the early results from a government-funded clinical trial showing that Prozac was better than talk therapy or a placebo. An objective source? Hardly. The trial was conducted by Dr. Graham Emslie, a Texas-based psychiatrist who is one of the nation's leading advocates of medicating depressed children. Emslie's corporate client list reads like a who's who of the drug industry and includes Eli Lilly, maker of Prozac. Alas, the Times never told its readers this fact.

Though funded by NIH, Emslie's was a curiously designed trial. It looked only at Prozac, the first serotonin reuptake inhibitor. Previous trials had already shown it to be the only SSRI that was effective in kids. For some reason, the government didn't ask Emslie to compare it to other SSRIs.

Despite the missing comparisons, the Times story did nothing to differentiate Prozac from its many me-too SSRI rivals, which have entered the market in the years since Prozac's spectacular debut. The headline suggested that all "antidepressants" were effective in children.

The Spitzer suit, coming only a day later, must have embarrassed the Times editors into giving it the same front page placement. Had they fact checked their headline the previous day, they would have learned that copycat SSRIs like Paxil and Zoloft have never been shown to be effective in children. In fact, tests submitted to the FDA for patent extensions revealed just the opposite: they were no better than placebo.

Moreover, there are dozens of lawsuits across the country alleging the drugs have caused suicides and suicide idea formation in some youths who take them. Unpublished clinical trial data obtained in those lawsuits formed the basis of Spitzer's suit.

Meanwhile, the Food and Drug Administration's inquiry into the suicide side effects of SSRIs continues. Despite an internal review suggesting most of this class of drugs has no efficacy in kids (why would you accept any risk if there is no benefit?), the agency has refused to follow its British counterparts and ban their use in children. It awaits a comprehensive data review by Columbia University psychiatrists, which is due out this summer.

This scenario should sound familiar to anyone who remembers the government's response to the Enron scandal. While the Securities and Exchange Commission dithered, the crusading A.G. from the Empire State rushed in to fill the void. Now we have a similar situation unfolding in drug regulation.

I applaud Spitzer. But in the end, state regulation is no solution. No state official, no matter how aggressive, has the scientists, the experience or the clout to effectively take on Big Pharma. Only the FDA can protect the American people from dangerous drugs. And when it comes to kids, they should err on the side of caution.