Money and virtue: An odd tension in health care

Publishing in the BMJ, Vinay Prasad, an oncologist and health care’s leading evidence-based iconoclast, found that over half of medical reviewers who leave the FDA work for device and pharmaceutical industries. Prasad’s findings created disquiet amongst purists of various stripes. The media was shocked and tried shocking people by showing how shocked it was. The Lown Institute, which has been fighting physician conflict-of-interest (COI) with industry, seemed exasperated that yet another COI has emerged. Even pro-industry observers were upset by Prasad’s data-driven insinuation that a career in the FDA seems, for many, a means to a career in industry.

The reactions show deep inconsistency and a tangled web of moral confusion which pervades health care. Let me start with the obvious. If nothing is inherently wrong with physician-industry relationship, and I side with the amoralists, then it scant matters that for some physicians the FDA is a stepping stone to industry. I’ll be more explicit: it is illogical to encourage physician-industry relationship and be upset when this relationship is consummated.

Conversely, if you believe the FDA is a force for public good (FWIW, I’m decidedly on the fence), then you should be happy when an FDA reviewer consults for a pharmaceutical company, particularly if you also believe that industry is not a force for public good. If you believe there’s inherent virtue in regulations, that the assessment of safety and efficacy of a new drug is a science that is as beautiful as religion, then why be upset when a regulator shows industry how to satisfy regulators? The FDA sets standards to save us from rapacious capitalists, and some FDA reviewers show rapacious capitalists how to meet the standards which keep us safe. By valuing medical reviewers for the FDA, industry signals that they value satisfying regulators. Am I alone in I failing to see a problem? Would the Church of the Latter Day Saints object to their members moving to Wall Street to proselytize investment bankers, or to Hollywood to preach prudence?

Of course, I’m being simplistic and will continue being simplistic to make my point. The root of the moral confusion is the surprising ambivalence Americans seem to have towards money, which reminds me of the attitude Brits had towards sex during the Victorian era — i.e., they’re embarrassed to acknowledge its salience, ashamed to admit they want more, and jealous when others are getting more action. The Indians, on the other hand, are clear about money — “paisa hi paisa” (money is everything) — and as far as sex is concerned just watch a dance routine from a Bollywood movie.

Thus, we see an odd tension in health care. Though money is reward, virtue is a biomarker for right intentions, and money and virtue conflict. So everyone signals virtue all the time, in part to justify their rewards. Frankly, I’m getting sick of the moral exhibitionism endemic in physicians, which is cheap, nauseating, and redundant, and encourages a phylogenetically immature discourse. We all know that industry would do jack if it weren’t for dollars, and that physicians are motivated not by a desire for penury. Yes, even academics are well fed, before you start playing the violin for us.

Does that mean that Prasad’s findings should elicit no alarm? No, I think they should.

In public choice economics there’s a phenomenon known as “regulatory capture.” Briefly, regulators sculpt regulations which benefit certain industries, and industry influences regulators, by promising a lucrative career, to create regulations which give them an advantage. Remember, regulations are a barrier to entry — successful capitalists love regulations, aspiring capitalists hate regulations.

Health care, a swampland of regulator-industry relationship, is a fertile ground for regulatory capture. This is because health care is dominated by two forces — regulations and industry. Regulators and entrepreneurs are like power couples — it shouldn’t surprise that they’re humping each other. Regulators create regulations. Entrepreneurs create products which help us abide regulations without being asphyxiated. It is perfect symbiosis, a match made in heaven, a love which can’t be unrequited. Off the top of my head, I can give several examples of regulatory capture in health care — electronic health records (EHRs), meaningful use, acceptable radiation dose for CT scanners, maintenance of certification, etc. Just follow the careers of advisors to Obamacare. Very few advisors have ended up in Buddhist monasteries in Lhasa.

Can pharma capture the FDA? Admittedly, regulatory capture is not as easy for drug and device companies as it is for EHR vendors, but it is possible. A company can make a big deal about safety and efficacy which only their product can adequately deliver. The company’s goal is to drive away competitors whose products are inferior, even if not inferior by much. This gives the company a de facto monopoly, and ability to price gouge as if they’re selling water in the Sahara desert to the dying (hint, hint — epinephrine injectors).

But understand the problem here. The company need not lie about safety. If a company can persuade the FDA that there are safety concerns with inferior products, it is because the FDA, and by extension we, cares about safety. It takes three to regulatory capture — regulators, industry, and a risk-averse proletariat. Note, also that it is in FDA’s interest for the proletariat to be concerned about safety, because that determines its size, scope, and access to the public purse. The problem with relationship between industry and the FDA is not that there will be too little safety, but too much safety, so much safety that competition in the drug and device sphere will be further decimated.

Regulatory capture is not the only concern with relationship between FDA and industry. Economist Frank Knight, felt that entrepreneurs should be rewarded for uncertainty, not risk. The distinction he made between the two is important. Risk is when we don’t know for certain if an outcome will occur but know the probability of an outcome. In rolling a fair dice, the chances of landing a six is 1/6. With risk, we know the numerator and denominator. With uncertainty, we do not know the probability of an outcome — that is we do not know the numerator or denominator. Knight felt that a true value of an innovation is the uncertainty in which it was developed. Stated differently, the riskiness of a venture is not “risk” but “uncertainty.” Playing with uncertainty is how we get dramatic innovations.

By assessing products for their safety and efficacy, the FDA sets a floor of expectation. The floor becomes the dice — the risk — and industry tries to better the floor, marginally, by developing a product with small incremental efficacy, or a slightly better safety profile — for example a newer statin which doesn’t cause muscle pain. FDA’s floor of expectation is industry’s ceiling of aspiration. This leads to incrementalism — same old, same old — but very few breakthroughs.

The relationship between the FDA and industry, even if in the future tense, not present tense, risks dulling industry’s imagination. But appreciate why. There’s a trade-off between security and innovation, and we have chosen security over innovation — because if unregulated innovation produces breakthroughs, unregulated innovation also produces dangerous products, and we can’t tolerate danger. The FDA is a phenotype of our risk-averse DNA. If the FDA continues unabated in its mission, we will be left with missionaries in missionary positions, making the world a safer but duller place.