By Nicolas Terry
Business disruption, Christensen’s classic observation of disruptive technologies leveraged by market entrants attacking mainstream industry incumbents, has generally failed in health care. There are several reasons why innovative businesses harnessing modern technologies have found health care a difficult nut to crack. The most likely reason is that the misaligned incentives caused by third-party reimbursement discourage consumers from choosing new, lower-cost alternatives.
However, there are additional explanations. Sometimes the arcane, fragmented nature of health care proves to be a poor fit for technologies successfully implemented in other businesses. In other cases—think electronic health records—a lack of common data standards allows proprietary data formats to cause customer lock-in.
But, what is the impact of health care regulation? Beyond the traditional trope that regulation stifles innovation, how does health care regulation impact disruption? Recent developments in the markets for hearing aids suggest some answers and even a possible regulatory approach to the broader and burgeoning category of mobile health apps and wearables.…
Read the full post at the Health Affairs Blog!
By Rachel Sachs
Earlier this week, a bipartisan group of Senators introduced the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, a bill designed to speed generic drug approvals (and thus lower drug costs) by removing a delaying tactic some branded drug companies use to impede the generic approval process. Essentially, branded drug companies sometimes refuse to sell samples of their drugs to generic companies who want to come to market, preventing them (for at least a time) from performing the necessary bioequivalence testing and extending their market dominance. Sometimes companies try to hide behind a regulatory program, Risk Evaluation or Mitigation Strategies (REMS), in claiming that they legally cannot provide such access. Other times, such as in Martin Shkreli’s case, no such excuse exists and the company simply refuses to provide access.
These delaying tactics have received substantial attention from both scholars (Jordan Paradise’s work can be found here) and lawmakers. This is Congress’ third attempt at addressing the situation, although as Ed Silverman helpfully notes at Pharmalot, the previous attempts would have only dealt with REMS delays, not Shkreli-like closed distribution systems. By contrast, the CREATES Act would require brand-name companies to provide access to samples of their drugs, whether subject to a REMS or not, on “commercially reasonable, market-based terms” or face potential civil action from the generic drug company in question. There’s already been a lot of commentary on the bill, including a particularly helpful blog post from Geoffrey Manne providing background on REMS abuses and on why antitrust law has not sufficed to solve the problem. Here, I want to add two points that I haven’t yet seen in the discussion: one about drug shortages and another about remedies.