The Great Race: Innovators vs. Bureaucrats

Who wins the 21st century, the innovators or the bureaucrats?

We focus on health care today. And the race is on…

Rising health care costs menace the Treasury. Medicare and Medicaid constitute roughly 25% of the federal budget… and growing. Mix in Social Security and entitlements are half the budget.

Not for nothing did former Bush 43 Treasury Undersecretary Peter Fisher call the federal government “a gigantic insurance company with a sideline business in defense and homeland security.”

Health care costs must be bridled. One partial solution? Technology. And not necessarily the fancy biotechnology we’ve frequently discussed around here…

Consider: One of the reasons new medicines are so expensive is because it sometimes takes over a decade of expensive trials and more than a billion dollars to secure FDA approval. What if that time and cost can be dramatically reduced?

According to Dr. Bertalan Meskó, armed with a Ph.D. in genomics, the rapid development of artificial intelligence (AI) could greatly reduce both the time and cost of producing drugs.

For example, an outfit called Atomwise is using supercomputers to simulate drug interactions and recommend the appropriate drug. Last year, they used their wizard machine to find safe, existing medicines that could be redesigned to treat the deadly Ebola virus.

The AI technology then pinpointed two drugs that could significantly reduce the spread of infections. But here’s the thing: According to Meskó, “The analysis, which typically would have taken months or years, was completed in less than one day.”

The technology has a way to go. But if AI can reduce months or years of work to a day or less, imagine how it could impact the time and cost of developing new drugs.

While we’re on drugs — as it were — here’s something else to consider: The American Heart Association says that poor medication adherence (people not using their drugs properly) costs nearly $300 billion a year in preventable doctor visits and hospitalization.

But Meskó says the might be a simple technological solution. Apps — those things you have on your smartphone.

Medication management apps and pill dispensers would ensure that patients take their meds on time and in the proper doses. The apps could also remind patients when it’s time to refill, and they can re-order medication within the app.

These apps, apparently, increase adherence by 40%. And estimates say that could save 50,000 lives and $120 billion each year.

Cheap, easy solution, big savings.

And do we need so many doctor visits? The American Medical Association, about 70% of the roughly 1 billion doctor visits in the United States every year are unnecessary. Most could probably be avoided by interacting with doctors using computers, tablets, and smartphones.

A recent Accenture study focused on a community in Spain where one in five patients did just that. They determined it decreased the number of hospital stays by 52,000 — and saved the place $55 million in just one year alone. Just by reducing doctor visits. And that’s only one community.

These are just some of the ways to dent health care costs. Some are surprisingly simple. Simple, that is, but not necessarily easy…

Innovators always have bureaucratic fiefdoms to confront, oceans of red tape to navigate… and hurdles to leap.

As our fearless leader Addison Wiggin styles it, “In an ideal world, entrepreneurs and innovators, the risk-takers, would be free to embrace the turmoil at their own peril. But no… in the real world, we have the meddlers, the world improvers, (ahem) bureaucrats.”

And that’s especially true in medicine. Dr. Meskó:

Bureaucratic machines and mammoth-like systems are slow. They cannot keep up with the pace of innovation, especially the technological innovation of the 21st-century… While the world is growing digital, designing medical technology is still a painfully slow process. In our caution to save lives, we’ve hobbled our efforts to innovate… I cannot stress its importance enough. It is the No. 1 reason why the application of amazing medical technologies is in delay for so many areas.

The race between the innovators and the bureaucrats?

Robert Goldberg of Brandeis University has estimated that FDA delays in approving drugs — already used safely in other countries — have cost at least 200,000 American lives over the past 30 years. That’s over three times the war dead from Vietnam.

But we close with a tale of hope… and perhaps a model for the future…

Dana Lewis is a health care analyst with a computer engineer for a husband. She’s also a diabetic. Managing that diabetes can be a challenge. And there was no single device on the market that could both monitor and adjust insulin levels.

So she and her husband said to blazes with the FDA. They struck out on their own to invent an “artificial pancreas” that would monitor and adjust insulin (it’s a device strapped to the abdomen).

And they succeeded. It helped Lewis with her diabetes. And she wanted to share the technology with other diabetics.

But there was the FDA…

FDA rules say distributing the device to others was strictly verboten. There’s a process. So the couple decided to bypass the FDA altogether. They created an online, grass-roots community and showed others how to create their own artificial pancreas. Hundreds have done so.

Fittingly enough, the movement they created is called #WeAreNotWaiting. Why wait for the FDA if it’s been shown to work and you can do it yourself?

Turns out the FDA finally approved the artificial pancreas — two years after Lewis started using her own.

Chalk one up for the innovators. May there be more!


Brian Maher
Managing editor, The Daily Reckoning

The Daily Reckoning