Finding a cure for Ebola

Bookmark and Share Health | Peter Gregory
Australian Financial Review 5th November, 2014

The outbreak of Ebola in Africa has demonstrated the need to reduce regulation of the pharmaceutical industry in the United States and elsewhere as a matter of moral urgency. Ebola is a horrible disease. According to the US Centres for Disease Control and Prevention the current outbreak in West Africa has infected 13,540 people and killed 4941.

The US Food and Drug Administration (FDA) regulates pharmaceutical production in America. Currently, for a drug to be "licensed" it costs at least $US500 million and takes 10 years of testing, according to Tim Worstall of the Adam Smith Institute. As awful as the Ebola outbreak is, the number of people infected is nowhere near high enough to make it cost effective for drug companies to meet the huge costs of getting drugs licensed in the US.

Bizarrely, many have blamed the drug companies for this and have accused them of being "uncaring" and "profiteering" from poor people's misery. Not only does this imply that commercial businesses should give away their products for free, but fails to understand why profit is a good thing. In this context, profit acts as an incentive for drug companies to produce lifesaving drugs that save billions of lives. But it doesn't have to be this way.

With less regulation, pharmaceutical companies can invent and produce more drugs quicker. Smaller drug companies would be able to enter the market. Daniel Klein and Alexander Tabarrok of The Independent Institute in the US conducted a review of FDA regulation in 2002 and came up with a range of modest amendments to the current system that could reduce the cost and time associated with producing drugs. These include enabling seriously ill patients to access unapproved drugs, dropping "proof of efficacy" requirements, implementing more international reciprocity agreements, creating a field of non-government drug-certifying bodies and making FDA approval voluntary.

But drug regulation has also created a tricky situation for western governments who are under severe pressure to fight the Ebola outbreak. After all, can't the government just step in and pay the drug companies to produce the treatments?


Once again, the relatively small size of the outbreak comes into play. If only a few thousand people are infected, and treatment costs a minimum of $500 million, then clearly limited government resources should be spent on less newsworthy diseases where many more lives can be saved.

Currently, the hopes of those infected are hinging on the development of an experimental drug called ZMapp. The only reason ZMapp exists is because the US armed forces paid for its development in preparation for the eventuality of Ebola being used in a biological attack. A paltry seven treatments of the drug existed at the time of the outbreak. They have already all been used with some positive results. It won't be until early next year before American drug companies, with the help of the government, can produce treatments numbering in the hundreds let alone thousands.

But Klein and Tabarrok's major recommendation was to revert to a fully voluntary system of drug certification. In this scenario, drug safety and efficacy would be secured by reputation, non-government certification organisations and "middlemen" such as pharmacists and doctors. Not to mention the threat of tort law in the event of malpractice on the part of drug companies.

After all, a concerned parent may quite rightly desire certification of medication they give to their child to treat basic conditions like the flu. But an Ebola patient with days to live may be happy to roll the dice on an uncertified treatment that just might save their life.

It is unclear why the latter option is illegal. It would seem that that US government thinks people should be free to make decisions on almost every aspect of their lives, except the most important one - their health.

Finally, any economist will tell you that greater innovation occurs in a free market system. It is no coincidence that what former Professor at the University of Heidelberg Hugo Kibinyi calls ‘the golden age of drug discovery' ended as the powers of the FDA were being ramped up following the Kefauver-Harris reforms of 1962 and throughout the 60s, 70s and 80s.

Unless the US returns to a system that invites innovation, we may never know the treatments that haven't been created as a result of the FDA's control of drug production. Some may argue that medical care is fundamentally too important to be left to the free market. But as the current Ebola crisis shows, it's too important not to be.