Neoliberal pharmaceutical science and the Chicago School of Economics

The birth of the echo chamber

As World War II came to a close, the pharmaceutical industry seemed poised to deliver on the promise of several so-called wonder drugs. By the late 1950s, however, public optimism about the industry had given way to deep misgivings about the high prices for prescription drugs, the adverse reactions associated with new drugs, and the lack of information to help both doctors and patients navigate all the new offerings. The US government organized several investigations into the trade practices of the pharmaceutical industry: in 1955, the US Federal Trade Commission initiated an investigation into the legitimacy of patents, costs of producing pharmaceuticals, and pharmaceutical prices; ² also in 1955, the House Subcommittee on Intergovernmental Relations began an investigation into collusion among producers of polio vaccines; in 1957, the House Subcommittee on Legal and Monetary Affairs initiated an investigation of truth in the marketing of drugs; and in 1959, Estes Kefauver, chair of the Senate Subcommittee on Antitrust and Monopoly, launched what would become the most prominent investigation of the pharmaceutical industry, the Administered Prices in the Drug Industry hearings. ³ Toward the end of this investigation, which lasted nearly 3 years, evidence came to light that thalidomide, a popular sedative that had nearly been cleared for marketing in the United States, had caused thousands of birth defects in Europe. In the context of this considerable public concern, the US Congress passed the Kefauver–Harris Amendments to the Federal Food, Drug, and Cosmetic Act in 1962. The Kefauver–Harris Amendments (hereafter referred to as the 1962 Amendments) granted the Food and Drug Administration (FDA) the power to restrict advertisements and establish standards for clinical trials. Moreover, they required drug manufacturers to provide proof of efficacy for all drugs approved since 1938.

Dominique Tobbell (2012a, 2012b) documents efforts of the pharmaceutical industry, beginning in the 1940s, to forge relationships with physicians and academic medical researchers. Pharmaceutical companies built this network by identifying strategies mutually beneficial to themselves, medical doctors, and academic researchers and sought to mobilize this network to challenge restrictions proposed during the Kefauver hearings on patents and drug pricing. The 1962 Amendments did not in the end address patents, pricing, or excessive profitability. However, established members of the industry acceded to the provisions concerning safety, efficacy, and truth in advertising enacted by the 1962 Amendments (see also Carpenter, 2010), and perhaps even welcomed them as they shaped them.

In the 1970s, opposition to the 1962 Amendments began to surface. This opposition could be viewed as an instantiation of the broader mobilization of business in response to the emergence of consumer protection regulation (Phillips-Fein, 2009). In this specific case, the pharmaceutical industry mobilized against ‘pharmaceutical reformers’ who renewed complaints voiced in the Kefauver hearings and additionally called for the substitution of generic for name-brand drugs (Tobbell, 2012a, 2012b). The 1969 outcome of the Panalba case galvanized the pharmaceutical industry (Carpenter, 2010). The issue at hand was whether the FDA should be permitted to withdraw medicines that had already been used, effectively substituting a science-based determination for a use-based determination of drug efficacy. The FDA prevailed, due in part to the willingness of federal courts to grant it some leeway in its administrative decisions. But the FDA’s position was undoubtedly bolstered in this specific case by the near unanimous support of its National Academy of Sciences and National Research Council (NAS-NRC) advisors. ⁴ The defeat of Upjohn, maker of Panalba, created a great deal of consternation among members of the pharmaceutical industry. ⁵

It was with a spirit of defiance toward the FDA that on 4 and 5 December 1972, pharmaceutical corporations, clinical pharmacologists, legal scholars, and economists participated in the Conference on the Regulation of the Introduction of New Pharmaceuticals, held at the University of Chicago. William Hubbard, then Executive Vice President of Upjohn, delivered a paper; Hubert Bloch, then director of the Friedrich Miescher-Institute (a corporate laboratory sponsored by Ciba-Geigy, which in 1996 merged with Sandoz to form Novartis), delivered another; the executive director of clinical research at Merck Sharp & Dohme also participated. Furthermore, pharmaceutical corporations offered to bankroll the conference: Pfizer, Smith, Kline & French, G. D. Searle, Merck Sharp & Dohme, and Upjohn pledged financial support. ⁶

The Chicago School of Economics, which included not only the economics department but also the Graduate School of Business (GSB) and the Law School, were newcomers to pharmaceutical policy debates. Chicago scholars assumed primary responsibility for organizing the conference. Faculty advisors involved in drafting the conference proposal included Kenneth Dam, Harold Demsetz, Milton Friedman, Reuben Kessel, Richard Posner, and George Stigler. ⁷ Stigler and Posner were especially important to the conference efforts. Stigler arranged for his former student Sam Peltzman to produce a paper on the ‘costs’ of the Kefauver–Harris Amendments, ⁸ pledged funds from his Walgreen Foundation to finance Peltzman’s research, ⁹ and oversaw its progress; Posner supervised the efforts of Edmund Kitch, who was tasked with writing on the economics of intellectual property. ¹⁰

The purpose of the conference was not to carry out a balanced evaluation of the 1962 Amendments but to subject them to a multidirectional attack. For over a decade, the Chicago School had been the epicenter of skeptical studies of the ‘governmental control of economic life’. It previously had placed electricity and securities regulation in its crosshairs. Led by Stigler, Chicago scholars now turned their attention to pharmaceuticals. A few months before the conference, Chicago GSB professor and American Enterprise Institute (AEI) scholar Yale Brozen wrote Stigler to suggest scholars for the conference, presenting their qualifications in terms of ideological criteria. For example, he recommended including Louis Lasagna, the lone NAS-NRC dissenter on the Panalba case, citing his dissent along with the fact that he was generally a ‘skeptic on the way efficacy ratings are used by the FDA’ as a primary qualification. ¹¹ Brozen’s evaluation of Lasagna in terms of his skepticism toward FDA regulation not only makes clear that he valued a skeptical approach in evaluating the FDA but also strongly suggests that Stigler shared the same view. D.J.R. Bruckner, who assumed the directorship of the Center for Policy Studies (which was nominally responsible for organizing the conference) after most arrangements had already been made, acknowledged at the time that he was disturbed by the ideological slant of the conference agenda and by the use of pharmaceutical corporation money to underwrite the conference. ¹² In a letter of invitation to Senator Gaylord Nelson, Bruckner wrote,

Frankly, when I came into this job six weeks ago, and had a chance to review the plans for the conference, I told the academic planners of the conference that I thought it was weighted too much as a critical forum of the FDA. ¹³

Although he claimed in the letter that he had taken steps to ‘broaden the participation’, Bruckner was unsatisfied with the results. In an April memo commenting on the book typescript resulting from the conference, Bruckner expressed concerns, specifically about sections publishing general discussion of the papers, which he characterized as follows: ‘I guess I am saying that [the] conflict or difference [among viewpoints] is not enough on the surface to convey any confidence in the reader that the conference was not an auto-de-fe of the FDA’. ¹⁴

In December 1973, the Center for Policy Studies published Peltzman’s and Kitch’s articles, along with the others under the title Regulating New Drugs (hereafter, Drugs). Richard Landau, editor of Drugs, provided the following motivation for the volume:

Although a portion of the public seems to believe that its concerns about drug safety and efficacy are now dealt with more effectively [after passage of the Amendments], the pharmaceutical industry, members of the academic medical community, and some medical practitioners have the feeling that regulations are keeping valuable and potentially useful drugs from the market, to the detriment of the health of the American people. (Landau, 1973: 4)

This statement reflects the position found throughout the book that the public was mistaken about drug regulation. The specific features of this consensus position become more evident upon examining the individual contributions:

The great majority of Americans would not dream of abandoning the important regulatory policies … [but] what is not commonly realized is that there are several ways to skin even a reforming cat. (Stigler, 1973: 10–12)

Public perceptions and expectations, after many years of indoctrination in the belief that there is already in being a good system for assessment and control, cannot easily be superseded. (Cooper, 1973: 32)

[R]educed regulation sharply contradicts the thrust of most organized groups that today most assertively purport to promote the consumer interest. (Peltzman, 1973: 208)

[T]he drug regulatory agencies function best in countries where they are relatively sheltered from interference by politicians, the press, and the various pressures of populist and consumer groups. (Bloch, 1973: 251)

Contributors expressed the belief that irresponsible reformers had besieged the pharmaceutical industry and that the widespread public support for such activities must be counteracted. Furthermore, they then argued that studies of pharmaceutical policy should put effort into figuring out how to counteract the public’s expressed desire. ¹⁵ It was broadly speaking an anti-regulatory position, but nuanced by a recognition that it was impossible to turn back the clock to before 1962: drug regulation was here to stay, but the state could be forced to behave differently. Under Stigler’s guidance, this view of the appropriate goal for an ‘economics of regulation’ became a hallmark of the Chicago School’s studies of regulation and politics. ¹⁶

The most noteworthy example of the kind of analysis included within the book was Sam Peltzman’s contribution on what he called the ‘costs’ of the 1962 Amendments. ¹⁷ Peltzman (1973) interpreted the 1962 Amendments as directed primarily at reducing the ‘costs of information’ about drug efficacy by substituting ‘FDA-provided information’ for ‘drug company promotion and actual usage’ (p. 131). His primary complaint about the 1962 Amendments was that they had in fact decreased the value of information available to consumers: FDA restrictions on pharmaceutical companies’ claims would decrease the amount of information on non-sanctioned uses of drugs, while any reduction in marketing for a drug of a particular brand would reduce information about the drug type in general. Peltzman then connected the decrease in information to social welfare by attributing a decline in the demand for new drugs to the decrease in information (more precisely, a decline in the demand of a bundled product of ‘pill-cum-information’ attributable to a decrease in the information component of it), and therefore a decrease in the consumer surplus associated with consuming drugs. The wish to assign responsibility for continuing education of physicians was a central concern of those engaging in debates over pharmaceutical policy (Tobbell, 2012b: 142–155). Would American Medical Association publications, such as the Medical Letter or AMA Drug Evaluations, be sufficient? Would it require an annually updated national drug compendium? Or would responsibility fall to the ‘detail men’ hired by pharmaceutical companies to sell their products to physicians? Or, perhaps an expert outreach program modeled on pharmaceutical detailing? Peltzman did place ‘information’ at front and center of his analysis, but his adoption of a position characteristic of the Chicago School – that the marketplace was best able to generate information about new drugs – left him poorly positioned to address the process of arriving at knowledge about drugs. Implicitly, Peltzman sided with the argument that the pharmaceutical detail men should assume responsibility, but he never directly addressed the concern that had led to proposals for continuing education in the first place: that multiplying the number of drugs available, along with the claims made for them, created confusion for doctors and their patients.

Drugs was sharply attacked in the scientific press. Reviewers noted how out of step, the book was with prevailing professional opinion: ‘some of the recommendations are so at variance with the current thinking in this field that they will be subject to much criticism’ (Megirian, 1975: 708); ‘It is doubtful that even the most outspoken critics of the FDA would advocate a return to the days when drugs of unproved efficacy and safety could be foisted on the medical profession and the public’ (Ballin, 1974: 910). Reviewers of Drugs pointed out that the economic analysis contained in the book was ‘most provocative’ (Ballin, 1974: 910) and puzzled at the ‘excessive space’ given to the legal and economic analysis of drug regulation (Buckley, 1974: 6820), especially given that the economic analysis did not appear to address scientific and medical considerations (Megirian, 1975: 708). One reviewer (Stolley, 1974: 856) noted the decisive presence of the Chicago School of Economics, detected a strong ideological influence, and complained about the exclusion of FDA officials, consumer groups, and economists who could challenge the Chicago view (see also Megirian, 1975: 708).

Even while Drugs was criticized, it also received considerable support elsewhere. It was, after all, no normal conference volume. ¹⁸ Milton Friedman devoted his 8 January 1973 Newsweek column to attracting attention to Peltzman’s work – 9 months before publication of the first book review. Senator Gaylord Nelson (the recipient of Bruckner’s letter, mentioned above), whose Subcommittee on Monopoly was in the midst of hearings on the ‘present status of competition in the pharmaceutical industry’, invited both Friedman and Peltzman to testify in 1973. Friedman declined Senator Nelson’s invitation (‘I shall be out of the country’), sending in his place a two-page letter, his January Newsweek column, a follow-up column that responded to critics of that column, and photocopies of a 1963 article entitled ‘The Assault on Integrity’, written by Alan Greenspan (yes, the very same) for Ayn Rand’s Objectivist Newsletter. Peltzman, however, did accept. An interview he gave for the British Broadcasting Corporation (BBC), in which he argued the costs of the 1962 Amendments exceeded the costs of the thalidomide tragedy, was read into the record:

It turns out that the cost [of the 1962 Amendments] is far in excess of the costs of having a thalidomide tragedy … I will have to say, how very shocking it might seem, that we don’t have enough thalidomide tragedies in the United States today. ¹⁹

Because any mention of thalidomide at that time would have immediately conjured images of malformed bawling infants with arrested limb development still fresh in the mind of just about everyone old enough to vote, it does not take a good deal of imagination to guess how Peltzman’s testimony was received. Moreover,

Peltzman could not name any drug which had not been approved in the United States, and which his analysis showed should have been approved, when he was asked to do so before the Senate Subcommittee on Monopoly, March 14, 1973. Rather, he replied ‘I’m not prepared to get into the names of drugs. I am more conservative than Professor Friedman, and so I recognize my limitations as a pharmacologist’. This, of course, did not enhance his credibility, even though his analysis was good. (Ricardo-Campbell, 1976: 17)

The author of this recollection, an AEI scholar, was repeating a point made by academic critics of Drugs, but from a sympathetic standpoint. If the inability to provide examples of drugs with lagged introductions into the United States created problems, the lack of data pertaining to pharmaceutical corporations’ R&D costs created bigger obstacles to making a persuasive case pertaining to intellectual property expansion. Drugs received a good deal of attention, ²⁰ but this attention revealed some crucial shortcomings in the approach taken. Peltzman’s work might have gone the way of many other poorly expressed economic ideas (which is to say, nowhere) but for the intervention of interested parties.

In the aftermath of the publication of Drugs, it became clear to participants in the Chicago conference and sympathetic observers that more work was needed. More specifically, they perceived a need to develop data on pharmaceuticals that could be kept out of the public sphere. To this end, they wanted to establish a seemingly independent institution to carry out studies of the drug development process, but because pharmaceutical corporations did not want these data to be too closely scrutinized by competitors and especially by government, it could be no normal academic institution. Rather, it would have to respect the pharmaceutical industry’s wish for secrecy. These were among the considerations that led Louis Lasagna – a participant in the Chicago Drugs conference – to establish the CSDD in 1976. It brought together economists, clinical pharmacologists, and members of the pharmaceutical industry and drew upon its affiliation with the University of Rochester (and, later, Tufts) to enhance its credibility. Crucially, it instituted a policy for secrecy:

Data are collected from the people who create it – pharmaceutical and biotechnology companies. They cooperate because they know Tufts CSDD will generate a comprehensive and objective picture of the drug development process, while strictly ensuring that individual company data are not disclosed. ²¹

But just in case pledges to keep secret company data and to produce a ‘comprehensive and objective picture of the drug development process’ did not offer enough reassurance, the fact that the CSDD received its funding directly from them would have helped. ²²

At roughly the same time, the AEI initiated complementary efforts. In 1974, the AEI established the Center for Health Policy Research, with the heavy participation of scholars that participated in the Drugs book and their students: Sam Peltzman’s PhD student (at University of California, Los Angeles (UCLA)) Robert Helms served as the first director, Louis Lasagna served on the advisory committee, and Yale Brozen served as director of the AEI Evaluative Studies Series. The AEI organized conferences and published several book-length studies and collections of articles (Behrman, 1980; Grabowski, 1976; Grabowski and Vernon, 1983; Helms, 1975, 1980, 1981; Peltzman, 1974; Wardell, 1978; Wardell and Lasagna, 1975) and reprocessed them into innumerable easily digestible pamphlets for policymakers. Therefore, in ‘link[ing] the two disciplinary critiques of economics and clinical pharmacology’ as Daniel Carpenter (2010: 377) characterized the effort, the AEI came to be a central hub for developing intellectual challenges to pharmaceutical regulation. Through the AEI, the pharmaceutical industry and pro-market advocacy foundations sponsored a program that brought together members of the original Drugs conference and expanded on their efforts. Its first publication was a book-length treatment of Peltzman’s work on the 1962 Amendments.

The CSDD advisory board included Henry Grabowski and Austin Ranney of the AEI; Lasagna served on the advisory boards of both the CSDD and the AEI Center. Several scholars published works at both institutions. Shared memberships and interlocking directorates of the CSDD and AEI helped ensure that their initial efforts would remain complementary. Together, these institutions operated as an ‘echo chamber’, a term coined by John Scruggs for his employer Philip Morris, referring to the strategy of producing a stream of seemingly independent studies for the purpose of advancing narrow economic and political interests. ²³ The echo chamber strategy became a standard part of the armamentarium for industries receiving public scrutiny, including the pharmaceutical industry. ²⁴

Louis Lasagna, the CSDD, and the pharmacological volte-face

The CSDD pursues a wide range of activities. It offers courses in professional development for drug executives and research team leaders (e.g. a well-known course in ‘Clinical Pharmacology, Drug Development, and Regulation’); it produces ‘R&D Management Reports’, which identify best practices in research and managing ‘drug portfolios’; it disseminates information about breakthroughs; and it generates reports on how to design clinical trials and efficiently outsource research. The CSDD’s mission comprises far more than generating arguments for use in policy debates, which has thus far been the only of its activities subjected to scholarly scrutiny. To bring its additional activities into focus, as well as the ideas that instruct them, I concentrate on the work of its founder and long-time director, Louis Lasagna. ²⁵

Lasagna had a brilliant early career. ²⁶ He played an important role in identifying the placebo effect. He established the first program of clinical pharmacology (at Johns Hopkins), which has inspired some to refer to him as the father of clinical pharmacology. He was a star witness for the Drug Industry Antitrust Act and the Administered Prices in the Drug Industry hearings. ²⁷ Following his participation in these hearings, Lasagna wrote The Doctors’ Dilemmas. In this widely circulated work, Lasagna not only supported the highly circumscribed provisions included in the 1962 Amendments but also expressed concerns similar to those that had originally motivated the Kefauver hearings. He noted that drug companies had hit upon a ‘pharmacologic bonanza’ and argued that this bonanza was due in part to the industry’s use of questionable advertising methods – the ‘hard sell’, the ‘numbers racket’, and the ‘throwaway newspaper’. He expressed concern that doctors’ prescribing practices were susceptible to manipulation through such methods, to the detriment of patients. Finally, he complained about the quality of new drugs and about the planned obsolescence of remedies. Lasagna publicly championed the use of clinical science to augment doctors’ knowledge, and thereby to address the most worrisome practices of what he unflatteringly termed ‘Medicine Avenue’. He became a founding editor of the Medical Letter, a subscription publication that devoted itself to providing doctors with a source of independent information about drugs; it did not accept advertisements (Greene and Podolsky, 2009: 351). Given his status in clinical pharmacology and his vigorous campaigning for its expanded role, it was only natural that Lasagna was invited to participate in the NAS-NRC Drug Efficacy Study.

Lasagna was a ‘pharmacology celebrity’, ²⁸ but over the course of the 1960s, the nature of his celebrity underwent a dramatic shift. By the decade’s end, Lasagna reversed his position on the FDA and the Drug Efficacy Study. He filed an affidavit supporting Upjohn in the Panalba case, placing him at odds with most academic pharmacologists (Carpenter, 2010: 332). Following Upjohn’s loss, Lasagna went public with his concerns. In 1971, he wrote an editorial for the Wall Street Journal that criticized the FDA for their handling of the findings produced by the NAS-NRC panels. ²⁹ Lasagna’s Wall Street Journal editorial was critical, but targeted: he questioned neither regulation as such, nor the use of academic consensus to inform it, nor the reliance on clinical science to produce such consensus.

During and after his participation in the Chicago conference, Lasagna would raise such questions and provide a provocative set of answers. Now Lasagna (1974b) insisted, ‘It is high time that we stopped trying to comment on drug performance without data of sufficient quality to justify professional and regulatory assessment and decisions’ (p. 154). Importantly, Lasagna was not calling for more reliance on clinical trial data, but for less. He asserted that clinical trials were ‘remarkably artificial in the sense of not resembling the real-life application of medicaments to treatment of the ill’, and therefore ‘unlikely to predict precisely the performance of a drug once it is approved for sale’ (p. 153). As a remedy, he suggested relying more on ‘naturalistic’ studies, by which he meant the study of medicines after they had been cleared for marketing. Lasagna wanted to replace the phase-based system of FDA clearance: ‘improved surveillance should not simply be an “add-on,” but a substitute for something else – most logically the “information needed to approve”’ (Lasagna, 1978a: 43). While he still supported a place for clinical trials in establishing safety and efficacy, he insisted that ‘a few well done controlled clinical trials’ would be sufficient to establish efficacy and a ‘modest additional expansion of clinical studies should usually be adequate to get a feel’ for safety, at least to a sufficient degree for the regulatory agency to permit marketing the drug (Lasagna, 1974b: 154). At this point, pharmaceutical manufacturers would conduct ‘naturalistic’ studies by closely monitoring the performance of drugs, with ‘prompt communication’ of any data that would revise estimates of a drug’s usefulness and safety. Far from merely encouraging caution when generalizing from trial data, Lasagna now called for a complete reorganization of the way the United States evaluated drugs, and a reprioritization of the clinical trial in that evaluation.

One of the primary rationales motivating the clinical trial requirement enshrined in the 1962 Amendments was to cut through the kinds of confusing and deceptive claims propounded by the pharmaceutical industry’s ‘detail men’, by giving doctors useful information about drugs. The phased system of drug approval arrived at a single more-or-less definitive answer about a drug’s safety and efficacy. Reorganizing the approval process to permit easier and earlier approval would not merely shift the timing of information gathering from pre- to post-approval, but would also change the nature of the information gathered, the nature of the assessments made, and who was making them. Lasagna was well aware of the rationale for the clinical trial requirement and even espoused it in his earlier testimony before the US Congress, but he came to see the multiplicity of claims and counterclaims as a good thing. Lasagna expressed his views about science in various places, but he was especially clear in a 1976 piece, ‘Consensus Among Experts: The Unholy Grail’. There Lasagna decried what he viewed as an increasing tendency to use expert opinion to regulate medicine; his concern was that doctors, including experts, were often in disagreement. This would not be so bad were it not for the fact that the majority at any time might be wrong, and therefore, judgments about appropriate regimens made by expert bodies were bound to silence minority opinions.

One might respond that a major reason for differences in opinion was that doctors conditioned their judgments on different information (their own limited experiences with prescribing a drug; the claims propounded by drug companies in their advertisements). Lasagna (1976a) fingers another culprit:

Given professionals of good will and expertise, how can one explain these kinds of disagreements? To begin with, experts may be speaking from different data bases … But there is another major source of disagreement: different value judgments, given the same data base. (pp. 543–544)

If taken seriously, Lasagna’s argument carries profound consequences. If the problem is that medical experts disagree mainly because they have access to different data, or incorrectly generalize from the data they do possess, then a possible solution is to enforce stricter limits on drug regimens – precisely this concern was cited as a primary motivation for the 1962 Amendments. But by emphasizing the importance of value judgments in expert disagreement, Lasagna (1976a) actually called into question the entire rationale for having an academic science-based regulatory regime. After all, are not the patients’ values the ones that should be heeded? This was exactly what Lasagna (1976a) argued:

Since it is more often true than not that doctors and patients will disagree on what is ‘best’ or ‘proper’ and since individual judgments are both necessary and desirable in most of medicine, the appropriate goal should be a clear exposition of the facts (such as they may be, including what is not known) to doctors and patients, with the probabilities (where they exist and updated as necessary) of benefit and harm for the various options available. Then the individual can make his own judgment. (p. 547)

Of course, there was always the possibility that patients might not welcome this responsibility; the vast majority of people lack medical education, and moreover, patients are usually called to make these profoundly difficult decisions when ill, when they are least equipped to do so. Lasagna agreed that people probably did feel this way, but they were either weak or deluding themselves, and much in need of acquaintance with harsh reality: ‘The public (including the politicians) needs to be educated to live with uncertainty, and with certain risks that are irreducible, no matter how painful that fact may be’ (Lasagna, 1978a: 43):

Just as a city is better off with a number of newspapers rather than one, I believe that the doctor and the patient are best served by exposure to a variety of opinions, as unpleasant as that will be to those (unfortunately in the majority) who prefer the illusion of certainty to the ambiguousness of reality. (Lasagna, 1973: 272)

The reference to irreducible uncertainty was fundamental to the argument. It provided a plausible rationale for a regime in which there were multiple contradictory judgments about drugs: determining whether one regimen should be preferred to another, or indeed to nothing at all, was just too ‘complex’ a question for scientists to answer. Such decisions were best left to patients, who probably would not welcome such responsibility, but nevertheless should be forced to assume it.

Lasagna developed his argument in part as a response to specific charges leveled at the pharmaceutical industry. In 1976, at the time Lasagna was writing on these matters, Senator Gaylord Nelson held hearings about industry involvement in continuing medical education. In these hearings, Richard Crout (head of the FDA Bureau of Drugs) attacked the way that pharmaceutical companies used ‘throwaway journals’ – publications that superficially resembled peer review journals, but whose content was controlled by their sponsors (e.g. by the practice of ghostwriting ³⁰ ) – to encourage doctors to prescribe medicines for off-label uses (Greene and Podolsky, 2009). Crout argued, ‘The issue here is whether such an article in a controlled industry circulation journal presents, in the guise of a scientific paper, promotional information which otherwise could not be legally published as drug advertising or drug labeling’ (quoted in Greene and Podolsky, 2009: 371). In light of the wide circulation of the throwaway journals – of the 28 medical publications with a subscription base greater than 10,000, only the New England Journal of Medicine and the Journal of the American Medical Association were peer-reviewed (Greene and Podolsky, 2009: 371) – Crout was addressing a widespread practice, and to the extent that this practice was harmful, a worrisome one.

Lasagna (by now a contributor to The Good Drugs Do ³¹ ) shot back:

An extremely troubling side issue has now surfaced in the U.S. because of the role played by drug companies in their support of so-called ‘throw-away’ journals. It is being alleged that such journals publish ‘slanted’ articles and editorials, and that their pages carry irresponsible, unfactual stories. Further, it is suggested that physicians showing exhibits at conferences are also guilty of collusion with drug companies in painting excessively rosy pictures. The proposed solution? Censorship of both the press and the individual. You may find that difficult to believe, and I suspect that Dr. Crout and Senator Nelson would deny that this is what they have in mind, but Lysenkoism is what they in fact espouse. (Lasagna, 1976b: 510)

Lasagna would have understood the Soviet Lysenko controversy as a sad case of the triumph of pseudoscience – of a thoroughly discredited Lamarckism over Darwinism. The lesson he drew was that there was considerable danger in allowing the state to arbitrate a scientific dispute. ³² It was not the first time he leveled the charge of ‘pharmacologic Lysenkoism’, a term he coined first in the aftermath of the Panalba decision and that was gleefully repeated by the chairman of the Pharmaceutical Manufacturers Association (PMA) (Powers, 1970: 9). But here, the relevant ‘scientific’ dispute pertained to the reception of findings propounded by the marketing arm of drug companies. He came to regard the ‘academic mind’ as a problem: pharmacologic Lysenkoism occurs when the FDA heeds academic consensus, and then imposes it on the medical community (Lasagna, 1974a: 77–78). The problem was that academics often exhibited a deplorable tendency to act ‘nihilistic’, by which he meant that they expressed too much skepticism toward pharmaceutical companies’ claims about drug regimens (e.g. Lasagna, 1973: 272). On this basis, Lasagna argued that the prerogative of the pharmaceutical company to present its preferred form of evidence and interpretation of such evidence must be protected.

By the mid 1970s, Lasagna had become, in Carpenter’s words, a ‘renegade clinical pharmacologist’ (Carpenter, 2010: 377). During the 1960s and early 1970s, most clinical pharmacologists held a favorable impression of the FDA and tended to defend the FDA against its critics (Carpenter, 2010: 323). Lasagna took a public stand against the FDA; later, Lasagna generalized his critique and attacked uses of clinical science in regulation (especially academic clinical science) that would have commanded widespread assent. If one took seriously Lasagna’s charge of nihilistic bias, then espousing the pharmaceutical company’s position could offer a useful counterweight even in the event it was itself biased. Seen from this perspective, a certain kind of scientific bias might even be deemed praiseworthy. His position was now clearly at odds with the mission of the Medical Letter, so it should be unsurprising that he was dismissed from its advisory board. Lasagna’s reputation had been harmed by his public defense of Upjohn and Panalba, which ‘marked the beginning of a steady decline in his stature among medical academicians’ (Carpenter, 2010: 330).

Yet, the historical literature leaves no question of the overwhelming influence exerted by Lasagna and his associates. The ‘Drug Lag’ meme is the most enduring product of the CSDD. The Drug Lag refers to the idea developed by Lasagna and William Wardell that excessive regulation had increased the time for valuable drug regimens to be introduced into the US drug market, relative to international markets. As Carpenter (2010) has noted, it was a complaint found in industry circles as early as 1964, but during the 1970s, ‘the collective lament about reduced “innovation” began to relocate, coming less from industry and financial circles and more commonly from academic venues, particularly among two disciplines: clinical pharmacology and economics’ (p. 375). The structure of the CSDD (along with the AEI and the echo chamber tactic) was responsible for the ‘collective’ nature of the lament. ³³

It is crucial to emphasize that Lasagna and his associates registered an impact well beyond the policy realm. The CSDD viewed its mission as providing study of and guidance in economic, legal, public policy, and scientific issues. ³⁴ It advised pharmaceutical firms on the best method of commercializing research, and in providing commissioned research (among other activities), the CSDD commercialized its own operations. Such research ranged from conducting surveys to hosting management roundtables to the contract production of research for peer-reviewed journals. Its website communications adopted the language of advertising: ‘Analysis and insight into critical drug development issues. Cutting edge information. Original research. Your most reliable guide to drug development’. ³⁵ Finally, the line between the CSDD and the private Contract Research Organizations (CROs; see Mirowski and Van Horn, 2005) that it encouraged and emulated blurred. William Wardell, cofounder of the CSDD and coauthor with Lasagna of the Drug Lag, was employed by the creator of the CRO, Hein Besselaar (see Petryna, 2009), and later started his own company, Wardell Associates International LLC.

During his tenure at the CSDD, Lasagna developed his views on the appropriate way to organize the clinical trial and what to do with its results. Although he challenged the status accorded to the clinical trial in regulation, he recognized that it had its uses, so long as it was organized correctly and its results used in the right way. On the surface, Lasagna seemed to be repeating the shopworn complaint that academics cannot meet deadlines: ‘Investigators with impressive academic credentials and lengthy publication lists to their credit may be least amenable to sponsor discipline’ (Lasagna, 1986: 370). But for Lasagna, the task was never as simple as speeding up academic research. At times, it would be necessary to provide information faster, but at other times (such as when a sponsoring pharmaceutical company’s intellectual property claim depended on it), it would be necessary to withhold information: ‘There is a tendency in academia to act as if there can never be one moment of publication delay, even when such delay of public disclosure may be crucial to the sponsoring firm in regard to a patent position’ (Lasagna, 1987: 11). Lasagna was actually arguing for placing control of drug research entirely in the hands of pharmaceutical corporations. Clinical science was in bad shape: it took too long, it was too expensive, it was too critical, and yet, it was also somehow prone to think itself into dead ends. In short, it was too academic:

At times industry will have to engage in what amount to ‘intellectual commando raids’ on academia, darting in and out, looking for ideas, supporting them temporarily, and then cutting bait when it looks as if the research is not productive. (Lasagna, 1987: 12)

The CSDD is best known for its interventions into pharmaceutical policy. Of these interventions, the one receiving the most scholarly scrutiny has been its role in creating and promulgating the ‘$800 million pill’. The circumstances motivating the production of this highly controversial figure for the expense of drug development were those leading to the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. One of the most heated debates pertained to the amount to be paid by Medicare for drugs: would the government merely accept ‘market prices?’ or would it negotiate for quantity discounts? The pharmaceutical industry staunchly opposed the latter option, and in support of its position cited a study that seemed to demonstrate that drug development was a risky and expensive business: the president of Merck announced in December 2001 the existence of a study demonstrating that it cost over US$800 million to bring a drug to market; a year later, this study was given the imprimatur of the Journal of Health Economics (DiMasi et al., 2003). The CSDD produced the ‘$800 million pill’ study; the echo chamber then kicked into gear publicizing this number, floated it as an alternative explanation to market power for the high prices of drugs, whereupon it was used as a primary reason for preventing the government from negotiating with pharmaceutical companies for lower drug prices (Goozner, 2004). Several features of the data upon which the CSDD study was based raised serious questions. ³⁶ For example, the firms participating were self-selected, and there is no evidence that the data they provided were subjected to any critical scrutiny – did the ‘R&D’ figure include legal expenses for challenging IP claims? For research done for marketing purposes? For continuing medical education courses? For advertisements? But there was no way to answer these questions, since the data upon which the study was based were submitted to the CSDD researchers confidentially. The CSDD created seemingly independent studies that were often published in respectable peer-reviewed journals, but its policy of secrecy ensured that its results could never be decisively refuted. The CSDD was less effective in advancing academic discussions about policy than it was in achieving targeted intervention into the realm of policy.

Because of his influential leadership of the CSDD, his development of justifications for the transformation of clinical science, and his generation of ideas for how best to conduct such science, one can understand why Adriana Petryna identifies Lasagna as a key figure in the globalization and privatization of clinical science (Petryna, 2009: 59–60). Occasionally, someone has leveled the charge that Lasagna was merely a ‘hired gun’, but neither the emergence of this perception nor Lasagna’s loss of stature among academics mattered in the least. His control of the CSDD offered Lasagna a unique opportunity to develop his ideas and a platform to put them into practice. The phalanx of institutions constituting the pharmaceutical echo chamber supported the CSDD’s mission and, to an important extent, conditioned it. And, as I show below, the activities of members of the Chicago School of Economics were important to the development and fulfillment of this mission.

Neoliberal science: the MPS connection

It is possible to view the activities of Lasagna, the CSDD, and indeed the echo chamber as the most recent chapter of an old story that originates in the postwar efforts of the pharmaceutical industry to mobilize sympathetic scholars and medical practitioners (e.g. to shape the 1962 Amendments). While these network-building activities probably did influence later efforts, by the 1970s, the industry was joined by an increasing number of dedicated pro-market advocacy foundations, general-purpose think tanks, special purpose institutions, and academic economists who were uninvolved with previous efforts. ³⁷ The composition of the network that challenged pharmaceutical reformers had changed; consequently, so had the ideas instructing the efforts. Proponents of neoliberalism advanced a critique of state reason based on a presumed inherent inability of the state – or any person – to comprehend as much as the market. ³⁸

One could describe the message emanating from these various institutions as broadly pro-business, or pro-market, but there is more to it than that. As Foucault argues in his 1978–1979 Collège de France Lectures (later published as The Birth of Biopolitics), the roughly contemporaneous set of intellectual and structural developments constitute a fundamental change in the mode of governmentality. One important reason for the change in message was the participation of the Chicago School of Economics. By the 1970s, Chicago scholars (Foucault mentions Stigler by name) were no longer merely supplying arguments to roll back an encroaching regulatory state, but developing methods of auditing it; think tanks staffed with Chicago scholars or those sharing their views (Foucault singles out the AEI) now stood mobilized to audit governmental regulatory bodies, and thereby to control them. For Foucault, the ideas informing such efforts amounted to a new form of liberalism – a neoliberalism. ³⁹ One need not commit fully to Foucault’s account of the historical development of the social sciences to credit him with arriving at an insightful interpretation of developments at Chicago: from that location emerged a view of the appropriate role of the state, distinct from laissez-faire liberalism or libertarianism.

Recent historical scholarship has improved our knowledge of neoliberalism by devoting attention to the doctrines developed and activities engaged in by members of the MPS. ⁴⁰ Organized by the Austrian economist Friedrich Hayek in 1947, the MPS was a group of individualists who devoted themselves to reformulating liberalism by creating a ‘neoliberalism’ as a counterblast against ‘collectivism’: socialism, institutional reformism, social welfare liberalism, and Keynesianism. The MPS was an obligatory passageway for those most heavily involved in constructing the postwar Chicago School of Economics, including Milton Friedman, George Stigler, and Allen Wallis. ⁴¹ Chicago neoliberals rejected classical liberalism and sought instead to rethink its intellectual foundations by recasting the market as an information processor more powerful than any human mind. They called not for a laissez-faire but for an activist state; they developed methods to control the state and fostered institutions to exert such control. ⁴² An imperative of the neoliberal view is that building such institutions can make the critique of state action permanent. Such activities were often conducted well outside the academy and included businesspersons, politicians, and journalists; the proliferation of pro-market think tanks during the 1970s was the most visible mark of the transdisciplinary and extra-academic effort to advance neoliberal ideals. ⁴³ Economists played crucial intellectual and organizational roles in this effort, but viewing neoliberalism as merely a set of economic doctrines would be a mistake: neoliberals developed a set of political and philosophical ideas to instruct the activities of scholars from across the disciplines. ⁴⁴

Allen Wallis played an important role in forming the CSDD and thus entrenching the neoliberal critique. Over the course of his career, Wallis served as an advisor to the Eisenhower Administration, Dean of Chicago’s GSB, and Under Secretary of State for Economic Affairs in the Reagan Administration. At the time of the Drugs conference, Wallis was chancellor of the University of Rochester where Lasagna was employed. ⁴⁵ In 1974, Lasagna approached Wallis with a proposal calling for an ‘informal consortium of pharmacologists, sociologists, economists, lawyers, etc., in a mini-center devoted to problems of drug development’. ⁴⁶ Wallis took an immediate interest in this idea and a personal role in raising funds for it. He wrote the heads of American Home Products, Hoffman-La Roche, Squibb, Sterling, Pfizer, and Merck Sharpe & Dohme, pointing out, ‘I personally have been much interested in questions similar to some of the ones that Dr. Lasagna will attack’, and enclosing copies of his (Wallis’) speeches that ‘quote at some length from Dr. William Wardell’. ⁴⁷ He introduced CSDD cofounder William Wardell to William Simon, the head of the Olin Foundation, a pro-market advocacy foundation. Wallis’ efforts were remarkably successful: in March of 1976, Lasagna reported in a letter to Wallis that a total of 10 firms had committed to funding the CSDD. ⁴⁸ The Olin Foundation offered the CSDD an unrestricted grant of US$10,000 per year. ⁴⁹ Later that year, the CSDD commenced operation.

Wallis’ interest in the CSDD project went far beyond any normal interest a university chancellor takes in fundraising. Lasagna first caught Wallis’ attention with the 8 April 1971 publication of his (Lasagna’s) Wall Street Journal editorial critical of the FDA’s use of the NAS-NRC Drug Efficacy Study. The following day, Wallis sent a memo to Lasagna expressing his admiration for it, adding that he believed that all regulatory agencies necessarily have a ‘net detrimental effect’. ⁵⁰ That same day, Wallis wrote fellow MPS members William Meckling of Rochester’s Graduate School of Management and Henry Manne of Rochester’s Political Science Department:

Wouldn’t it be worthwhile sometime to get up a discussion on this problem of [FDA] regulation between you [Meckling and Manne] and some of your colleagues and some of the science and medicine types? Although almost everyone who gets exposed to some aspect of the regulatory process immediately sees how bad it is, I have never encountered a one who drew any general lessons from this … My main point would be to use this case to provide specific concrete detail for the people associated with you, and to use a discussion with Lasagna or others to give them some comprehension of what is really involved in the regulatory process, so that they do not go away thinking that it is all a matter of a few evil people or unfortunate but episodic events. ⁵¹

Clearly, Wallis’ interest in the work of Lasagna derived from his belief that Lasagna would be useful to concretize a general critique of government regulation. In addition, the letter suggests that Wallis hoped to persuade Lasagna and other ‘science and medicine types’ that the problems of regulation were not merely specific to the Drug Efficacy Study, but endemic. Wallis suggested that Lasagna’s project be merged with Rochester’s Center for Research in Government Policy and Business, which was created by MPS members William Meckling and Karl Brunner. Although the decision was made to keep the units formally separate, in practice, they were closely connected. In the CSDD’s first annual report, Lasagna thanked William Meckling for ‘providing a link between his School and our Center so that increasingly important economic questions can be studied’ (CSDD, 1977). Ronald Hansen, Associate Director of the Center for Research in Government Policy and Business, served on the board of the CSDD. The nature and intensity of Wallis’ interest along with the direct participation of MPS members suggest that the CSDD was conceived as a vehicle to put neoliberal ideas into practice.

One observes the objectives shared by members of the MPS and the CSDD in Lasagna’s (1976b) article, ‘Drug Discovery and Introduction: Regulation and Overregulation’. As might be gleaned from the title, it is a polemical piece. It is filled with several instances of jarring transitions between seemingly technical scientific matters and political matters. For example,

[I]t does not require brilliant insight to accept the effects of digitalis – good and bad – on the basis of two centuries of experience without insisting on modern double-blind, randomized, controlled trials. But such sophistication offends the purist liberal, who is shocked to learn (if he ever does) that equality and freedom are difficult to reconcile, since one freedom is the right to recognize (and even reward) inequality of all sorts. (Lasagna, 1976b: 509)

The polemical tone is similar to that Wallis adopted in a commencement address he delivered to a graduating class of medical students at the University of Rochester. ⁵² In this address, from which Lasagna said he ‘cribbed mightily’, Wallis declared, ‘The most serious health problem in America today is the one diagnosed 40 years ago by Walter Lippmann, in his great classic The Good Society, as “the sickness of an overgoverned society”’ (Wallis, 1976a: 351). ⁵³ Lasagna followed Wallis in quoting extensively from Walter Lippmann’s The Good Society. Lasagna (1976b) continued,

The United States, in the years since Lippmann’s book appeared, has done nothing to reverse the lugubrious process which he so presciently described. During the last decade and a half, over-regulation has become a way of life. (p. 507)

He quoted Wallis to provide a response to the problem:

The remedy … is obvious and simple, but implausible. Return the power to the people. Give each doctor and each patient the right and responsibility for making his own decisions freely in light of his own best knowledge (or ignorance) and judgment (or folly). Inevitably, some doctors and some patients will make some unwise decisions, perhaps even some that harm other people. But there is no possibility that the greatest harm these errors could do would even approximate the least harm that the government can do … (Lasagna, quoting Wallis, 1976a: 511)

Here, Lasagna explicitly connects the arguments he made for the reorganization of clinical pharmacology and pharmaceutical policy science (the irreducible uncertainty and danger associated with drugs, the need to assign the task of coping with this uncertainty and danger to patients) to the ideas of Wallis, indicating their debt to neoliberal ideas.

As documented in detail above, Lasagna reversed his position from defending the FDA and drug regulation to attacking it. Lasagna’s skepticism toward the FDA was apparent enough in 1971 for Wallis to take notice of Lasagna and champion his cause. But before his encounters with Wallis and other neoliberal scholars, Lasagna’s views were undeveloped, and his goals were incompletely articulated and hence unrealized. After his encounters with Chicago, Lasagna generalized his critique of regulation by adopting the characteristically neoliberal position that the ability of markets to arrive at the truth about drugs is unsurpassed. ⁵⁴ By the end of the 1970s, Lasagna had become the chief advocate for neoliberal clinical science. His CSDD emerged as an influential organization in promoting such science, due in large part to the activities of Wallis and other MPS members. ⁵⁵ The CSDD assumed importance immediately preceding the top-to-bottom reconstruction of clinical science (Mirowski, 2011). Pharmaceutical industry executives who were close to Lasagna recognized the influence of Wallis’ work and celebrated it. Following Lasagna’s delivery of ‘Regulation and Overregulation’ at the opening of Pfizer’s laboratories in Sandwich, United Kingdom, the president of Pfizer (who called the speech ‘remarkable’) asked Lasagna ‘whether it would be possible to run [Wallis] for President’. ⁵⁶ Pharmaceutical companies were grateful and knew quite well to whom they owed their thanks.

Conclusion

This article has documented links between the Chicago School of Economics and the pharmaceutical industry in their responses to the 1962 Amendments. Scholars directly and indirectly connected with the Chicago School of Economics provided arguments challenging the policy approach of the FDA, generated performance measures to critique and guide regulation, and participated in efforts to link policy critique to scientific practice. Interlocking directorates and shared memberships connected academic departments (the Chicago School of Economics), transnational efforts (the MPS), general-purpose think tanks (the AEI, the Competitive Enterprise Institute (CEI), the Manhattan Institute), and special purpose institutions, such as the CSDD. Because many historians assume that the activities of Chicago scholars are limited to economic policy, the Chicago School–CSDD connection is especially noteworthy.

Establishing the Chicago–MPS connection clarifies the ideas that instructed the participants’ efforts. They did not call for ‘free markets’ in medicine, or at least not consistently; their arguments were not merely ‘pro-market’, but neoliberal. In the policy sphere, they generated both arguments and methods for controlling regulatory bodies. Theirs was a view informed by a belief in the epistemic superiority of markets. This belief lent itself to expression in arguments that were not obviously pro-market (such as calling for the strengthening of intellectual property laws), and in developing methods of permanently counteracting democratic overreach (the maintenance of institutions to audit the FDA). It also informed efforts well outside the profession of economics, such as those to influence the management of science. Many of these activities have gone unnoticed, and it is unsurprising that they have: they fail to fit the conventional view of what an economist does.

Of course, a primary motivation for studying medical neoliberalism is the fear that pharmaceutical science is failing to serve the medicine consuming public well. Scholars of medicine have identified biases in research outcomes and have attributed these biases to such practices as the early termination of clinical trials, delayed publication of results, and industry control of publication outlets (Lexchin, 2012a, 2012b). This study identifies the role of neoliberal ideas in justifying the structural conditions that allowed these practices to take hold. Louis Lasagna defended industry control of both the conduct of clinical science and the reporting of results, and criticized (what he took to be) traditional academic norms. Moreover, Lasagna provided justifications for specific objectionable practices. In writing approvingly of pharmaceutical companies staging ‘intellectual commando raids’ and ‘cutting bait’ when they deemed research ‘unproductive’, and complaining of a ‘tendency in academia to act as if there can never be one moment of publication delay’, Lasagna suggested reasons for the toleration of terminating clinical trials for economic (as opposed to safety) reasons and delaying publication of clinical research results; in proposing the test of the marketplace not as a complement, but as a substitute for large-scale randomized clinical trials, Lasagna argued against the production of a certain kind of knowledge about drugs. ⁵⁷ As was shown, Lasagna appealed to neoliberal ideas concerning the epistemic virtues of markets in making these arguments.

A striking feature of Lasagna’s arguments is how his view of the epistemic superiority of the marketplace lent itself to justifications for specific practices implicated in the production of ignorance about the effects of taking drugs (Michaels, 2008a, 2008b; Mirowski, 2011). The connection between neoliberalism and the production of ignorance is noteworthy. Scholars have devoted a great deal of attention to the historical circumstances surrounding efforts undertaken by industries to manufacture ignorance about the effects of using their products (Oreskes and Conway, 2010; Proctor, 2008). The tobacco and petroleum industries have commanded the lion’s share of this attention; considering the pharmaceutical industry alongside such cases may improve our understanding of the ideas instructing these efforts. It may also lead us to reevaluate their importance. Given that pharmaceutical science is this era’s exemplary ‘Big Science’ (Sismondo, 2010), previous studies of the manufacture of ignorance might have overlooked its most significant case.