Understanding the FDA LDT Financials

The FDA press release about the LDT proposal doesn't  mention finances at all, except a qualitative remark that "benefits would outweight the costs."

The proposed rule says very little about costs, except for some cryptic summary information at beginning and end.  The "annualized" 20 year benefits (the 20 year value divided by 20) will be $2B to $86B per year.  The annualized costs will be $2B to $19B per year (the 20 year costs divided by 20).

Find footnote 34 of the Rule and it takes you to a 127-page PDF at the FDA, the preliminary financial analysis.   Slog through to the end, to find tables 35 and 37.  Those are the "money slides."

Table 35 above shows that benefits begin at $14B per year as soon as registration is put in place, rapidly rising to about $26B per year out to year 20.  

It also shows that costs will be $10B and $27B in years 3 and 4, tapering to $3B per year out to year 20.

The costs are actual lab compliance costs.  The benefits, we learn, are mostly driven by value-years of about 10,000 patients living about 3 years longer for a value of about $2M ($2M x 10,000 = $20B).  All of those numbers are highly conjectural and reflect implied or intangible values.

In table 37, the 20-year costs are simple added up (with discounting) and then, divided by 20 to annualize them.   Thus, the "annualized" cost to industry is about $6B and the annualized benefits to society anywhere from $22B to $31B per year.   What's lost is that most of the industry costs are $40-50B in the first few years.  (This is also why the present-value costs are much less sensitive to the 3% or 7% discounter).