We Need A Regulatory Reformer to Head The FDA

The Trump administration is conducting a search for a replacement for Dr. Scott Gottlieb, who resigned as head of the Food and Drug Administration in March. The position is one of the most important in the federal government, because the FDA is ubiquitous in Americans’ lives.

The agency regulates pharmaceutical and other products that account for more than $1 trillion dollars annually — 25 cents of every consumer dollar; and the average cost (including out-of-pocket expenses and opportunity costs) to bring a new drug to market is more than $2.5 billion.

According to sources, there are three candidates being considered — two academics and the current acting commissioner, who was previously the director of the National Cancer Institute at the National Institutes of Health.

This transition offers an opportunity: We need an aggressive regulatory reformer. 

Government regulation provides reassurance and some tangible benefits, to be sure, but it has massive costs, direct and indirect. Regulation that is wrongheaded or that merely fails to be cost-effective actually costs lives, both directly by withholding life-saving products, and also by diverting societal resources to gratuitous regulatory compliance

Therefore, the number of lives saved or other benefits derived from government regulation should always be large enough to offset the costs. The diversion of resources to comply with regulation — whether it is good, bad, or indifferent — exerts an “income effect” that reflects the correlation between wealth and health. The poorest and most vulnerable in society disproportionately bear the costs and impacts of regulation that is not cost-effective, while they enjoy relatively few benefits. As economist Diana Thomas has written, “[B]y focusing on the mitigation of low-probability risks with higher cost, regulation reflects the preferences of high-income households and effectively redistributes wealth from the poor to the middle class and the rich.”

In recent years, under administrations both Democratic and Republican, the FDA has made egregious errors, in both the formulation of policy and the evaluation of individual products, that have had important consequences. While he did a lot of chest-thumping on easier issues, Gottlieb shied away from or stumbled over many tough ones. The FDA’s current dysfunctional regulation of animals made with modern genetic engineering (see this and this), the war on e-cigarettes, and the permissiveness toward illegal claims by the organic food industry are prime examples. 

Although there are exceptions, such as too-lax oversight of homeopathic “medicines” and dietary supplements, most of these missteps have been in the direction of excessive risk-aversion or heavy-handed regulation. For example, the FDA has arbitrarily introduced various obstacles to drug testing: Regulators have directed researchers at drug companies to begin trials at inappropriately low dosages; injudiciously limited early clinical trials to only single-dose, instead of multiple-dose, studies; demanded unnecessary, invasive procedures on patients; and insisted on efficacy superior to existing drugs.

My former colleague, the late, great economist Milton Friedman, observed that to gain insight into the motivation of an individual or organization, look for the self-interest. Where does the self-interest of regulators lie? Not in serving the public interest, alas, but in expanded responsibilities, bigger budgets and grander bureaucratic empires for themselves.

Another incongruity is the widespread misconception that more-stringent regulation is synonymous with greater safety, but, in fact, the net benefit to patients is often compromised because of a regulatory anomaly: namely, the asymmetry of outcomes from the two types of mistakes that regulators can make. A regulator can err by permitting something bad to happen (approving a harmful product such as a drug with delayed side effects), or by preventing something good from becoming available (not approving a beneficial product in a timely way). Both outcomes are bad for the public, but the consequences for the regulator are very different.

The first kind of error is highly visible, causing the regulators to be attacked by the media and patient groups, and to be investigated by Congress. But the second kind of error — keeping a potentially important product out of consumers’ hands — is usually a non-event, eliciting little attention.

Former FDA General Counsel Peter Barton Hutt summarized the regulators’ conundrum thusly: “FDA employees have been praised only for refusing to approve a new drug, not for making a courageous judgment to approve a new drug that has in fact helped patients and advanced the public health.” 

As a result, regulators make decisions defensively, so they tend to delay or reject new products of all sorts, from fat substitutes to vaccines and painkillers. That’s bad for public health and for physicians’ and consumers’ freedom to choose among a variety of products.

Congressional oversight is supposed to provide a check on regulators’ performance, but rarely does it focus on their unnecessarily delaying product approvals. A premature or mistaken approval makes for more exciting hearings, with injured patients and their families paraded before the cameras.

The impacts of FDA regulators’ self-serving actions range from the creation of disincentives to research and development (and inflated costs for them) to significant threats to public health, such as the years-long delay in approval of a much-needed meningitis B vaccine.

We need structural, policy, management, and cultural changes that create incentives to regulate in a way that imposes the minimum burden possible. There are a number of possible approaches and remedies, ranging from radical to more conservative, that could be effective. Many could be accomplished administratively, but the FDA is comprised almost exclusively of civil servants, who cannot be fired for sloth or incompetence, and have no incentive to disrupt the status quo.

Therefore, given the paucity of political appointees at the FDA, if we are to realize the kind of aggressive deregulation called for by President Donald Trump, the new commissioner will need to be a skilled manager and highly knowledgeable about the workings of the agency. 

We need regulatory reform, which will require an agency head who is strongly committed to it. If not now, when?

Henry Miller, a physician and molecular biologist, is a senior fellow at the Pacific Research Institute. A 15-year veteran of the FDA, he was the founding director of the agency’s Office of Biotechnology. Please follow him on Twitter at @henryimiller.

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