An Access Advertising EconBrief:

Hey, Hey, FDA – How Many People Did You Kill Today?

The Interstate Commerce Commission may have been the first federal-government regulatory agency, but the Food and Drug Administration (FDA) is the eminence grise of regulation. For over a century, it has cast its shadow over America’s supply of food and medicines. Today its decisions directly affect goods comprising about one-quarter of all consumer expenditures. No other regulator so typifies the popular conception of regulation as the stern, all-seeing, all-knowing guardian of public welfare. No other government body better exemplifies the hideous reality of regulation as the substitution of totalitarian rule for individual choice.

A Very Short History of the FDA

Milestones in FDA history are marked by tragedy. With each tragedy came an increase in federal-government regulation. Each increase brought us closer to the FDA as it exists today.

In 1902, two separate incidents of poisoning due to adulterated vaccines caused a total of 22 deaths. (Interestingly enough, government officials were the guilty parties.) These led to the Biologics Control Act, which mandated government control of the interstate sale of serums, toxins and viruses. In 1906, the Pure Food and Drug Act made it a crime to transport “adulterated” food or drugs across state lines. In 1914, the Harrison Narcotics Act forbade possession and sale of various narcotic drugs by non-physicians.

In 1937, the pharmaceutical company S.K. Massengill sold a preparation called “Elixir Sulfanilamide.” The company’s chief chemist mixed sulfanilamide with raspberry-flavored diethylene glycol, apparently without being aware of the toxic effects of the latter upon humans and animals. The company failed to conduct the usual animal tests before marketing the preparation. Deaths due to kidney failure resulted, with the ultimate toll rising as high as 107. (The chemist eventually committed suicide prior to standing trial for negligent homicide.)

A famous letter to President Roosevelt from the mother of a juvenile victim was published and provided the impetus for the Food, Drug, and Cosmetics Act of 1938. This act conferred upon the FDA the power and duty to gauge the efficacy of new drugs. Although subsequent legislative enactments further enhanced the agency’s powers, this was the watershed marking the emergence of the modern FDA.

In what follows, we will concentrate our analysis on the FDA’s regulation of drugs, a topic that is more than sufficient to engage our full attention.

The Dichotomy Between Safety and Efficacy

The unfolding history of the FDA reflects a dichotomy between two desirable attributes of every drug. (Slightly modified, the dichotomy applies to food as well.) These attributes are safety and efficacy. We want our medicines to be free of risk to our health. But we also want them to perform the therapeutic tasks for which they were created.

Early on, the FDA’s main task was to regulate drug safety. But in 1962, amendments to the Food and Drug Act gave the agency the power to gauge a new drug’s efficacy. For the last half-century, the FDA has insisted that medicines must be both safe and effective in order to be legally marketed. Having grown up under the aegis of big government in general and FDA in particular, Americans today take this insistence for granted. Yet in recent decades, discontent with this mantra has rumbled across the land.

Economists, who are taught remorseless logic at their professor’s knee, were the first to challenge the conventional thinking. Their first volley was aimed at FDA regulation of efficacy. Why not allow the free, competitive marketplace to determine whether a medicine works or not? After all, that is exactly what we do with almost all goods and services.

The reflexive response to this viewpoint is: We don’t dare do that, because we have to know whether a medicine works before we take it. Otherwise, we die or suffer horrible ill effects. That is why we test all medicines to make sure they are safe and effective before we allow them on the market.

But a little thought will reveal the falsity of this reaction. The vast majority of all medicines are not administered to forestall death or even dire illness, although a few are. And for almost all of mankind’s time here on earth, the only way to tell whether a substance or plan of treatment was effective was for a human being to take or adopt it. Even today, only a small minority of all existing drugs underwent rigorous testing by the FDA prior to introduction. We know about the amazing therapeutic properties and relative safety of aspirin, for example, because it was used for centuries before 20th-century tests refined our knowledge of its properties and effects.

Maybe the most important argument against allowing the FDA to determine efficacy is that this is often a subjective matter. The FDA tends to rely on the criterion of “statistical significance,” based on the result of clinical trials involving large numbers of patients. But scientists are increasingly coming to recognize the degree to which both diseases and medicines are unique to individuals. This is true of cancer, for example. It is really a large number of diseases rather than one single disease, and the effects of different therapies vary widely among individuals. A drug can fail the FDA’s test of efficacy yet still be effective for individuals; a drug’s clinical trials can display “statistically significant” results while still failing substantial numbers of patients. That is why the empirical case for leaving the decision to individual patients and their doctors is so strong.

Most economists who have studies the issue agree that the FDA shouldn’t regulate efficacy. On this point, the public tends to be sympathetic once their attention has been gained and their critical faculties engaged. But the issue of safety is where the general public tends to get impatient with the arguments of economists. Just because we can’t test all goods doesn’t mean we shouldn’t test as many as we can, does it? After all, as everybody knows, you can’t be too careful

As every economist knows, you can be too careful. Testing drugs for efficacy takes time. Today, the tests required by the FDA take years, often well over a decade, to complete. (The average drug undergoes over 60 clinical trials involving thousands of test-consumers.) Suppose that the drug eventually passes the test and is allowed onto the marketplace. The implication of this is that for all those years, people who could have been helped by the drug… weren’t. And suppose that this happens to be one of those unusual cases of life and death – the very sort of case for which we supposedly need FDA regulation to prevent unnecessary deaths. Lo and behold, it turns out that FDA regulation causes unnecessary deaths rather than preventing them. The name given to the inordinate time span needed for drugs to pass FDA muster was “drug lag.”

All economists would acknowledge a role for certification in the marketplace. That is, there are many contexts in which we want to know that product-related representations made by sellers are accurate. There is no basis for assuming that this function can be performed only by government and every reason for expecting private businesses to perform it better and cheaper. The existence of organizations like Underwriters’ Laboratories and Consumer Reports underlines this.

It is important to reserve this certification to the private sector because only consumer demand can answer the vital question of how many resources to allocate to the certification process. When government attempts to answer this question, it does so politically, using criteria that are important to bureaucrats and politicians but irrelevant to the public at large. We probably don’t need to devote much time and attention to certifying dental floss or facial tissues. The way to make sure that money isn’t wasted on trivial matters but is spent purposefully where wanted is by allowing full play to free markets, where only those costs of certification that consumers are willing to pay will be incorporated into production, distribution and marketing.

Even economists disagree about how much emphasis to give safety, though. For years, this was the FDA’s central mission. In 1974, economist Sam Peltzman of the University of Chicago set out to measure how effective the 1962 laws had been at improving safety – and at what cost. Peltzman found that prior to 1962 an average of 49 new drugs were introduced each year. In the ten years following passage of the amendments, this average total of new drugs introduced fell to 16. This is bad in two ways. First, it is obvious that a drug that never appears on the market cannot benefit consumers. Second, some drugs are introduced to compete with existing drugs rather than to create an entirely new kind of product. Since an artificial reduction in the number of competitors cannot help but reduce competition in the marketplace, this made it more difficult for the drug marketplace to do its job of determining which drugs work best for which consumers. That is a very important finding because the FDA’s limited resources prevent the agency from testing most existing drugs; it must rely on competitive markets to do the job of weeding out ineffective products. So not only do consumers lose out from not having the benefits of a drug available, they also lose out on the beneficial competitive effects the lost drug would have had on other drugs.

Soon the ranks of skeptical economists were swelled by protesting private citizens. Contrary to the impression created by news media and commentators, the citizens were mostly protesting against drug lag rather than against the introduction of new drugs. That is, they were consumers who objected to the FDA withholding beneficial, or potentially beneficial, products from them. This protest movement reached a crescendo during the height of the AIDS crisis in 1988. A gaggle of AIDS activists gathered outside FDA headquarters in the Washington, D.C. suburbs and chanted “No more deaths!” They were not excoriating the agency for allowing an unsafe AIDS drug or treatment on the market, thereby causing AIDS patients to due prematurely. No, they were protesting the unconscionable delay, caused by drug lag, in bringing new AIDS therapies to market. Clearly, their attitude was: “We’re doomed without much better medicines than now exist and we’re willing to risk death in order to shorten the time necessary to discover and deploy those medicines.”

The political clout wielded by the AIDS movement was sufficient to budge the FDA off dead center. It pioneered an approval concept called “fast track,” by which a new drug or therapy could make it to market within two years once a threshold level of efficacy against AIDS was reached. It also introduced a program of access to experimental medicines called “compassionate use,” designed to allow the terminally or critically ill to take greater risks than ordinary health-care consumers.

Hey, Hey, FDA – How Many People Did You Kill Today?

Not unwilling to face the consequences of their own logic and research, economists realized that the FDA was killing people. It occurred to them to wonder how many people the FDA was killing every year. Because economists love to count but do it imperfectly, their estimates varied widely.

William Wardell (a pharmacologist using econometric methods) complained that nitrazepam, a relatively safe used as a sedative and tranquilizer, was held off the U.S. market by the FDA for five years after it was available in Great Britain. He estimated that over 3,700 Americans died from use of less safe substitute drugs during that interval. Wardell also estimated in the late 1970s that 10,000 lives could be saved yearly by FDA approval of beta blocker drugs for regulating blood pressure. Yet such drugs as propranalol, practahol and others were kept off the U.S. market years after they had been approved in Europe. The Independent Institute’s “FDA Review” project estimated that tens of thousands of lives were lost by these actions.

D. H. Gieringer compared the human toll in mortality and morbidity of FDA approval delays compared to those in Europe. During 1970-1993, FDA approval times lagged those in the U.K., France, Spain and Germany for the same drugs. Differences in data collection complicated direct comparisons, but the differences were nonetheless stark. He found that the FDA’s policy may have avoided as many as 5-10,000 casualties (deaths and injuries combined) per decade, but at a fearful cost – the FDA policies caused between 21,000 and 120,000 deaths per decade. (Notice the “casualties vs. deaths” comparison, necessitated by international differences in data-collection procedures.)

The difference in drug-approval policies suggests another point of comparison. Perhaps the foreign countries, with their looser regimes, suffered disasters like our Elixir Sulfanilamide tragedy? Or perhaps they showed a clear pattern of higher deaths or morbidity? No, no such pattern of inferiority was present. Drug recalls were roughly the same, except for a somewhat higher rate in Great Britain, where the economist who studied the case remarked that the benefits enjoyed from the earlier availability of approved drugs undoubtedly outweighed the costs of withdrawals.

The Competitive Enterprise Institute found thousands of deaths caused by FDA delays in approval of drugs such as interleukin-2, taxotere, vasoseal, ancrod, glucophage, navelbine, lamictal, ethyol, photofrin, rilutek, citicodine, panorex, femara, prostar, omnicath and transform. Overall, the Independent Institute concludes that “the number [107] of victims of the Elixir Sulfanilamide tragedy and of all other drug tragedies prior to 1962 is very small compared to the death toll of the post-1962 FDA.”

The FDA has been especially hard on the victims of so-called “orphan diseases;” that is, diseases of which there are comparatively few sufferers. The paucity of potential buyers makes drug companies loathe to spend large sums of money on drug development for these diseases, but the costs of FDA compliance are just as large in the absolute sense (thus, much larger in relative terms) for “orphan drugs” as for drugs used to treat big-ticket diseases like AIDS, heart disease or cancer. The 1983 Orphan Drug Act loosened FDA requirements for such drugs. Of course, this is a tacit admission of just how high a barrier to market entry FDA compliance really is.

Fans of big government might conjecture that FDA policy keeps more “bad” (adulterated or just plain ineffective) drugs off the market than alternative regimes. Perhaps the roster of drugs delayed or deep-sixed by the FDA is populated disproportionately with marginal or less-effective drugs. No, economists have investigated – and rejected – these possibilities as well.

Overall, 35 economists who have studied the record of the FDA have favored some program of liberalization or reform, according to the Independent Institute’s FDA Review project. Programs range from outright abolition of the agency to much more moderate reform, such as speeding up introduction of new drugs to market. Only 3 economists have opposed liberalization.

During the height of the Vietnam War, young left-wing anti-war protestors repeatedly chanted “Hey, hey, LBJ – how many kids did you kill today?” Their intent was to transform President Johnson in public imagination from a wartime commander-in-chief to a deliberate murderer of children. Neither the President nor any other civilian head of state has ever denied the existence of collateral civilian casualties in wartime. Rather, the rationale has been that these deaths are regrettable but unavoidable concomitants of achieving war aims. But the FDA’s studied avoidance of its economist critics has no justification. The fundamental economic definition of cost is the highest-valued alternative foregone. The real cost of FDA approval delays is not measured in dollars but in the death and suffering caused by not having drugs available. That is a conscious choice made by the FDA for which its Commissioners are morally responsible.

The Skewed Incentives Faced By the FDA

The overwhelming question induced by these estimates is: Why? Why should the FDA always err on the side of killing people through excessive caution? Consider the comments of former FDA commissioner Alexander Schmidt: “The times when [Congressional] hearings have been held to criticize our approval of new drugs have been so frequent that we aren’t able to count them… The message to FDA staff could not be clearer. Whenever a controversy over a new drug is resolved by its approval, the agency and the individuals involved likely will be investigated… The Congressional pressure for our negative action on new drug applications is, therefore, intense.”

Congress is in session roughly 40% of every year. It exerts budgetary control over the FDA. So when legislators speak – or even clear their throats – the agency listens. In contrast, the influence of protesting citizens lasts only as long as media cameras are pointed in their direction. The AIDS lobby is a special case because the political power wielded by homosexuals gave them unusual consumer clout. Ordinarily consumers are fragmented and well-nigh impossible to organize effectively. That is why the incentives facing FDA are so heavily skewed against consumers and in favor of bureaucratic inertia.

Risk vs. Benefit

It is worth asking how the FDA has been able to justify suppressing the development of new drugs. The answer to that question lies in its one-sided, unbalanced approach to risk. We face risk at every moment of our lives. Most human actions involve an element of risk. Getting out of bed entails the risk of falling. Driving to work risks injury or death from vehicular accident. Dining out runs the risk of acquiring food-borne illness. Every recreational and athletic pastime carries risks that may even include death.

Even the most familiar medicines pose risk to the patient. Dosage is the most obvious, since there is virtually always an optimal dosage range. Underdosing will lose the therapeutic benefit, while overdosing will harm the patient or even kill him. Tolerance is another problem; allergic reaction and individual variation prevent advance prediction of how everybody will respond to a particular medication.

We have lived with risk from birth and normally take it for granted. That causes us to overrate many risks of which we are consciously aware. The FDA has profited from this asymmetry. It has seized upon our extreme emotional aversion to serious diseases like cancer to develop policies that enhance its power over us, thereby increasing its security at our expense.

In 1958, Congress passed the Delaney Amendment, which banned any substance that caused cancer in humans or even in a single animal, regardless of the dose received by the test subject. This amounted to an engraved invitation to ban anything against which somebody had a grievance. In 1986, a panel of scientists estimated the cancer risk of a particular dye at approximately 1 in 19 billion human exposures. When the Ralph Nader-founded organization Public Citizen sued to prevent the FDA from reclassifying the dye as safe for certain commercial uses, the agency caved in to the pressure. Scholars such as the late Aaron Wildavsky and W. Kip Viscusi have characterized the implicit theory underlying this attitude as the “zero-risk” approach to public policy.

Once again, it was the AIDS crisis that forced the public to confront the absurdity of zero-risk. Homosexuals were dying like flies. Movies like Philadelphiahelped to transform them from pariahs to objects of public sympathy. Suddenly it no longer made sense for the FDA to deny them the use of AZT and similar drugs merely because it was highly toxic and might kill them. Whose life was it, anyway – theirs or the government’s? How dare the FDA tell them that they weren’t competent to fight for their own lives, in consultation with their personal physicians?

And if homosexuals were given the right to control their struggle for life, why shouldn’t the rest of us also have it?

Whose Life Is It, Anyway?

The supposed safety conferred by the FDA is a mirage. Instead, it is a killer agency. To the degree that U.S. markets for food and drugs are in fact safe, this is due to competition, not the FDA.

We have yet to broach the most problematic aspect of FDA regulation. Daniel Henninger, a journalist who has long specialized in the FDA and drug regulation, puts it in this way: “Normally, political decisions about regulatory practice are made among a small community of specialists. Today, the intense interest in curing, or at least ameliorating, diseases such as cancer, AIDS, heart disease, arthritis and Alzheimer’s means that the outcome of the debate over the drug lag is likely to reflect the values of an unprecedentedly large community of public interests.”

Why should the ability of any one individual to decide whether and how to treat himself medically be controlled by “a small community of specialists?” Why should health-care consumers have to organize politically in order to enjoy the rights given them at birth and guaranteed by the Constitution? What if an individual is so unfortunate as not to suffer from a high-profile disease like cancer, AIDS, heart disease, et al? Do his “values” then lie outside the mythical “community of public interests” Henninger cites?

Does my life belong to me or to the federal government?

The correct answers to these questions are “it shouldn’t,” “they shouldn’t,” “it shouldn’t matter,” “no, because there is no community of public interests” and “to me,” respectively. But the existence of the FDA means that the correct answers are not the answers in fact. And the only remedy for that is to end, not mend, the FDA.