The costs of the FDA

The FDA and the coronavirus

As the coronavirus crisis continues, so does the search for treatments. Last week, Fortune reported:

Private firms are stepping up to fill a hole in coronavirus testing that federal authorities, to date, have been unable to fill. And Roche’s diagnostics arm claimed one of the most significant advances this week.

The Food and Drug Administration (FDA) late Thursday announced a pair of new measures meant to spur coronavirus testing in the U.S.—an important public health response which has suffered from a series of manufacturingregulatory, and political setbacks.

The story continues:

Roche’s test has also advanced on a dramatically fast timeline. “We started to work on developing the test in February,” said Paul Brown, global head of Roche’s molecular department arm and chief of Roche Molecular Solutions. Brown said developing and getting regulatory approval for a new diagnostic usually takes 12 to 18 months, but Roche was able to pull it off in about six weeks.

How? The government was keen to move quickly since it has a dearth of testing options…

Why do we have a Food and Drug Administration?

The FDA was created to deal with concerns about potentially and actually harmful quack potions such as Dr. Hostatter’s Stomach Bitters and Kickapoo Indian Sagwa. The Food and Drug Safety Act of 1906 which created the FDA required that medicines be correctly labeled as to their contents and that they not contain any substances harmful to customer’s health.

Despite this, in the 1930s, 107 people died after taking Elixhir Sulfanilamide, an anti-biotic which had been erroneously mixed with poisonous diethylene glycol, a chemical cousin of anti-freeze. So, the FDA’s powers and responsibilities expanded again. The Food, Drug, and Cosmetic Act was passed in 1938 which required manufacturers to demonstrate the safety of new drugs before approving them for sale.

The early 1960s saw the thalidomide scandal when a sleep aid given to pregnant women in Europe and Canada was found to result in severe birth defects. In response, in 1962, the Kefauver-Harris Amendments to the 1938 Act were passed.

The costs and benefits of the FDA

According to economists Roger LeRoy Miller, Daniel K. Benjamin, and Douglass C. North:

The 1962 amendments drastically increased the costs of introducing a new drug and markedly slowed the approval process. Before 1962, for example, the average time between filing and approval of a new drug application was seven months. By 1967, it was thirty months: and by the late 1970s, it had risen to eight to ten years. The protracted approval process involves costly testing by the drug companies – more than $1 billion for each new drug – and delays the receipt of any potential revenue from new drugs. Both the delays and the higher costs reduced the expected profitability of new drugs, so fewer drugs have been brought onto the market.

Debate continues over how much FDA regulation is needed to ensure that drugs are both safe and efficacious, but there is little doubt that the 1962 amendments resulted in a U.S. “drug lag.” On average, drugs take far longer to reach the market in the United States than they do in Europe. Admittedly, it takes time to ensure that patients benefit from, rather than are harmed by, new drugs, but regulation-induced drug lag can itself be life-threatening. Dr. George Hitchings, a winner of the Nobel Prize in Medicine, estimated that the five-year lag in introducing Septra (an antibiotic) to the United States killed 80,000 people in this country. Similarly, the introduction of a class of drugs called beta blockers (used to treat heart attack victims and people with high blood pressure) was delayed nearly a decade in America relative to Europe. According to several researchers, the lag in the FDA approval of these drugs cost the lives of at least 250,000 Americans.

The FDA has produced benefits by keeping Kickapoo Indian Sagwa off our shelves and anti-freeze out of our medicines. But there have been costs too, in terms of lives and suffering, as these estimates show. As I wrote yesterday, and as we noted at the beginning of this post, the regulatory apparatus of the FDA is intended to protect public health, but in the genuine public health crisis we now face, they are actually an obstacle.

Whether these costs outweigh the benefits is a question for another day, but it is one which the fight against the coronavirus will make more pressing. For today the lesson is, as ever, that in public policy we must account for unintended consequences when weighing our actions.

John Phelan is an economist at the Center of the American Experiment.