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.”

Click here to read more of this Insights and Issues article by Henry I. Miller.

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