By Timothy J. Smyth Jr. ’22
With COVID-19 ravishing our country and planet, everybody is impatiently awaiting a panacean vaccine that will return us to our pre-pandemic life. However, it is time that we start to question the role of our government in processing the eventual vaccine that will help end this economic and public health crisis, and more widely, the role the government has in drug production. It is no secret that inflated drug prices are a pressing–if not suffocating–issue for Americans and the government. A possible solution: abolish the Food and Drug Administration.
To start, we must look at why the FDA was founded. In 1906, President Theodore Roosevelt signed into legislation the Federal Food, Drug, and Cosmetic Act (FDCA), which, in 1938, would be transformed into what we know today as the FDA–which is, among other things, responsible for approving drugs and therapies for diseases and viruses. The movement to expand the federal government came largely as a result of the muckraker era of investigative journalism in the early 20th century. Upton Sinclair was a principal catalyst for this movement after he was sent into a Chicago meatpacking plant to investigate working conditions in American factories. Sinclair’s subsequent novel, The Jungle, sent shockwaves through the country and raised a (justified) concern among Americans about the cleanliness of their food.
Similar to many government overreactions, the FDA came into existence and has been a bain in the healthcare industry free market ever since. While the intentions were clear and rational, the result of this vast big-government policy has been disastrous for the people and “small pharma.” While many critics of the pharmaceutical industry place the blame of soaring drug prices on the hands of companies (or “Big Pharma”), this ignores the role the federal government has played in facilitating the issues we associate with and blame on Big Pharma.
A 2017 Tufts University study found that the cost of receiving an FDA approval–which includes research, development, and initial investment–now exceeds $3 billion. That doesn’t even consider the amount of time that is also invested in this process. When people question why the cost of an epi-pen is $600, the blame should not be placed on the “greedy” pharmaceutical companies, but rather, an inefficient and unnecessary department of the federal government that allows for this greed. As discussed by Jonathan Tepper and Denise Hearn in their work The Myth of Capitalism, these regulations, of which demand a-more-than-considerable time, funds, and energy on the part of the company are easy to provide by big companies with more resources, but incredibly difficult for smaller companies with less–and the big companies know this. Small companies cannot stomach the long wait-times and extensive capital and funds, thus leaving Big Pharma as the sole players in the industry. This is a concept introduced early in your Economics 101 class: barriers to entry prevent competition, create monopolies, and drive up prices. Pharmaceutical companies lobby extensively to maintain these draconian regulatory policies in an effort to maintain this nearly insurmountable barrier.
According to Tepper and Hearn, this barrier is also propped up by patent laws that grant pharmaceutical companies monopolies over certain products for extended periods of time. Patent regulations are easily exploited by companies who make slight (and largely inconsequential) changes to their products for the sake of prolonging the longevity of their monopolies. Similarly, despite the immense similarities between nearly identical generic products, every drug must undergo the same rigorous evaluation, stifling production of products. The dwindling number of companies entering into and operating within the pharmaceutical space, coupled with the lack of incentive to alter their research or development methods has caused these Big Pharma companies to become complacent and continue to push prices higher. Competition is crucial to resolving this issue.
As Milton Friedman, a famed 20th century economist, noted in his text, Free to Choose, FDA “approval becomes more expensive, time-consuming, and risky. Research on new drugs becomes less profitable. Each company has less to fear from the research efforts of its competitors. Existing firms and existing drugs are protected from competition. New entry is discouraged. Research that is done will be concentrated on the least controversial, which means least innovative, of the new possibilities.” The dwindling number of companies entering into and operating within the pharmaceutical space, coupled with the lack of incentive to alter their research or development methods has caused these Big Pharma companies to become complacent and continue to push prices higher. Competition is crucial to resolving this issue. This lack of competition in the pharmaceutical industry is recognized by the Journal of the American Medical Association as the “most important factor that allows for manufacturers to set high drug prices” and the need for competition is widely recognized and documented
The FDA has, however, done some good in the area of public health. For example, one can point to thalidomide, which, in 1962 France, produced severe health complications in prenatal children. Dr. Frances Kelsey, a reviewer for the FDA, resoundly denied the importation of this drug into the US due to its deadly side effects.
Despite the individual success in the FDA in banning thalidomide, the body still has the tendency to be too eager to ban drugs with possible negative side effects. One must question all of the thousands of other drugs and therapies that these government bureaucrats have denied that could have potentially saved thousands of lives. Due to the immense public pressure to not accept a drug with the slightest negative side-effects, the person in charge of its approval would rather deny it than risk blame for future health crises. In the absence of the FDA, one would be able to choose for himself whether or not to take a drug rather than relying on a disconnected bureaucrat somewhere in the labyrinth of Washington. Think of all of the vaccines and drugs that were never approved but could have saved so many lives. No one has ever heard about them because unlike with the thalidomide controversy, FDA rejections are never addressed, yet their impacts are just as important.
The free-market also produces the same mechanism the FDA exists to execute: consumer safety. With an exclusively free-market system, one may (rationally) worry about the potential sale of dangerous drugs like thalidomide. The process of market rejection requires consumption by consumers, and lying on this mechanism would result in health risks for many. However, fear of product rejection is not the only reason why hazardous products will not be sold. The producers of thalidomide endured great losses when it had to pay millions of dollars in damages to those impacted by the drug. The fear of, as well as a desire to avoid, such an event will require drug-producing companies to conduct their own thorough and intensive research on their products. This can be made even stronger with laws that ensure companies will feel the damages they will have to pay to consumers for ineffective and damaging drugs.
The free-market will also give incentive to smaller and more focused drug producers to have their products on the shelves. It is nearly impossible for these companies to afford the cost of an FDA approval today, but the presence of these companies in a free-market system would incentivize research into rare diseases.
President Trump’s decision to allow the importation of drugs from Canada and other select foreign markets is a big step in fixing the problem at hand. It has been a long-standing US policy, or rather, FDA policy, that no foreign drug makers can receive a proper stamp of “approval.” This assumption should be quite to the contrary because countries such as Germany, Switzerland, and the Netherlands are eons ahead of the US in generic drug production. Health and Human Services director Alex Azar has stated that this move by the Trump administration will “allow safe importation of certain prescription drugs to lower prices and reduce out of pocket costs for American patients. This is the next important step in the Administration’s work to end foreign freeloading and put American patients first.”
Let us hope that President Trump or the next administration will push forward with completely revamping the byzantine structure of our federal government and, by God, begin with abolishing the FDA.