Leviathan’s Drug Problem: Federal Monopoly of Pharmaceutical Regulation and its Deadly Cost

A new research report by the Pacific Research Institute (PRI) reviews three decades of the Food and Drug Administration’s performance and concludes that the agency is overfunded, overstaffed, and denies hundreds of thousands of Americans timely access to new medicines. Leviathan’ s Drug Problem: The Cost of the Federal Monopoly of Pharmaceutical Regulation and its Deadly Cost was authored by John R. Graham, Director of Health Care Studies at PRI.

President Barack Obama, in this past week’s radio address, asserted that “there are certain things that only government can do, and one of those things is … ensuring that the medicines we take are safe, and don’t cause us harm. That’ s the mission of our Food and Drug Administration.” President Obama also claimed that the FDA is both underfunded and understaffed.

“In recent years, the contamination of American staples such as spinach, tomatoes, and peanut butter has made news headlines nationwide and has now captured the attention of President Obama,” said Mr. Graham. “But lost in these headlines are the hundreds of thousands of people who lose their lives each year waiting for access to new life-saving or life-prolonging drugs that are mired in the FDA approval process. While food contamination is serious, the deaths resulting from long waits for new medicines far outnumber the lives lost from food contamination – indeed Mr. Obama should move the slow FDA approval process to the top of his agenda.”

Overstaffed and Overfunded

Many well-meaning observers continue to believe that the FDA’s failures are due to a lack of funding and employees. “This is not the case,” said Mr. Graham. Other developed countries have similar agencies that approve new medicines with far fewer employees. Great Britain’s regulator is about one-third more productive than the FDA, and other European countries are even more productive. This is because the European Union has implemented a policy of regulatory competition, where a central regulator and national regulators compete for user fees that they charge manufacturers to lift their bans on new drugs. When one regulator has lifted its ban on a new medicine, all countries must generally reciprocate by lifting their bans.

The Prescription Drug User Fee Act, first passed in 1992 by Congress, and renewed every five years, imposes a fee on drug manufacturers to fund the approval process. This excessive tax has dramatically increased the FDA’s budget, so that half of the funds for reviewing new prescription drugs now come from this tax burden. Mr. Graham notes, “While this has sped up the FDA’s bureaucratic processes somewhat, it has not transformed the harmful incentives facing the agency. Indeed, it has reinforced them, and entrenched the FDA’s monopoly-power.”

Leviathan’s Drug Problem recommends that Congress amend the Food, Drug, and Cosmetic Act to allow Americans to use new medicines once a regulator in a comparable jurisdiction, such as the European Union, has removed its prohibition. Drug makers would then be permitted, but not compelled, to distribute their medicines to willing doctors and patients in the U.S.

The report also recommends that Congress adopt the policy enshrined in the ACCESS Act, introduced by U.S. Senator Sam Brownback (R-KS) in 2008. This allows seriously ill patients who have exhausted other treatments to try experimental drugs at an earlier phase of regulatory approval than is possible now, and encourages the FDA to use measures other than placebo trials to determine the safety and efficacy of such new drugs.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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