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The Cost of a Caring Leviathan: The FDA at 100


John R. Graham
Medical Progress Today
July 3, 2006

The power of the state has increased tremendously over the last century, and its expansion has faced the least resistance in food and drug regulation. How remarkable that a novel, rather than science, launched this overwhelming bureaucracy. In 1906, Upton Sinclair's The Jungle, which described appalling conditions in the Chicago meatpacking industry, caused President Theodore Roosevelt to establish the Food and Drug Administration that same year. The 1906 law effectively created a specialized police force.

The FDA could levy charges after it suspected violations, and the suspect enjoyed the presumption of innocence and due process we expect in a free society. The Food, Drug and Cosmetic Act of 1938, as initially drafted, allowed the FDA to cast a wider net but did not challenge this basic principle of justice. However, a new drug containing an untested solvent (diethylene glycol) killed more than a hundred people within a few days while the bill was working through Congress, and Congress quickly re-wrote the bill to require drug-makers to submit a New Drug Application (NDA) for approval. At that point, the NDA was required to demonstrate the new medicine's safety, but not its effectiveness. If the FDA took no action within 60 days of the application, the agency was deemed to have approved. A generation later, new amendments to increase the FDA's power languished in Congress due to a lack of popular support. Such support appeared when the negative effects of thalidomide, a sedative prescribed to pregnant women, became apparent.

In 1958, Merrell, an American company, licensed thalidomide from its German manufacturer for distribution in the United States. Merrell submitted an NDA in November 1960. FDA examiner Dr. Frances Kelsey deliberated far longer than usual, during which period thalidomide's side effects became known. The case is still widely cited as the grounds for an "all-powerful" FDA. However, the FDA never "caught" thalidomide, nor were its harmful effects identified in a clinical trial.

Thalidomide's problems were identified by an Australian physician who reported his suspicions in the British Medical Journal after observing a rapid increase in malformed babies in his hospital. The FDA's Dr. Kelsey was concerned about reports from Europe that the drug caused nerve damage to pregnant women, not their fetuses. The NDA trials did not catch the problem because they were done on rats, which metabolize the drug differently than humans. After thalidomide's effects had already been identified in the community, they were confirmed experimentally with rabbits and monkeys. Nevertheless, the drive for a more powerful FDA got a huge boost.

The 1962 Kefauver-Harris amendments required affirmative, pre-market approval. Drug makers now had to demonstrate that a new medicine was effective as well as safe. These amendments fundamentally changed pharmaceutical research by increasing the costs of regulation. Research output collapsed, as measured by the number of applications to begin clinical testing for new chemical entities (NCEs).

In the 1970s, University of Chicago professor Sam Peltzman determined that NCEs introduced annually from 1963 through 1970 were only 39 percent the number from 1951 through 1962. He attributed this to the increased regulatory burden of the 1962 amendments.

In the 1980s, professors Henry Grabowski of Duke University and John Vernon, from the University of Connecticut, found that drug makers faced a serious decline of more than one half in R&D productivity from 1962 to 1975, as measured by the ratio of the number of patents to the number of R&D employees. A more subtle effect of the regulations was the reduction in competition caused by the high cost of compliance. Columbia's Lacy Thomas found that the 1962 amendments wielded a devastating impact on small firms, including their ability to conduct R&D, thus entrenching larger firms.

The American people do not see the loss of new medicines, medical devices, or competition that result from this vast bureaucratic power. Instead they hear a ceaseless drumbeat of horror stories, of which Vioxx™ is only the latest, that deafen them to the truth about this harmful regulatory overreach.

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John R. Graham is Director of Health Care Studies at the Pacific Research Institute. Previously he was Director, Health and Pharmaceutical Policy Research at the Fraser Institute, Canada's leading free-market think tank.

 
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