How Would Drug Safety be Assured Without the FDA?

by Don Boudreaux on November 19, 2005

in FDA

Several weeks ago I wrote the following letter to the editor of the Washington Times:

Peter Pitts wants Dr. Andrew von Eschenbach, as FDA commissioner, to "empower" patients "through better communications" ("Tough Tasks for New FDA Chief," Oct. 20).

The only real way to empower patients is to abolish the FDA.  Why in the land of the free must each of us – each with different medical histories, family situations, and risk tolerances – be forced to abide by bureaucratic decisions made by strangers in Washington ?   Dr. von Eschenbach might be, as Mr. Pitts says, a remarkable physician.  But Dr. von Eschenbach has never met me.  He doesn’t know my situation.  He cannot possibly know enough to make trade-offs for me as well as I am likely to make them.

Donald J. Boudreaux

As is my vain and annoying practice, I also sent this letter to a number of people on an e-mail distribution list that I keep; I sent this letter out under the caption “Government is not god (although many people wallow in this particular piece of mysticism).”

Several friends on this list wrote to ask how drug quality can be assured without a regulatory agency.  I promised them an answer; here’s my (tardy!) first stab at fulfilling that promise – although I state up front that there’s too much to say on this issue to fit into a single blog-post.


The summary answer is that markets and traditional common-law institutions provide this assurance.

Abolishing the FDA does not entail abolishing contract, tort, and criminal law.  If a drug maker intentionally, recklessly, or negligently causes someone harm, that drug maker is subject to civil and criminal sanctions.  Likewise, a drug maker who violates terms of a contract with its customers is subject to civil penalties.

Far more importantly, in my view, is the market institution of branding.  Brands enable consumers to identify which firm produces that especially yummy chardonnay, that disappointingly tasteless peanut butter, and that sliced turkey that made the family ill.  Brands give producers incentives to develop a positive reputation among consumers.  Just as the makers of the tasteless peanut butter and the tummy-ache-inducing turkey will lose customers because of their poor performance — consumers know who they are! — so too will a drug maker lose customers and profits if it develops a reputation for providing either ineffective or too-dangerous pharmaceutical products.

But common-law and reputational sanctions aren’t the only forces working to protect consumers in markets left unharassed by bureaucratic proscriptions.  Private quality-evaluation agencies emerge, such as Underwriters’ Laboratories, to test and vouch for the effectiveness and safety of products.  Because consumers aren’t stupid, they will seek out independent and expert opinion on various drugs’ effectiveness and safety.

Similarly, MDs help patients in the same way – by having the expertise to evaluate the appropriateness and risk/effectiveness details of drugs that their patients are considering using.  (And, as with drug companies who supply bad drugs, MDs who give poor advice will lose patients and profits to MDs who give sound advice.)

Robert Higgs, here, is far more articulate on this matter than I can hope to be.

Be Sociable, Share!



18 comments    Share Share    Print    Email


James November 19, 2005 at 12:02 pm

Perhaps in a followup you could address how already time streched doctors will be able to evaluate a plethora of drugs that they prescribe routinely. Specifically, one would think they would seek outside help. Perhaps the AMA? On another, related note M. Friedman has one of his priorities as the abolition of doctor licensing *restricting employment*. Would this also be appropriate?

I am wondering about the trade off – it would seem that doctors would bear a cost in seeking outside expertise to evaluate the profiles of drugs. This would then enter into something like the life drive epocrates – a pda application that is commonly used by physicians. Such drug profiles, however, are the result, at least in part, of drug testing. It would seem the private sector would have to do this – but there would be an incentive for doctors to focus on a smaller range of drugs to lower costs, perhaps at the expense of their patients.

You do mention that the FDA does not know you. Perhaps a person has some disease and there are a variety of treatments. The doctor is aware of all of them and can look up the data in, say, epocrates (100 dollars per year). Now in a fda free society that same epocrate program would be much more expensive. Why would the doctor feel inclined to purchase a 'full version' instead of one that focuses on the most effective treatments for the average person. But perhaps you are not average.

As per civil and criminal claims, there would seem to be an insurance issue. As it stands currently insurers have a general idea of the risk involved for all specialities and the doctors within them. I would imagine claims would increase and insurance rates would also go up. If we were to go as far as friedman, they would become prohibitive in terms of premiums.

spencer November 19, 2005 at 12:05 pm

So you are proposing transfer drug regulation from federal bureaucrats to
the "torts" lawyers and the courts.

As we have seen in many other areas, isn't there a massive risk that this would actually make things worse.

Would this change the risk the firm faces from one of a reasonably well known and understood task of jumping through bureaucratic hurdles to one of facing extremely large and impossible to predict fines and legal judgements from a judiciary that according to some is out of control.

John Thacker November 19, 2005 at 2:29 pm

"So you are proposing transfer drug regulation from federal bureaucrats to the "torts" lawyers and the courts."

Well, the thing is, the current system actually combines the two types of regulation. Witness Vioxx and others trials, where drug manufacturers have been sued even after their drugs passed FDA regulations.

I've heard proposals for reform in two different ways: First, a proposal that would grant immunity from lawsuit to drugs that passed the FDA screening process (assuming no shenanigans on behalf of the company, fixing data and the like), and second, proposals to make the FDA process optional, like a UL seal.

And, as with drug companies who supply bad drugs, MDs who give poor advice will lose patients and profits to MDs who give sound advice.

This is not necessarily true, especially in the short run. Witness all the quackery out there. However, quackery exists anyway with the current FDA system.

iceberg November 19, 2005 at 6:09 pm

complacency kills

I always stress this meme when explaining the unintended consequences of the even most benign-sounding legistlation. As Lisa Casanova said it some time ago on

The FDA should be totally shelved. No one should be in charge of keeping “marginally safe” drugs off the market, since there is really no such thing. There are no safe or unsafe drugs, only the tradeoff of risks and benefits that is unique to each individual making the choice to take the drug.

In a way, I think that abolishing the FDA might make big lawsuits less of a problem. Right now, people have this idea that drug safety is something they don’t need to concern themselves with, because someone else worries about it for them. They think someone is going to magically know alll the risks and benefits of a drug and tell them, “you can take this drug with zero worries. It’s nice and safe. Go ahead and pop that pill!”

Consumers of drugs get the idea that if the drug is on the market, that must be a sign that nothing bad can happen to them if they take it. If something bad does happen, someone must be to blame, since it was the job of somebody else to make sure the drug was safe, and nothing bad should happen to you if you take approved drugs, right?

Right now, people who take drugs that turn out to have serious risks have this attitude that someone let them down by not making sure that the drug they freely chose to take had no risks. Maybe people buying drugs on the market need to adopt more of a mindset of participants in a clinical trial, one of “I’m stepping into the unknown here. Is it worth it to me?”

If people knew that every time they take ANY drug, they are taking a risk (which is the way things really are), then maybe people would give lots more thought to drug safety than they do now, and outside of cases of companies committing fraud or hiding information about risks, it would be harder to blame someone else every time a drug turns out to have ill effects.

tarran November 19, 2005 at 6:44 pm

Couple of additional points:

Before the creation of the FDA, the AMA did provide advice and warnings concerning drug quality, and Consumers Union, which eventually morphed into the organization that publishes Consumer Reports, originally was chartered with drug safety testing as one of its major activities.

The fundamental problem with the FDA is that it is a governmental organization: and decision they make is enforced by treats of violence. If you sell something they don't like, even conduct research they do not approve of, they will shut you down and possibly have you arrested and jailed.

The immorality of this arrangement was demonstrated in the early years of the Aids epidemic, when a drug showing promising results was available in Japan and not approved in the U.S. Many AIDS patients who desperately wanted to evade the sword of Damocles hovering over them went to Japan to procure a supply. At the behest of the FDA, U.S. customs kept a close watch on AIDS patients traveling to Japan and confiscated large quantities of the drug from AIDS sufferers returning to the U.S.

Rather than lose control, the regulators were willing to let people die.

I do not deny that there must be some regulation of drug manufacturers. I am convinced that the regulation would be far better if it were performed by one or more charities or privately funded non-profits.

First, these regulators have to keep drug consumers happy. If they recommend agaisnt a great drug nd they get caught, they will lose credibility. I fthey recommend a bad drug as beign safe, again they will lose credibility. Without that credibility, they will have a hard time getting funding. Let us assume, further, that there is one privately funded regulator, and it is performing badly. Then its bad performance will prompt outrage. As its funding goes down, the people who would have funded it will look for alternative places to direct their moeny. Inevitably, there will be some unhappy individual wiht the know-how and the connections to start a rial regulator, and will work to dispalce the existing regulator.

I doubt, however, that it would go that far: Underwriter Laboratories has been a going concern for many decades, has an effective monopoly (in the U.S.) which it has maintained by providing great value to its backers.

Let us contrast this with what happens when the FDA messes up. historically speaking, every time the FDA has messed up, it has come up with pretty much the same explanation. It needs more power, It needs a mbetter organization employing more people. It needs more money. They don't have to worry about keeping a majority of doctors and consumers happy. Rather, they need only to keep a few senators and congressmen whose commitee oversees them happy. This of course they can do by approving good drugs and disapproving bad ones. they can also do it by satisfying a senator who thinks birth control is a sin by preventing birth control drugs from getting on the market.

Let us now turn to James' concern.

Actually, this is a valid concern. However, the problem is not that doctors are doomed to be overworked by their nature, but rather because ther is an acute shortage of doctors in the U.S. caused by govt regulations. In essence in order to keep doctors' salaries high, the AMA and its afiliates in all 50 states have lobbied for and established medical boards, which in effect they staff. These medical boards in turn limit the number of doctors they license, and by controlling th enumber of graduates medical schools are allowed to graduate.

The licensure boards are behind the shortage of doctors and should be abolished.

jomama November 19, 2005 at 9:28 pm

Now here's another solution to personal drug research:

You can even download a reference "book" to your desktop there.

Glen Raphael November 20, 2005 at 1:27 am

A key factor thus-far unmentioned is the informational quality of retailor brands. Safeway (note the name!) doesn't want a reputation for selling food and drugs that make people sick, so they have a huge incentive to invest time in figuring out which drug brands and which third-party testing agency seals are worthwhile. Consumers that buy retail can safely assume that the worst drugs won't make it to most store shelves due simply to competion between retailers. They can thus evaluate and decide which stores to patronize based on their individual risk profile rather than having to decide independently for every drug purchase whether to trust specific manufacturers or seals.

The analogous situation with regard to appliance fire safety is that I don't need to check that the UL seal is on a toaster I buy from Sears – if the seal is important, Sears will check before stocking the toaster.

Russell Nelson November 21, 2005 at 2:04 am

MOGW (Men of Good Will) claim that consumers are indeed stupid. If consumers were smart, then advertising wouldn't function to get them to buy things they don't need (that is, in the opinion of the MOGW). Since advertisers are willing to pay for advertising, then clearly THEY think it works, thus advertising functions to persuade stupid consumers to buy things.

Thus, government needs to protect consumers from businesses.

Of course, nowhere in this theory do consumers need to be protected from government. Somehow the stupidity of consumers doesn't carry over into their voting. Wise voters, stupid buyers. Ya figure??

Randy November 21, 2005 at 9:40 am

Security has a cost. In making health care safe, we have also made it expensive. What do we say to those who can not afford "safe" healthcare?

Previous post:

Next post: