 Good afternoon, ladies and gentlemen It's it's time to begin a new session. I'm Robert Higgs and this is a session on quality assessment at least an application of the general problem of quality assessment Often when we do economics we we don't pay much attention to this particular issue we assume that consumers make selections among goods that are available on the market and we just describe those goods in some some gross way as shoes or bread or potatoes or television sets, but in actual consumption Occasions consumers care not only about what the product is but about various dimensions of the product they may depending on the case they may care about the color the location the texture any number of aspects of The products available to them which differ along these dimensions and one of the things that consumers always care about is the quality of the item that they select and by quality I mean such things as Will it perform as they expect it to perform? If it's a food will it taste the way they want it to taste will it have the texture they like? if it's Something like an electronic gizmo will it work reliably What kind of software is connected with it and so forth so they're just any number of Quality dimensions that people might might care about and do care about When they select one product rather than another now, I'm going to talk specifically about products related to medical care mostly pharmaceuticals and medical devices and These are especially important Products for consideration of quality because in these cases a Life and death are literally on the line If you get a medicine that is poor quality that may actually mean that it's toxic and will kill you Or short of that it may have very harmful side effects of some kind If you get a medical device that is defective or not reliable It may either hurt you when it's used On you or it may fail to reveal something It's intended to reveal such as an x-ray or another imaging machine that's supposed to help your doctor identify Such problems as tumors in your body So medical products are especially important cases For consideration of quality assessment people care about this and so when they make their choices they they bear these things in mind often They're critically important so I Spent a long time doing research in this area back in the 1990s particularly and did quite a bit of writing and I want to call to your attention before I begin my presentation a paper. I wrote for the review of Austrian economics back when it was one of the publications of the Mises Institute And it has a very long and awkward title Called a banning a risky product cannot improve any consumers welfare properly understood with applications to FDA testing requirements and If you'd like to read this paper, you'll find it at Mises.org in the review of Austrian economics for 1994 so exactly 20 years ago and what it the paper does is develop a an explicitly Austrian Analysis of these issues that I'm going to discuss today I won't go into quite the same kind of detail here that I went into in my paper but There will be a great deal of similarity in the underlying substance of my presentation here and my paper of 20 years ago This is not a an area in which I've changed my mind about anything and Even though the Food and Drug Administration that I'll be talking about is always in the process of changing the details of its regulations the basic way in which it regulates and the fundamental problems Created by the way it regulates Have remained the same right up to the present time So let it let us proceed then if you were suffering from a serious disease Would you prefer a that you and your doctor decide how to treat your ailment? Selecting from all existing medical goods the ones that offer the best combination of benefits and risks or B That you and your doctor select from all medical goods except those Probably the most promising ones That a low-level government employee in Rockville, Maryland has decided to withhold from you The answer is obvious of course rational people would never consider themselves to be better off Because their range of choice had been arbitrarily limited Yet such restrictions of consumer choice Affecting both patients and their physicians fedders consumers at all times in the United States The Food and Drug Administration, which I'll just call the FDA The FDA alone decides whether a newly devised medical good either a drug or a device may be sold Many potentially beneficial goods remain on the shelf for a decade or more while their manufacturers traverse the rigid and elaborate testing Procedures required by the FDA before it will approve marketing of the good While innovative medical goods run the bureaucratic gauntlet People who could have benefited from their use suffer and die unnecessarily Defenders of the government's actions insist that without the FDA's regulations greater harm would occur Consumers they say would suffer from the toxicity or adverse side effects of unsafe products Or they would squander their money on useless remedies Consumers can avoid these injuries if they are permitted to use only medical goods that have met high standards of safety and Efficacy by passing successfully through the FDA's required testing This is a quick summary of the major Activities the federal the Food and Drug Administration employs in Testimony before a congressional committee an FDA official said the following The allegation has been made that the cost to our society to prevent a thalidomide type Tragedy far exceeds the benefits of a regulatory system developed to prevent such a tragedy We disagree We believe that benefits which accrue to society Because of our regulatory system are worth the cost and far outweigh any risks end quote This statement which expresses the agency's standard line is remarkable in at least five ways first it uses the most notorious medical tragedy of modern times to illustrate what presumably the FDA's regulation routinely prevents The presumption is indefensible Except in a freakishly unlikely case one may not reasonably assume that an unrestricted manufacturer would sell a medical good giving rise to a thalidomide type tragedy besides their ethics manufacturers have good financial reasons Including product liability judgments and the loss of consumer confidence to be careful About what they place on the market Second the statement I quoted stands alone without any attempt to demonstrate that the lives saved and the suffering prevented Exceed the lives lost and the suffering endured as a result of the FDA's regulation It is merely a naked declaration Which the audience presumably should accept because it emanates from the self-proclaimed experts third The statement speaks of the benefits and costs of the regulation as if they were experienced by society at large rather than by specific individuals who differ enormously in their personal valuation of the costs and benefits and In their willingness to bear risk It rests on the unspoken assumption that a single rule should apply in all cases mocking the actual heterogeneity of people's preferences and medical conditions fourth The statement confidently declares we disagree and we believe While describing the balance of benefits and costs experienced by others But only specific individuals can possibly know whether the benefits to them outweigh the costs to them Neither the benefits nor the costs can be objectively assessed by third parties Nor may the benefits and costs Experienced by many individuals be aggregated into a total or social Valuation and thereby made comparable There is no common unit of account in which the aggregation may be made Who knows how to measure the depth of one person's fear or the breadth of another's relief Fifth the statement presumes an answer the wrong answer To the question posed by AIDS activists and FDA critic Martin Delaney Quote who should decide which risks are acceptable the bureaucracy in Washington or the patient whose life is on the line if we had more time we could Consider the process which Goes on in a connection with the FDA's regulation and the various parties that are somehow Involved in deciding what the regulations will be How they will be changed and how external events are related I've used this diagram and some of my writing to pull some of the main factors together and What we have at the top is is showing that here as in many regulatory Cases there exists an iron triangle Consisting of the congressional committees with oversight and budget authority over the regulatory agency That agency itself and then various interest groups one of which of course is the users or patients But the ones that are most often involved in the process are actually industry groups manufacturers for the most part, but also some so-called public interest groups get involved some of the most important ones being shills for trial lawyers who are always angling to Get the FDA more authority so that they can help their Their lawyers more effectively bring lawsuits against manufacturers, which sometimes have big payoffs But in any event there are interest groups and then the powers of the FDA emerge From the legislation Congress has passed But is continually being pushed out by the agency itself. This agency is especially remarkable Among regulatory agencies for constantly and vigorously Pushing the envelope of its authority out into areas where many people would dispute it has statutory authority to go But it's very always been a very ambitious agency politically constantly striving to gain more control over markets and over the actions of consumers and providers of health services so There's a constant pushing and the results of that Pushing out of the FDA's authority is a diminished scope for individual action By patients doctors and providers of medical goods in other words, there's a Contraction of the realm of freedom people have to act within It's especially important That in this area Shocking news events have a big effect on the the course of regulatory dynamics if there's something like a thalidomide tragedy or Back in the 30s the elixir Sulfonylamide was a drug that killed more than a hundred children And led to the passage of the food drug and cosmetic act of 1937 such events as that are widely reported in the newspaper get all The public up in arms and there's a certain kind of diffuse demand that something be done and in reaction to that sort of demand members of Congress are very eager to leap into the breach and Be seen as Responding to the public's demand for greater safeguards But the upshot is that these safeguards are very often Not Beneficial in the way that they're represented to be and I'll go on to talk more about that The people who make decisions at the FDA respond to incentives just as people do elsewhere The bureaucrats prefer to advance in their careers They do not want their incompetence or brand blame-worthiness to be exposed In their circumstances FDA Examiners may err in two different ways What I'll call type one error is when the examiner of Application for product approval Does not approve a product that is safe and efficacious Okay, he turns down the application even though the product is okay Type two Error is one in which the examiner approves a product that is not safe or efficacious and Naturally the examiners want to protect themselves from criticism arising from their commission of errors The examiners Incentives to avoid a mistake however differ greatly for these two types of error As a former FDA inspector described the situation Quote anytime you approve a new drug you're wide open for attack If the drug turns out to be less effective than the original data showed They can nail you for selling out to a drug company If it turns out to be less safe than anybody expected some congressman or a newspaper writer will get you So there's only one way to play it safe Turn down the application or at least stall for time and demand more research Notice there's only one way for the examiner to play it safe But his safety is a very different matter from the safety of everybody else involved Because of such demands for more research new drug applications now Commonly consists of two or more volumes of summary data and as many as 100 volumes of raw data Sometimes more than a hundred thousand pages all together Although such heavyweight requirements help the FDA examiner to play it safe They often result in much avoidable suffering and many deaths among the patient population awaiting access to the good Unfortunately, the news media members of Congress and self-described consumer advocates almost never hold the bureaucrats responsible for these invisible or statistical deaths Hence the cost of a single bureaucrats career insurance may be and in some cases certainly has been tremendous sacrifice of human health and life Consider for example that from 1963 to 73 The FDA's doors were essentially closed to cardiovascular drugs Even though cardiovascular disease was the leading cause of death in the United States and Rapid advances were occurring during those years in pharmaceutical therapies Beta blockers and a specially valuable class of drugs awaited FDA approval for a decade After they were first used abroad Dr. William Wardell a professor of pharmacology toxicology and medicine at the University of Rochester Estimated in 1979 that a single beta blocker Alprenolol Which had already been sold for three years in the strictly regulated Swedish market could have saved more than 10,000 lives a year in the United States Now think about that 10,000 preventable deaths a year from a single drugs being held up at the FDA in 10 years time That's more deaths than the United States had among its military personnel in the Korean and Vietnam Wars combined And that's but a single drug in a single time period. I Don't think it's a reach to suppose although no one's ever tried to make this calculation I don't think it's a reach to suppose that the FDA's actions have resulted in Perhaps as many as a million premature deaths during the time the FDA has been in operation I can easily imagine more. I don't claim to know But it's very easy from what we do know to make a projection of that order of magnitude Other examples given by Wardell include years of delay in the availability of at least four respiratory drugs That caused severe disadvantages to many asthma sufferers as well as a six-year lag in the Availability of Valproate in particular and the continued absence of nitrase of Pam that Substantially reduced the treatment options for epilepsy patients Lithium carbonate an effective drug for the treatment of manic depressive disorder Was used in 40 countries before its approval by the FDA a 1980 study by the US General Accounting Office examined 14 therapeutically important drugs introduced in the United States between 1975 and 1978 The GAO analysts found that only one of the 14 had become available first in the United States For the others the lag in availability ranged from two months to 13 years Many drugs successfully used abroad are never approved for use in the United States by the way, so 13 years is not the upper bound Astonishingly the FDA has given little or no weight to foreign evidence of product safety and efficacy Nearly all new drugs and devices have been forced to pass through the same rigid Expensive and time-consuming testing procedure in the United States Even though a product might already have been used successfully for many years elsewhere Economist Henry Grubowski and John Vernon of Duke University made many studies of the pharmaceutical industry Considering the results of their own research along with the findings of other studies Comparing the experience of various countries. They concluded quote US citizens have experienced sizable foregone health benefits from regulatory induced delays in obtaining beneficial new drugs While obtaining relatively modest benefits in the form of less exposure to drug toxicity perhaps the most damaging consequence of the FDA's regulation since 1962 when the testing requirements were made much more rigid and time-consuming is The slowdown in the rate of innovation in view of the high costs of securing FDA approval to market new products Many manufacturers conclude that otherwise promising R&D projects will not be profitable As a result beneficial new drugs and devices are never created Suffering and death that might have been prevented continue unabated Of course since the innovation never comes into existence Hardly anyone appreciates that he has been sacrificed on the altar of regulation The rule of law Means much more than the requirement that the legislature authorized an exercise of power by the executive branch of government as Classical liberals understand it the rule of law requires that the law be clear and understandable that Penalties for violations be predictable and that the law be applied equally to everyone including members of the government The FDA's actions though broadly sanctioned by legislation failed to satisfy these criteria in Stark violation of a genuine rule of law The FDA's actions are frequently arbitrary and capricious sometimes even blatantly unconstitutional as When they restrict freedom of speech and the press which they do on an extensive scale in The medical device industry where the FDA conducted a jihad during the early 1990s manufacturers Remonstrated that their cited violations of the agency's good manufacturing practice regulations Often arise because the regulations are vague Even companies that genuinely try to comply fully with the US GMPs good manufacturing regulations according to one Official can find themselves cited for violations. I've seen many examples of this myself Companies whose products are esteemed by customers have been forced to stop production Because their paperwork did not satisfy the regulators The health industry manufacturers association complained that the FDA quote is not made clear the type of data It wants to see and therefore the companies had to make a series of information submissions hoping that something would satisfy the regulators Sometimes the FDA requests one type of study Then changes its requirement and requests another type after the company has completed the first one Health industry manufacturers Association director Alan magazine described the device approval process as a giant guessing game Supplicants can expect no reliable guidance by asking the FDA what is required The agency does not respond to inquiries Expeditiously when it does respond the response often lacks substance Moreover after years of countermanding the informal device given to regulated Parties it recently announced that it would no longer be bound by its own formal advice Did you hear what I said? It announced that it would no longer be bound by its own formal advice Indeed the head of the FDA's drug surveillance branch stated quote We used to say that if a company made certain changes, then we would probably not take any action Now we won't Now even if they make the changes they might end up in court We want to say to these companies that you don't know when or how we'll strike We want to eliminate Predictability Think back to what I said about the rule of law Predictability is of the very essence of the rule of law and here we have a government official Publicly declaring that he will not make his regulation predictable at all That a so-called civil servant would make such a statement is stunning Recourse to the courts which is costly time-consuming and full of uncertainty holds little promise of protection in view of what Professor Wardell called the extreme Vulnerability of the industrial firm that argues with the FDA Without a search warrant the FDA may inspect a company's plant and records at any time Because the regulations are so numerous and so often vague Last time I checked they they took up eight volumes in the Code of Federal Regulations because they contain Such vagueness and are so numerous inspectors can always find violations if they want to find them In short the agency possesses the power to destroy a company at will To retaliate for past resistance or to make an example by closing down the firm's Operations or seizing its property The FDA is known to everybody who's studied it carefully as highly vindictive and you you Only at great risk challenge anything the agency does There's a place for paternalism It's in the family Where young children are incapable of Making wise decisions for themselves and we're a patient of a parent Linked to the children by bonds of love and responsibility May normally be relied on to decide what is best for the children But when paternalism becomes a form of government when the individual freedom and responsibility of competent adult citizens are suppressed in favor of Exclusive decision-making by a central planning board. No one should expect a healthy outcome For more than half a century Americans have been forbidden to make important decisions regarding their own health Decisions on which each individual's life and death depend Of course, we've been assured by those who wield the power that they act only in our best interests But anyone who makes even a superficial study of the FDA its regulations and its congressional overseers Quickly discovers that the official line is far from the truth This government agency like all the others is a political institution swayed by the ceaseless quest of its leaders for position publicity power Privilege and perquisites all associated with a big budget and a far-reaching agenda It's a mistake to suppose that the FDA acts or even attempts to act so that all things considered suffering and loss of life are minimized instead Responding to the asymmetrical incentives created by the reactions of the news media Certain members of Congress and so-called consumer advocates FDA officials systematically strive to avoid type 2 errors while disregarding type 1 errors Not relishing the negative publicity sure to follow their approval of medical goods that later cause harm Even relatively slight harm They adopt the role of obstructionists Requiring ever more stringent Expensive and time-consuming testing before allowing goods to reach the market That avoidable suffering and death routine routinely occur while they drag their feet and protect their careers Does not sway them because hardly anyone holds them accountable for the harm caused by their type 1 errors Okay, I'm going to shift gears a little bit now and come at some of these issues from a slightly different angle risk Attends the use of medical goods as I've said Whether used for diagnostic or therapeutic purposes the consumer may suffer directly because of adverse side effects or Indirectly by using a particular good instead of a more beneficial alternative mainstream economists commonly attribute the quote excessive harm to imperfect consumer information and characterize the conditions giving rise to such harm as market failures These economists conclude that government provision of information and government regulation of the terms on which medical goods may be sold or used can remedy the failure and Produce a more efficient allocation of resources This way of thinking about the issue is incomplete and seriously misleading In fact, two kinds of risk exists There is to be sure a risk of harm from using the good But there is also a risk that denied access to the good consumers will be harmed because alternative medical goods are less Effective in curing or millerating their condition I'll call the first kind of risk use risk the second kind prohibition risk Obviously the two vary in a reciprocal relation the more the government diminishes people's exposure to use risk by limiting a good Availability the more it exposes them to prohibition risk and vice versa Notwithstanding the common characterization of the problem is one of imperfect consumer information The underlying risks cannot be banished by decree They are inherent in the state of scientific knowledge and technical skill The vital issue is how to optimize exposure to the two kinds of risks Balancing them so as to maximize the welfare of consumers. I Concern now is to analyze how the allocation takes place under government regulation of the sort carried out by the FDA and To contrast the system with the allocation under an unimpeded market process My general conclusion is that the market brings forth a superior outcome especially in the long run It's instructive to consider this issue along the lines pioneered by Mises and Hayek and Develop further by their Austrian school followers in the analysis of central planning From this analysis, we know that socialism cannot succeed if by success one means The attainment of maximum feasible satisfaction of consumers wants Information about resource endowments technical constraints and consumer preferences is dispersed Among the population Moreover, this information is always in flux Central planners have no effective means of collecting the relevant information Even if somehow they could collect the information it would be obsolete by the time they could implement plans based on it Ever-changing consumer preferences cannot conceivably be known by central planners The consumers themselves don't know exactly what their preferences are until the moment they act upon them At that time they have demonstrated preferences as Murray Rothbard called them demonstrated preferences But not withstanding the usual assumption in neoclassical economics They do not have a stable all-encompassing indifference map in their minds And even if they did it would be inaccessible to anyone else It would be pointless for the government to conduct a survey to discover people's preferences opinions are one thing demonstrated preferences in which consumers necessarily bear real opportunity costs known only to them are something else and These are the only preferences that count in the maximization of consumer welfare This kind of analysis can also be applied in considering the allocation of risks associated with medical goods Only individual consumers who are free to seek whatever professional advice or other information They consider worthwhile Can evaluate the risk of using a medical good and the risk of not using it and Determine the point at which Weighing the two kinds of risk they judge the use risk to be acceptable Consumers alone are in a position to compare the prospective pains and pleasures Inherent in the decision and to determine when the risk of not using the good outweighs the risk of using it others any others have no way to intuit or Simulate judgments of this kind Only the risk bearers themselves know the scale of values on which the opposing risks are weighed The units in which the prospective disutilities of risk-bearing are measured if Outsiders presume to make the decision for those who actually bear the risks their intervention represents nothing more than the pretense of knowledge for which Hayek indicted the economic planners macroeconomists and neoclassical welfare economists The intervention compounds ignorance of consumers true preferences with government coercion To believe that such heavy-handedness can improve the welfare of consumers is sheer paternalism and bad economics Apart from the fundamental incapacity of government regulators to solve the relevant allocation problem It is folly to think that they would do so even if they could Public choice theory and careful observation alike teach us that regulators tend to seek their own interests rather than any Public interests To preserve their budgets and their prerogatives they respond to the dictates of their political overseers Elected politicians who themselves seek re-election and self-aggrandizement and do not shrink from twisting the truth and burdening the public in that quest Knowing that the polity responds disproportionately to crises politicians and bureaucrats exploit Notorious events such as the elixir self-anilomide tragedy of 1937 and the thalidomide affair of 1962 to justify great extensions of their authority as a rule they employ their powers with heavy emphasis on the short term readily sacrificing longer run and widely dispersed benefits for immediate concentrated and often spurious benefits for which political credit can be claimed in Making decisions that allocate use risk and prohibition risk the regulators systematically regard the former and disregard the latter This imbalance makes good sense for them regardless of its unfortunate consequences for consumers If adverse side effects cause serious or widespread harm when consumers use a government-approved good Those who approved it will be held accountable by the news media and congressional overseers with consequent jeopardy to their bureaucratic careers Regulators therefore as we've seen are loathe to approve any good until is undergone Extremely exacting tests which typically require more than 10 years to complete for new drugs more than 10 years of testing Other countries as I've also noted often allow the marketing of new drugs long before The FDA approves their sale in the United States and likewise for many medical devices in contrast if people suffer preventable harm even if the suffering is Extensive and lethal while a medical good undergoes an extended period of mandatory testing The regulators are unlikely to be identified by the media as Responsible for the suffering and many people will be unaware that a potentially beneficial good is being kept off the market It follows that the number Stringency and expense of the required tests all of which are correlated with the duration of the test period Exceed the levels preferred by many consumers who consider prohibition risk as well as use risk Notice that consumers who prefer more information than the government requires are not affected They can voluntarily wait until enough additional information has been induced to satisfy them however Making a good available to those already willing to risk its use hastens the day when sufficient information Will have become available to allay the doubts of those currently unwilling to bear the use risk in Some the regulators systematically impose requirements for marketing approval that lengthen the test period beyond that at which at least some consumers prefer When the government has the power to approve or disapprove the marketing of medical good Political jockeying comes into play to resolve people's differences of belief and risk evaluation Those who prefer to use the good immediately cannot express their preferences by means of market bidding they must resort to politics hence afflicted citizens sometimes testify before congressional committees and Disease victims sometimes demonstrate in the streets even while political action Committees and executives of drug and medical instrument companies make large campaign contributions to office seekers None of this would occur if the benefits costs and risks of medical goods were allocated by a market process Under the current regulatory regime heavy fixed costs must be borne by Producers to gain FDA approval for marketing The effect is to penalize disproportionately both small companies and Projects to develop products with a relatively small market for example the so-called orphan drugs Abandoned by developers because their expected revenues are too small to justify the costs and delays imposed by the FDA approval process This is especially unfortunate because small companies are often the most innovative The longer the elapsed time before products receive widespread use The more delay occurs before the availability of more reliable estimates of potential risks Which can be established with high confidence only in very large samples, especially when the risks are small Ironically the FDA's regulation may increase not only the prohibition risk in the short term But also the use risk in the longer term Much of the public's approval of government regulation of medical goods springs from a failure and by the way the public overwhelmingly approves of what the FDA does When you take a survey and ask people about their attitude toward various regulatory agencies the FDA invariably gets the best ratings by the public which is a Tremendous testimony to public ignorance of what this agency does and what affects its actions have Here's the most lethal regulatory agency by far of any in the government More lethal perhaps even even in the Department of Defense and yet people hold it up as the paragon of good government regulation Much of the public's approval springs from the failure to understand how private institutions would operate in the absence of such regulation Many people fear that without the government watchdogs Consumers would be deluged with harmful goods and unable to identify fake procedures and quack medicines This unsavory vision of the unregulated market process owes more to progressive ideology and Fairy tales than it does to sound theory or history Even in today's heavily regulated context private sources of research products information and advice Do vastly more than the government to remedy the public's ills Absent the regulation such sources would flourish even more There are a few items that Give us a vision of what would happen without the FDA's product bans There is no need for government to assure the safety or efficacy of medical goods none People who are concerned about such matters can look to any number of private sources and they will readily pay for the sorts of information they actually value as Opposed to the kind of information used only to justify depriving people of the right to make their own decisions about their own health Medical and pharmacy associations for example might reinstate certifications Schemes for drugs and devices like the seal of acceptance program operated by the AMA between 1929 and 1955 Private information services which already flourish Could be greatly extended Private organizations such as the consumers union which publishes consumer reports and the Consumer Federation of America could do much more To inform the public regarding medical goods the American Association of retired People might redirect some of its activities from lobbying to advising the elderly about medical goods Manufacturers themselves if legally free to do so would have a strong incentive to provide information about potentially harmful or ineffective goods offered by rivals Trade associations could establish and police standards quality could be certified by an organization such as underwriters laboratory a Private organization that currently tests electrical appliances to ensure that they meet strict standards Insurance companies with policies covering manufacturers for product liability judgments would play a much stronger role in the absence of the FDA If you're a libertarian as I suspect some of you are you've no doubt had discussions with people who are opposed to libertarianism Who tell you that you're just dreaming about how markets would work if we didn't have all the government regulation we have now and They think you're inventing what would happen but in fact because these problems are real problems and because What the government does does not actually meet the requirements that? people have for information and quality assurance the market already provides what people value and I want to call to your attention one just one such Organization called ECRI recently renamed itself ECRI Institute when it was founded in 1968 it was called emergency care Research Institute and concentrated its its activities on on Studying and evaluating problems and solving problems associated with with emergency care Devices such as defibrillators, but since then ECRI as it has expanded in all directions to maintain enormous databases of problems associated with medical devices and drugs of Procedures used by by health care providers and to serve a whole variety of other Purposes that people value ECRI is a not-for-profit organization that takes very great care to ensure that its Employees have no conflicts of interest if you work for ECRI for example, you may not own Shares in any pharmaceutical or medical device company So here is a magnificent organization independent of the government And yet one that is so good that it it's one to to which people all over the world go for information advice and Solution of problems that arise in their own use of products I I saw this myself and I actually became acquainted with Joel Noble the doctor who founded ECRI in 1968 I Encourage you just Google sometime when you you have a while ECRI org and Look at what information is available at the website. I think you'll be absolutely amazed Okay, and this is only one example of how not only is the government not Providing what people value, but even though the government won't get out of the way Other people have stepped into the breach to give people what they need and what they do value and what they're willing to pay for ECRI has some of the best experts FDA is always holding itself up as the gold standard of expertise and science which is a complete Misrepresentation of the truth. I dare say there is not one single minute issue On which the people at the FDA are the best experts in the world not one and very often They're way behind the curve. So Once again, what we've got here is a body of government lies propping up what amounts to a Fatal form of regulation People who are concerned about these matters can look to any number of private sources as I say ECRI being a great example, but only one of many You might also check when you're googling something called TUV product services TUV is an organization that started in Europe but has again Expanded its business globally To evaluate and certify products Not just medical devices or or medical related devices, but all kinds of goods In any event manufacturers themselves have a strong incentive to maintain High quality in order to avoid large penalties assessed by the courts in tort cases At present many such private activities though by no means all Heaven effect been crowded out by the operation of government agencies Well, let me wrap up here and reach some conclusions The two most important questions in any economic analysis are What is the alternative and What happens then and then and then It's basically what Henry Haslett taught us in economics in one lesson unless one is carefully considered the free market alternatives One is not justified in concluding as most mainstream economists have that government regulation of medical goods including marketing Certification only after rigidly structured very expensive and time-consuming tests improves consumer welfare By the way, a new drug now as I mentioned it takes more than ten years on average to pass through the approval process and the Cost of getting through the approval process Exceed one billion dollars The latest estimate I've seen is 1.4 billion now that tells you a great deal about why Small startups never make it through to become big drug companies. They virtually all Sell their ideas to a big company because small companies simply can't finance a Billion dollars or a billion and a half dollars to plow through all the testing the FDA requires The bulk of this is clinical testing at using actual human subjects which comes in three phases each one larger than the one before and Involves thousands of test subjects and is immensely costly because of the record-keeping Associated with it, but the FDA is not only made clinical testing more and more onerous and time-consuming and expensive But it's added new forms of required testing such as post Approval study after the drug has been approved for marketing then the companies have to continue making very expensive reports and Also demonstrating not simply safety and efficacy But also demonstrating Relative efficacy meaning your new product not only has to be safe and efficacious for the indication it Describes, but it also has to be a significant improvement over any product now on the market This presumes however that Basically all the patients are the same They're the average patient in the studies and one reason why you want Similar products to come onto the market is that not all patients are the same Nor do these products work the same on everybody People are medically almost unique in many ways and what works on you may not work on me What works safely on you may actually kill me and vice versa, and if we have only one Product on the market what the FDA is doing is not only denying users access to a variety of possible remedies and testing And other types of services, but it's creating monopolies The first guy who gets there and gets approval for a certain type of product Stays there until somebody else can plow through the expensive test to show He's got a product that on average is significantly better Hey, of course such regulation does diminish the risk Indeed by prohibiting all medical goods entirely Use risk could be wholly eliminated at least legal use risk a moments reflection on that absurd Extreme makes plain what is wrong with emphasizing use risk and Ignoring prohibition risk Whatever means one finds preferable for allocating the risk the analyst analysis is incomplete Until one inquires into the ensuing consequences not only the immediate ones But the increasingly remote ones likely to flow from the chosen institutional arrangements government regulation inevitably leads to politicization and its evolution reflects the shifting distribution of political power Market processes permit consumer preferences to drive the allocation of inputs outputs and risks Over time one can expect government regulation to feed on itself and to ratchet upward with each notorious Medical tragedy over time one can expect the market process to respond to consumer feedback via the price system and to encourage the types of product innovation and information transmission actually valued by consumers of course the market process will not produce nirvana Risks cannot be banished Inescapably within the limits set by technical institutional and human constraints. They must be born Even in a free market regrettable choices will sometimes have to be made tragic events will sometimes occur But apart from the more promising long-term developments one may realistically expect from the market process one must ultimately face up to The moral dimension of the issue as the health scientist Samuel Broder has said It is not good for people To be put in a situation where they are begging for their lives From a central government authority Thanks a lot. Well, I'll take a question if somebody has to go then There's actually a third possibility which I think is usually the case and that is that the What the FDA does you have to do all these clinical trials and the records you generate will will Not only tell you the outcome, you know, if it's a drug if it's a drug for blood pressure It'll record not only what happened to the subjects blood pressure But it will record every other condition that each subject happened to have and if some of them just happened to have tuberculosis and Asthma and arthritis Even though it has nothing to do with the test you're making that has to be reported by FDA Regulation, so they do that because if they don't the FDA will not approve their marketing Well, what they did starting in the 1990s was the law was changed to require what's called a user fee Because they were taking so long the argument was well if the FDA had more money Yeah, they're always wanting more money, but if they had more money then they could approve products quicker Okay, so they said hence forward people who apply for approval to sell a new drug have to pay a certain user fee these are quite expensive fees by the way and And so as a result of those user fees the pharmaceutical companies are ponying up a substantial share of FDA's total Revenue now and of course FDA loves that what FDA did not do in exchange was speed up the approval process It just took the money and made things even worse for the people who are paying the money I think I'll answer the questions here while we're in a break, but those of you have to go Please go. I don't want to hold you up