Unprepared: Government Failure at the CDC/FDA
2020-04-09 · Guest: Alex Tabarrok (Mercatus Center at George Mason University) · 51:28
Systemic failures of CDC and FDA during COVID-19
Bob Zadek and economist Alex Tabarrok discuss the systemic failures of the CDC and FDA during the early stages of the COVID-19 pandemic. They explore the economic trade-offs between public health and economic activity, the necessity of assigning a value to human life for policy-making, and the regulatory hurdles that prevented rapid testing and drug approval.
Topics: COVID-19, FDA, CDC, Value of Life, Economics, Regulatory Failure, Testing Capacity, Right to Try, Telemedicine, Public Choice Theory
Speakers:
- Bob Zadek: Host
- Alex Tabarrok: Bartley J. Madden Chair in Economics at the Mercatus Center at George Mason University
Introduction [00:18]
Bob Zadek: Hello everyone, welcome to the Bob Zadek Show, the longest-running live libertarian talk radio show in all of radio. Thank you so much for listening this rather strange Easter Sunday. The experience which our country, our planet is going through centered around the coronavirus, COVID-19, is for all of its economic and health destruction and disruption, for all of the negative aspects of this terrible period in our history, it is also offering to us, and I think will continue to offer to us, a master’s if not doctoral level course in the relationship between citizens and their government.
It will offer to us an opportunity to rethink, or maybe think for the first time, exactly what that relationship should be, what do we expect from our government, and what has this experience taught us about the strengths—and yes, there are strengths—and failings of government performance at all levels, federal, state, and local, during this very difficult, perhaps somewhat unique time. It has an economic component, a health component, a civics level component, and there will be so many lessons right there if we are smart enough to sort through all the noise and find those important lessons. And I dare say there is a profound and deep opportunity that when we are on the other side of this, we will be as a country, hopefully as a world, but certainly as a country, if we take the opportunity and use it, we will be infinitely better off with a deeper understanding of our relationship to government than we are now.
At times like this, I do my very best to find thoughtful observers, teachers, people in political life to help us sort out these very difficult issues. And I certainly have succeeded with this morning’s guest. I’d like to welcome to the show Alex Tabarrok. Alex is the Bartley J. Madden Chair in Economics at the Mercatus Center at George Mason University, where he also teaches economics. Alex writes, co-writes a wonderful mandatory reading every morning, as it is for me, economics blog, but it’s economics plus a lot more, called Marginal Revolution. I commend it to everybody. Do not start the day before you check out the writings at the Marginal Revolution. Their thoughts and their links are seductive and astonishingly educational. You just get smarter by the minute as you click on the links and read the thoughts of Alex and his co-author at the Marginal Revolution. He also is the co-founder of the Marginal Revolution University, a thoughtful, rich with content online teaching platform.
We’re going to discuss this morning the interaction between the economic and the health issues which are raised by the COVID-19 epidemic. Alex, welcome to the show this morning.
Alex Tabarrok: Oh, thanks Bob, and thanks for that kind introduction.
Bob Zadek: Oh, sure. Well deserved, Alex, to be sure.
The Economic Value of Life [04:01]
Bob Zadek: Now, Alex, I would like to start the show just to set the tone and to tee up the issue, if you will, with a quote, a direct quote that I read only minutes before we went live this morning. It was a quote of Governor of New York Andrew Cuomo. And focusing on the issue of the tension between the government’s duty to maintain our economic life and our physical life, Governor Cuomo said—this is a direct quote, Alex, and we’re going to use this to start the show—Governor Cuomo said, quote, “You can’t ask the people to choose between lives lost and dollars gained. You cannot ask the people to choose between lives lost and dollars gained.” Isn’t that exactly what all of us are being asked to choose, or perhaps we’re not being asked to choose, the choice is being made for us?
Now, Alex, you have written extensively with great thought and with great passion about the economic and health effects of the virus on our country, on the cities and states. Tell us about—and you have asked for, or stated that your standard is you want very little from government, I’m paraphrasing, but you certainly want competence. Now, how does your desire for competence apply to this decision between, in Cuomo’s words, lives lost and dollars gained? How does government make that decision between where economics are more important or where health is more important?
Alex Tabarrok: Right. You know, economists are often criticized because we do try and estimate the value of life. We do try and put a dollar value on life. And, you know, we all make decisions all the time about whether to cross the road against the light or whether to take a risky job, you know, being a coal miner as opposed to doing something else, which implicitly involves a tradeoff of our lives and risk and money. But the interesting thing is, is that the number you get is pretty high. So the number that is often used is about $7 to $9 million. That’s the value of life. So when, you know, the government is deciding how much to spend on fixing up the highways or improving safety in other ways, $9 million is a number which economists think is pretty good. And what that actually tells you is that the value of life is so high that at this moment, a lockdown is probably a pretty good idea.
Bob Zadek: So actually, what you’re saying is that government does, and indeed probably has to, or else there’s no way to make the decision between the proverbial apple and orange. One, if you don’t assign a value to human life, if you don’t do that, then it is impossible for anybody, whether it’s personal, anybody to make a decision about to what extent should we give up, surrender economic losses in favor of hopefully gaining human lives. So while many people out there who haven’t thought about this issue that much would wince in pain, and you will hear people say, “How can you assign a value to human life?” Well, that’s kind of naive because, Alex, unless you do that, decision-making becomes impossible. There is no alternative to assigning a value.
Alex Tabarrok: Exactly. You can’t make rational choices. You know, tradeoffs are everywhere, and you can’t make rational choices without making tradeoffs. So we can do one of two things: we can close our eyes and pretend that the tradeoffs don’t exist, and then implicitly make some judgment. That is, you know, we have to decide how many ventilators are we going to buy? How big should our medical care system be? How close does the fire truck have to be? How many fire trucks do we need? How many ambulances do we need? You know, we make all of these decisions. Now, we can do it implicitly and just kind of throw up our arms and take a guess, or we can do it seriously, the kind of hard-nosed economic way, put a value on human life, and then figure out, well, given that value, how many, you know, how close does the fire department have to be? What’s kind of the optimal distance?
So I’m much more of the hard-nosed person who’s willing to put a number on life. And, you know, in this case, when the number turns out pretty high, then that says we ought to be willing in a rich society like the United States—the United States is a very rich society—so we have the luxury, the luxury of giving up some of our wealth in return for life, and it’s a pretty good deal for us.
The Arbitrary Nature of “Essential” Businesses [09:59]
Bob Zadek: And what’s interesting, when you gave your first example, you said crossing the street or undertaking a dangerous occupation. What was interesting about your frame of reference was they were two individual choices that all of us make all the time. We make those decisions. Now, we don’t do it with a calculation with life expectancy tables in front of us, but all of us decide, is the risk at a personal level, the risk to our lives or health, is it worth the benefit? The benefit might be economic, it might be emotional, it might simply be a gain in happiness, but we make those decisions. So that’s not a foreign decision. Part of being a human is to make that calculation. So if we do so individually, then of course it’s natural that where necessary, we do so collectively.
And it sometimes boils down, Alex, to kind of the view of the left versus the view of the right. And the left would like to believe they don’t assign a value to human life. But of course, even if we go to something like Medicare for All, government-supplied health insurance, you cannot run government health insurance, the single payer or Medicare for All, unless you make the calculation because you have to decide how much healthcare to give somebody, and that has to be an economic decision. So just help us understand that calculation is essential in every government program, even those that are promoted by the left.
Alex Tabarrok: Oh, absolutely. So, you know, if we have free medical care, then the demand is going to be infinite. So any country which has a national healthcare system imposes limits on what they’re going to buy. And that’s not unreasonable. But unfortunately, it does mean that sometimes we get a one-choice-rules-all, and that’s not very efficient either. Although I agree with the lockdown at the present moment in time, we are going to have to get more subtle. And we’re going to have to think about moving, starting the economy up again, but what kind of protocols should we be taking to do that? Who should be going back to work? Who should be staying at home? How are we going to manage our work life? Are we all going to be wearing masks? I think that’s a good idea until we reach vaccine time.
So the government, unfortunately, just is good at making a, you know, a clampdown decision, right? One decision, everyone has to follow it, clamps down. What the government is not good at is making subtle tradeoffs, which individuals are much better at. You know, some individuals, young people, it’s much going to be much safer for them to go back to work than it is for older people. And we need to start allowing, or we need to think about how we’re going to allow these more subtle tradeoffs to be made by individuals and firms.
Bob Zadek: And what’s interesting is, even though we all have used the expression “total lockdown” or phrases such as that, right now there are obviously huge swaths of the economy that are not in lockdown. The health part of the economy is functioning. Manufacturing in many areas is functioning. Somebody is making the masks and the ventilators and preparing the food and growing the food. There are huge segments, somewhat invisible perhaps, of the economy that are functioning. So we always have made the decision about the tradeoff. And the question is, it is—we are not now by any means in a total lockdown. The economy is functioning, just differently. And perhaps we have closed up too much, perhaps just the right amount. But it’s only a question, isn’t it, Alex, of just continuing what we’re doing now? We have this false dichotomy of essential or not essential—kind of silly and left to local administrators and states. But by making this kind of phony excuse of essential quote and inessential, we are really in far less than a total lockdown right now.
Alex Tabarrok: Yeah, and I agree with you that this nonsense about essential and non-essential, you know, it’s just giving the government kind of an excuse to do what they always like to do, which is to make these broad-based rules and to kind of decide from their armchairs, you know, what’s what’s going to be allowed and what’s not. I mean, so I know in Michigan, you can’t buy seeds if you want to grow a garden, okay? Which is kind of crazy. I mean, they have Walmarts and then the Walmart has got to close off certain aisles because the whatever’s on this aisle is deemed non-essential. I mean, this to me is ridiculous. I think instead what we need is what Walmart was doing already, which was to have temperature checks for their employees, to disinfect the stores every night, and to have more social distancing. So to have fewer hours so that they can disinfect more and to have like one-way aisles, for example. You know, if you have a one-way aisle, then you can social distance much more than if you have people going both ways. Now, that’s a very simple thing, but it allows much more flexibility and it doesn’t sort of tell people, “Well, you can’t buy this, you can’t buy that. Oh no, you can’t do that. That’s non-essential.” You know, this is kind of ridiculous. We’re a little bit—we’re going a little bit out of control. You know, at first the government ignored the threat, and now they’re getting a little bit out of control in the clampdown.
Bob Zadek: Before we leave this almost amusing dichotomy between essential and non-essential, in the Bay Area, the San Francisco Bay Area in California, all construction was halted as being non-essential, except for—I don’t know if you heard this, Alex—low-cost housing. Affordable housing is essential and that’s continuing. And also in the Bay Area, there was a discussion of banning gourmet foods. If food is labeled gourmet, it’s inessential. However, baked beans—my favorite—baked beans and macaroni and cheese, being the opposite of gourmet, you can sell all you wanted. So that’s like government at its very worst. I don’t know if you heard those stories. I found them quite amusing.
Alex Tabarrok: I wonder if San Francisco will make an exception for arugula.
Bob Zadek: I hope not. Lettuce is supposed to be green, no other color is acceptable to me. It’s supposed to be green and tasteless.
Alex Tabarrok: Yeah, the construction thing is crazy. You know, one thing I point out is actually now would be a great time to fix the roads, because there’s no one on them. And the construction workers, that actually is a job where you can social distance quite well. Many of them are already wearing masks, you know, they don’t need to disinfect the tractors and the diggers and so forth. So actually now is a great time to improve the road system at low cost.
Bob Zadek: Perfect idea, Alex. You should be working for the Department of Transportation instead of wasting your time over there at MR.
Testing: The Path to Reopening [16:12]
Bob Zadek: Alex, this issue about flattening the curve. The concept of flattening the curve raises the choice which many governments felt they had to consider, which is close down the economy and so that not so many people get sick at one time because the healthcare infrastructure simply didn’t have enough beds. And so therefore you eliminate or mitigate the spread of the virus. But that has as a negative tradeoff that once you start to flatten the curve and you send people out from under—out from their homes back into society, you haven’t developed the herd immunity we’ve read so much about, and then the virus may very well come back, as opposed to not shutting down the economy, having a very high-pointed Mount Everest kind of curve, very high, but at the other side of it, you’ve eliminated the virus. Is that—that has an economic component. And it struck me, Alex, that the decision was made not based upon science and not based upon economics, but based upon the practicality of simply how many beds we had. Was that—was the thinking correct on that? And any thoughts on this flattening the curve versus powering through it in a Mount Everest kind of curve?
Alex Tabarrok: I think flattening the curve is a little bit misleading. This was the term which got out there early on to kind of save the healthcare system. I actually prefer “crushing the curve.” And the reasoning is this: the idea of flattening the curve or the lockdown or social distancing—you know, the virus can’t survive if it doesn’t find hosts. So we can kill off the virus, stop it from replicating, in a couple of different ways. One is to develop, you know, a vaccine or to develop, you know, herd immunity. But the other is to social distance, and there to hide. We’re basically hiding from the virus. Because if the virus can’t find us, it can’t replicate and it will die off.
So what we’re in now is this first part of the plan, which is like this suppression or the lockdown part to kind of kill off some of the virus and get control. Once we have control, we’ve bent the curve, once we’ve got the number of deaths going down, then I think that we can start to talk about how to get the economy going again and who should go back to work and how and what sort of safety protocols we need. But I do agree that the first step, I think, is necessary, and that is to suppress and to crush the virus, to attack the virus.
But what we’re not doing yet is investing huge amounts in our testing capacity. That is what is going to drive us in the second part of the plan. And, you know, we had this huge relief bill, CARES bill, $2.2 trillion. There’s nothing in there for building new testing machines. And what we really need to do is to have so many tests that we can test basically people every couple of weeks. We need millions of tests a day. And if we can have that millions of tests a day—and this is America, this is the most ingenious country in the world—we can scale this up. We can invest a few billion dollars in these machines and then start testing. And that would be much, much cheaper. Testing people at a mass rate, millions of tests every single day, testing it would be a much, much cheaper way of addressing this crisis than the lockdown. And so far, I’ve seen a lot of private initiative in this area, but the government has not got behind this in any big way. We basically need a Manhattan Project for testing. And that’s doable, but I haven’t seen the government really pushing that yet, and they really need to get on the ball because they’re behind.
Institutional Failure at the CDC and FDA [20:39]
Bob Zadek: Before we go to break at the half hour, Alex, I couldn’t agree with you more, of course. Nobody could disagree on the issue of testing. But since it has been so widely written about and commented by so many people, including yourself and your colleagues over at Marginal Revolution, can you help us understand a bit about why such an obvious, obvious need is not being met? It’s not like it’s not known. Is there something about the decision-making in government? Is there something structural about our economy that mitigates against the all-hands-on-deck need for testing?
Alex Tabarrok: To be honest, I don’t understand why we are not pursuing this path 110%. I could understand in the early days, you know, the CDC completely botched the first test, and the FDA, following their usual slow bureaucratic procedures, did not allow private labs and state labs to run their own tests. And in a sense, although that was a huge error, that was a very, very costly mistake, and the CDC and the FDA have really botched it and are essentially responsible for thousands of deaths which could have been prevented had we acted earlier.
Although they made this huge error, I could understand it. They were sort of following the usual playbook, which was the risk-averse, go-slow. But at this stage in the game, I don’t understand what is going on. I don’t understand what Trump is thinking. I don’t understand, for example, you know, he’s still talking about creating a task force with Ivanka being on the task force. And, you know, all due credit to Ivanka or whatever, but she has no capabilities in this area whatsoever. Let’s get somebody who’s been thinking about this for some time. Let’s get a noted epidemiologist. Let’s get Bill Gates. Bill Gates is doing much more to address this crisis than the government is. And that’s amazing. I’m really glad Bill Gates is doing that. We can talk more about what he’s doing. But the fact that Bill Gates is doing more than the government is an absolute crime.
Bob Zadek: Well, that shouldn’t be a headline. Bill Gates has always done more than the government more effectively ever since Bill Gates was a teenager. But that’s a different subject for a different title. We’ll explore that a little bit more after the break. This is Bob Zadek speaking with Alex Tabarrok. Alex teaches economics at the Mercatus Center at George Mason University. He is the co-founder of the Marginal Revolution, a must-read blog every single morning, a must-read. Also the co-founder of the Marginal Revolution University, a wonderful online learning tool. Alex, before the break, you had mentioned in passing right before the break how the FDA, which you have written about quite a bit, its decision-making, you have used the label quite often that they are risk-averse. And I want to drill down a notch on that, Alex. And I expressed mild disagreement with you before the break. You will see it’s not really disagreement, it’s more nuanced than that.
The FDA’s Invisible Graveyard [24:53]
Bob Zadek: And the point I’d like to have you address is, the FDA in its decision-making was, as we all know, horrible, and you can explain that a little bit. But the point is, it turns out that the decisions they made were, as it turns out, the most risky. So they might have thought they were being risk-averse, but in reality, they were being very much risk-takers. They just didn’t know it at the time. And I say that because they chose an alternative that was horrible. So let’s explore a little bit about the decision-making of the FDA. What was their mission, and what is their structurally—I’m not looking to point fingers at any politician or any single bureaucrat. I like to focus on structure to see what we can learn from a faulty governmental structure. So please speak to the FDA, their risk-taking, and structurally what went wrong.
Alex Tabarrok: Yeah, so that’s an excellent point about risk-taking, Bob. I agree with you, and that is due to the exponential nature of this virus. You know, the virus, if unchecked, it doubles about every three days. And what that means is you start with just a thousand people who are infected, and in 30 days, just 30 days, that’s 10 doublings, you’re up to a million people. And that’s the nature of an exponential. So you’re absolutely right. When you’re dealing with an exponential process like this, then acting early is absolutely critical because that last doubling, when you go from the ninth to the tenth doubling, that’s an increase of 500,000 people becoming infected. So if you act early and can reduce just one doubling, if you can eliminate just one doubling, then you save 500,000 people from being infected.
Now, why was the FDA so slow? Well, they don’t usually deal with exponentials, and their usual procedure is that if we make a mistake and we approve a drug which turns out to have some bad side effects, then we’re going to be in trouble. You know, people are going to come knocking on our door, people are going to die, and then they’re going to complain, of course, and there’s going to be congressional oversight, and we’re going to be in trouble. On the other hand, if during a usual time period, the FDA says, “Well, let’s delay. Let’s take some more time. Let’s do another test.” Now, that also kills people. That kills people because people who would have lived had that new drug been available sooner, they still die. But it’s what I call an invisible graveyard. It’s a graveyard of people we don’t see them because we don’t know. I could have lived had this drug been available. The relatives, they don’t know if this drug had been available sooner, this person, my loved one, my father, my brother, my sister, they would have lived. Instead, they died. So they’re buried in this invisible graveyard.
So most of the time, the invisible graveyard doesn’t cause the FDA any problems. What does cause the FDA problems is the visible graveyard when they approve a drug which turns out to have some bad side effects. So they’re much more concerned about approving a bad drug than they are about delaying a good drug. And that has bad consequences for us. It means that more of us actually end up dying than should. But you can understand the FDA’s incentives, even though they are very biased.
Bob Zadek: That was observed by Frédéric Bastiat when he wrote about the unseen. There are, in any matters of governmental policy, there are the visible effects of that policy and then there are the unseen. And if you are afraid of being criticized, all you care about is, if I make a mistake, let the mistake harm larger numbers of unseen so I will not be criticized. Public choice theory comes into play here. And so it was the issue, as Bastiat pointed out, of the unseen. Unseen consequences are never a problem if you’re seeking to hold on to your job. All you care about, you light a candle every morning and say, “If there’s a God in heaven, no one’s going to know that I messed up.” And that’s Bastiat’s unseen. So structurally then, it’s the natural behavior. Nobody wants to be exposed as being bad at their job. And so the problem with the decision-making at the FDA was they made a decision even though the harm caused by their decision might be greater, they made that decision, as Alex pointed out, because it’s unlikely people will know and will know that these additional deaths are at the feet of the FDA.
Now tell us a little bit more about that early decision-making, wrongful decision-making, ultimately riskier decisions they made, but they hoped nobody would find out. The die was cast pretty early in the game by the wrongful decision-making of the FDA, wasn’t it?
Alex Tabarrok: Correct. You know, first the CDC messed up, and the CDC, their entire job is to prepare for pandemics. I mean, that is their raison d’être, right? That’s their reason for being. And they had more time than anybody to prepare for this because it was obvious what was going on in China. Okay? And China should have been a wakeup call to many, many more people. This was when I first started getting interested in the issue. I’m not an epidemiologist, but when I saw what China was doing, the lengths to which they were going to combat this virus—China is not shutting down their economy lightly, right? The Communist Party relies on high growth rates to stay in power. So when you see a government like that closing down and locking down entire cities and closing its economy, you know this has got to be serious. The Chinese aren’t stupid.
So we had lots of time to prepare for this, but the CDC utterly failed. They first produced a botched test which didn’t work. Then the FDA enhanced that failure by not allowing private labs to run their own tests. And this is where the ordinary, you know, bureaucratic behavior of the FDA came into play because they were used to being risk-averse. They were used to saying, “Okay, no, we must wait for safety protocols. We must wait for efficacy testing. Okay, we need to test the private labs. We can’t just say go ahead and create this test. You know, we need to check out the test ourselves.” And there was all kinds of ridiculous things, like to get a test approved, you have to mail, mail to the FDA a CD with your test results and a printout. I mean, this is entirely crazy when you’re dealing with this super-fast-moving process. And so it was only weeks later that the FDA finally let up and allowed the private labs to start making their own tests. And that’s when our testing capacity began to increase. It’s not enough, but that’s when things began to happen when we unleashed private forces. That’s when things really began to move.
Medical Self-Defense and the Right to Try [33:14]
Bob Zadek: And what you have written quite a bit about the FDA and you have questioned their basic mission. Now, what is the FDA’s and their current mission? “Safe and effective” is of course the phrase. That’s a relatively new mission, “safe and effective.” And you have written quite a bit that the FDA is given the wrong mission and ought to be recast to behave differently. So tell us how the Alex Tabarrok structured FDA, how different would it look from its current mission? And what is—explain in a few words its current mission, safe and effective, and what should it be in your view?
Alex Tabarrok: Right. Yeah, I think one thing which is interesting about this crisis is that everyone is feeling the effects of FDA delay, while before the crisis, it was only people who were sick who felt the effects of FDA delay. You know, but if you had cancer or if you had AIDS or heart disease before the crisis, you also were—could be pretty angry at the FDA for being so slow and bureaucratic because you felt those effects. And I’m hopeful now that people will think a little bit more when they come to evaluate the FDA.
Now, what should the FDA be doing? What do they think they’re doing? Well, basically they have put themselves up as the gold standard, as “we’re not going to allow a drug onto the market until it is both safe and effective.” So they’re the ones who are doing the evaluation, and they basically give a permit, okay? “Here’s your permit. You can’t produce a drug until you have a permit.” Now, what I think should be going on is actually much more of what I call a Consumer Reports model. So if you think about Consumer Reports, they evaluate products, they test products, they rank products, they rate products, but they don’t tell you, “You cannot buy this one,” right? They provide consumers with information. And that is an extremely useful thing to do. I’m very glad that they do that. And I’m glad when the NIH does tests on drugs and says, “Listen, here’s a randomized controlled trial, these are the effects of these drugs.” I think the FDA should be much more like a Consumer Reports agency. It should be providing information to physicians and to patients, but it shouldn’t be permitting. It shouldn’t be allowed simply to say, “You’re not allowed to produce this drug. You’re not allowed to sell this drug.” It should be much more in the Consumer Reports model of providing information and then letting physicians and patients make their own choices about what tradeoffs are reasonable.
Bob Zadek: And what’s important, and a lot of our listeners may not be aware of it, is this brings into play something many of us have spoken about, written about, which is the related issue which comes about here, which is Right to Try. A very important issue for libertarians, which is the FDA, as Alex has said, does not allow—the force of government prevents somebody with a disease, let’s just say a fatal disease, they’re diagnosed, they will have a very much shortened life. And there is a drug out there that may save their life. Well, under today’s regime, absent compassionate use doctrine we don’t have to get into, but in general, the FDA will not allow that unproven drug to be tried. Now, what’s the danger to somebody who is fatally ill? They are dying anyway. To protect them from a bad drug is utterly absurd. And what if that drug would help them? Isn’t it the individual’s right to say, “I want to take a chance. I have no hope otherwise”? So Alex, aren’t you bringing in this whole issue which is important to us libertarians of Right to Try and freedom over what goes into our own body so long as we are making an informed decision?
Alex Tabarrok: Right. So I think about this like the right to self-defense. There should also be a right to medical self-defense. That is to take whatever actions you and your physician deem necessary to protect your life in a medical situation where you are being threatened. You know, if somebody breaks into your house and threatens you, you have the right to self-defense. Well, I think if a virus or a bacteria or a cancer, if they break into your body, you also have a right to medical self-defense, which is to use whatever tools are available to fight back. And the FDA stands in the way of doing that.
So I’d like to see a whole bunch of rules, because it’s not just—we also want, you know, there’s drug lag, it takes the FDA time to approve these drugs. There’s also drug loss, which is all of the testing which the FDA requires manufacturers to do, that’s expensive. That costs a lot. And if the patient population is not that big, then it just may not be worthwhile going through all of that time and all of that expense to research and develop a new drug. It takes over a billion dollars, over a billion dollars to get a new drug on the marketplace. And if the market isn’t big enough, then a firm is just going to decide, well, it’s not worth it, and they’re not even going to research and develop the drug to begin with. So we have drug lag and we also have drug loss, and both of those are concerning.
Bob Zadek: And it would—much of the problem that you point out, Alex, would be eliminated if we took away two words from—and they’re relatively new words added to the FDA mission, which is “and effective.” If the FDA would just be told, “Make sure it’s safe.” In other words, apply the same standards to drugs that you do to food. Make sure it’s not going to kill somebody. Make sure it is safe. But “and effective” is meaningless. You can tell people the FDA has not found this to be effective, just like nobody believes that Cheerios is going to cause cancer. But because Cheerios is ineffective at causing cancer doesn’t mean it can’t be sold. So it’s this absurd “and effective” that mucks up everything. It just requires taking two words out of the mission and the FDA is performing a valuable, perhaps unique public service, so long as they are objective and competent—Alex’s word competent—but let them do that. Tell us it’s safe, but tell us it’s not proven to be effective. And after that, anybody on this planet can make an informed decision whether to spend money and time taking a drug or a food or not. Give us information and we have dominion over what goes into our body. So wouldn’t that do it? And the “and effective” is a relatively new addition to the FDA’s mission.
Alex Tabarrok: Yeah, that’s absolutely correct. That was only added after 1962. And I think you’re right. I think overall that would be better. It is true—now, we have to, you know, let’s be honest, we’re talking about tradeoffs—so it is true we would get more ineffective drugs. That’s correct. Okay? But the advantage is, is that you would have drugs on the market sooner and you would have more drugs available. And I think the advantages overcome the disadvantages.
Regulatory Reciprocity [42:10]
Alex Tabarrok: Moreover, there’s even simpler things we could do, at least to start. Okay? So here’s one idea which I have proposed. It just seems blindingly obvious to me, but I haven’t got the FDA and the government to agree yet. But here’s my blindingly obvious idea: any drug which has been approved by a major developed country, whether that be Japan, the European Union, Canada, Germany, whatever, any major developed country which approves a drug, that drug ought to be automatically approved within the United States as well. I mean, this is very simple. Suppose you’re in Germany and the German physician, you’re sick and you go to your German physician and they say, “Here, I’m prescribing this drug for you.” Do you ask your German physician, “But has it been approved by the FDA?” No, of course not. Germans trust the European medical system, and if the physician writes a prescription, you’re probably going to take it. Well, if it’s good enough for Germans, you know, it’s good enough for me, okay? So any drug approved in Germany ought to be automatically approved here. That would be a very simple thing to do, and it just seems a no-brainer to me.
Silver Linings and Future Reforms [43:47]
Bob Zadek: Alex, I have such incredible optimism in general, but specifically on the other side of this epidemic. In the few minutes we have left, it’s easy for I’m sure for you as well as myself to see all of the obnoxious policies that we have acquired in our country that have been set aside, the regulations to deal with the virus. I allow myself to be optimistic that these temporary suspensions of regulations will become permanent, because I’m an optimist. So in the few minutes we have left, tell us on the positive side what changes in our daily lives, in the regulations, do you see as a result of what we have learned, such as telemedicine? Tell us on the bright side what you are hopeful we will have learned in regulation from this experience. We have a few minutes left, Alex.
Alex Tabarrok: Sure. So yeah, the silver lining. We now are allowing more doctors to practice across state lines. This was always crazy. You know, it’s one thing to say, “Well, I don’t want a doctor from, you know, South Korea, they might not have as good a medical system as ours, so they can’t practice here unless they’re approved here.” But to say in New York that “I don’t want a doctor from California working on me,” I mean, it’s completely insane. But yet that is the position that we have had, 50 different approval systems for physicians. I think that’s going to go away.
I do think telemedicine is going to have a more permanent role. You know, we have hobbled it with these crazy HIPAA privacy regulations, so your doctor can’t even email you unless it’s a secure email system and so forth. But I do think most of the time the doctor can evaluate you, you know, over Skype. So I think that’s going to be a permanent change. Online education, I think we’re going to do more of that. I’m actually a big proponent of that. So I think it’s not great now because people are having to do it very quickly on the fly, but overall I think that will be a positive trend. So there’s a few—it’s a big cloud, but there are some silver linings.
Bob Zadek: Also, we’re not breaking up Big Tech anymore, are we? No one’s going to complain about breaking up Zoom or breaking up Amazon. I think those will go by the board since it is Big Tech that is keeping our country alive during this process. So I am quite optimistic that we will—there’s so much to learn. We could have a profound effect upon economic and medical life in this country as a result of, dare I say, the experience of the COVID-19 virus.
Alex, thank you so much for giving us an hour of your time this Sunday morning. Your wisdom is always welcome. And once again, I commend our listeners to read every morning the Marginal Revolution. It’s there every morning, reliable as can be. Their links are wonderful. And also check out Marginal Revolution University. It is a wonderful teaching tool. This is Bob Zadek saying thanks again to Alex for his time this Sunday morning, and thanks to all my friends out there for sharing the Sunday morning with me. Have a good rest of the day.