Wednesday, January 26, 2005

A Federal Car Administration?

Cafe Hayek has an interesting new argument on the question of whether we need an FDA. Link. It asks whether consumers would stand for a Federal Car Administration, that treated cars the way the FDA treats drugs. More people die of car accidents than bad drug reactions, so it is not that nonsensical a comparison.
The FCA would test new vehicle designs for safety and efficiency. That way, car shoppers could be assured that they would be getting safe cars and cars that did what they were supposed to do. A car advertised as a family mini-van would be tested to make sure that families could use these cars comfortably. An off-road vehicle would be tested off-road. A performance sedan would be taken on long trips to make sure it could handle winding roads without reduced driver comfort. The FCA would also make sure that there weren't too many "me-too" cars, cars that simply added another choice to a pre-existing niche.

Such tests would be extremely thorough. After all, cars are dangerous and a major expenditure for most families. It would take a decade of test-driving to make sure that cars fulfilled the claims made by their makers. Of course, this process would make cars very expensive. You'd have to charge a lot for a car that survived such a rigorous process to make up for the foregone earnings from tying up all that capital for so long without any return. And some cars wouldn't be approved. That would also tend to push up the price of cars that did get approved.

Choices would be few. Because of the high costs of the approval process, only cars that appealed to large numbers of consumers would receive attention from the manufacturers. On the plus side, the cars that did survive the process would be very safe and very good cars. They'd have to be. Manufacturers would want to reduce the odds of failure to avoid a ten year approval process that resulted in rejection.

This only goes to the problem of why drugs are so expensive. There is another, and larger, problem with the FDA. Other federal agencies, by delaying or denying choices for us, cause inconveniences. The FDA causes the deaths of tens of thousands, perhaps hundreds of thousands of Americans, by denying us useful, often life-saving drugs for years.

And they do not do it by requiring tests for safety, Phase I tests. These are cheap and quick. The big bucks and long years are for testing efficacy. The FDA was established to assure the safety of food and drugs sold in the U.S. That lasted until the early 1960s. In the 1950s, a sedative named thalidomide was sold in Europe, but was never approved in the U.S. under the then-existing FDA standards, which only tested for safety. It developed that, when taken by pregnant women, thalidomide could cause horrendous birth defects in their children. When the news broke, newspapers had a feeding frenzy, running front-page pictures of children with withered arms for weeks. As happens when there is such comprehensive news coverage, the cry went up to Congress to "Do Something!"

The problem was that there was nothing to do. Thalidomide was never approved in the U.S. The old FDA standards had worked. But facing the public outcry, Congress decided to do something, even if it was totally irrelevant to the problem in the news. They passed a new law requiring the FDA to approve efficacy as well as safety. This added 8-10 years and hundreds of millions of dollars to the process of each drug's approval. Since then, the number of new drugs has gone down drastically and the cost has gone up astronomically. The money that once was spent on discovering new drugs is now spent getting existing ones approved.

Although you can never prove what would have been, I have no doubt that we would today have cures for most cancers and for AIDS if Congress had not felt compelled to do something. And with the need only to prove efficacy to doctors, who have an interest in finding as many good drugs as possible, rather than to FDA bureaucrats, who have an interest in never approving a potential thalidomide, the costs of drugs would be pennies on the dollar of what they are today.


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