Economics & Finance
June Mon 08, 2009
All the articles in Economics & Finance
Regulation Must Be Scientifically Defensible and Risk-Based.
In his weekly message on March 7, President Obama tried to reassure a nation jittery about the economy: “With every test, each generation has found the capacity to not only endure, but to prosper to discover great opportunity in the midst of great crisis.” But no matter how effective stimulus packages and strategies may be, recovery from this downturn will be plagued by government regulation that is damaging the ability of industry to perform the kind of scientific and technological innovation that was the engine of past recoveries.
FDA, EPA, and USDA’s Animal and Plant Health Inspection Service, the agencies that perform a gatekeeper function needing to approve high-tech products such as gene-spliced plant varieties and pharmaceuticals and other chemicals before they can be marketed are unscientific, overly risk-averse, and highly politicized, easily prodded to excesses by congressional demagoguery.
The pharmaceutical industry used to be one of the nation’s most innovative and successful. But excessive, erratic regulation has pushed development costs into the stratosphere, made the outcome uncertain, and slowed approvals to a trickle. As Fred Hassan, CEO of Schering-Plough, said of the current regulatory climate, “What will it take to get new drugs approved? The point is, we don’t know.”
The plight of the industry is likely to become worse. The Congress and FDA have been moving gradually toward placing various restrictions on the prescribing, distribution, sale, and advertising of newly approved drugs. In addition, they have imposed additional requirements in order to obtain even those limited or conditional approvals, a devastating double-whammy that is dangerous for patients and damaging to one of the nation’s most critical industries.
The chemical industry is another favorite target of regulators and politicians. An example is the EPA’s designation as pesticides of pheromones, natural chemicals by which animals, particularly insects, influence the behavior of other members of the same species. When male insects seeking female mates are exposed to appropriate pheromones, they become confused and cannot easily locate the females. As a result, many of the females fail to mate and lay eggs, and the number of offspring is reduced.
Although pheromones are effective in minuscule amounts and exhibit virtually no toxicity in animals other than insects (and are far safer than conventional chemicals), the EPA classifies them as pesticides and requires extensive and hugely expensive testing in order for them to be used commercially.
Another example is the EPA’s land disposal restrictions when toxins are present, which impose annual costs of approximately $205.5 million in order to avoid 0.22 cases of cancer annually from groundwater contamination and 0.037 cases from air pollution that is, about one case of cancer every four years and $20 million from property damage.
Is a little overregulation all that harmful? The monies spent by the government on anything (whether good, bad, or indifferent), or by citizens and companies to conform to government regulations and policies, exert an “income effect” that reflects the direct correlation between wealth and health depriving communities or individuals of wealth, enhances their health risks.
Wealthier individuals are able to purchase better healthcare, enjoy more nutritious diets, and lead generally less stressful lives. Conversely, the deprivation of income itself has adverse health effects, including an increased incidence of stress-related problems, such as ulcers, hypertension, heart attacks, depression, and suicides.
Studies that indicate a direct correlation between the deprivation of income and mortality suggest that, as a conservative estimate, every $5 million to $10 million of regulatory costs will induce one additional fatality. Moreover, society’s resources are not infinite. Former OMB official John Graham, who is now dean of the Indiana University School of Public and Environmental Affairs, has spoken bluntly about the need for more considered and scientific regulation. “Sound science means saving the most lives and achieving the most ecological protection with our scarce budgets. Without sound science, we are engaging in a form of ‘statistical murder,’ where we squander our resources on phantom risks when our families continue to be endangered by real risks.”
From an article first published in Genetic Engineering & Biotechnolgy News - June 1, 2009
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