March 1, 2010 (Vol. 30, No. 5)

Regulators Need Appropriate Incentives and Disincentives

Frank Young, former head of the FDA, used to admonish his minions that there were times that common sense should trump established policies or rules. Other officials have not been so wise.

Young’s successor, David Kessler, for example, chose a high-profile but ludicrous issue calculated to get him on the evening news in a virile demonstration that he was going to be tough at enforcing the law. Was the issue defective heart valves, a contaminated vaccine, or perhaps moldy peanut butter? No, Kessler directed armed federal marshals to confiscate 15,000 gallons of Citrus Hill brand orange juice—solely because it was labeled “fresh.” It was reconstituted from concentrate, and the FDA contended that it is inaccurate to call orange juice “fresh” if it’s made by the dilution of concentrate because that constitutes “processing.”

On CBS’ “60 Minutes,” Kessler expressed his indignation: “[the juice] was made from concentrate. My grandmother could have told you. I mean, it wasn’t fresh. It wasn’t very hard [to tell the difference].” If it was so obvious, why then, couldn’t consumers simply be permitted to decide whether they liked the product enough to buy it again?

This wanton waste of regulatory and law-enforcement resources contrasts, for example, with a raid by federal authorities of a Louisiana sandwich company in August 2009, during which they seized tuna salad sandwiches and other food after inspectors found widespread rodent and insect infestations.

Another egregious—many would say  “inconceivable”—example of bureaucratic dysfunction was perpetrated in 2008 by a little-known Department of Health and Human Services regulatory sibling of the FDA. The federal Office for Human Research Protections halted a study by Johns Hopkins University and the Michigan Health & Hospital Association of the effectiveness of a simple five-step checklist intended to prevent catheter-related infections in Michigan hospital ICUs.

The checklist merely specified procedures that should be performed routinely at the bedside, including washing hands with soap and cleaning a patient’s skin with antiseptic. But, because researchers were planning to assess the results of implementing the checklist, their work met the strict definition of “research,” and therefore, required patients’ formal informed consent, the approval of institutional review boards, and other expensive and time-consuming red tape.

Because the researchers had not jumped through the hoops, the Office for Human Research Protections actually stopped the study, in spite of the fact that the checklist was associated with a 66% reduction in infections throughout the state of Michigan, saving over 1,500 lives and $200 million in the first 18 months alone. This was worse than an absence of common sense: It was monumental callousness and stupidity, if not outright malfeasance.

Eventually, the decision to shut down the study was reversed, but this is the kind of bureaucratic rigidity and cluelessness that should cause heads to roll.

Last fall, I took a sightseeing tour around the lovely town of Sonoma, CA, in a wagon pulled by two mules—a new, tourist-oriented venture started by an entrepreneurial businessman who does everything, including caring for the animals and driving the wagon. During the 5 mph circuit through the town, I noticed that he would periodically reach under the seat and flick the lever on a small black box. I asked him what it was, to which he responded, “It’s the electric turn signals that regulators require on the wagon. We also had to install hydraulic brakes.” The inflated, unnecessary costs of doing business in this hyperregulated world.

Late last year, I saw first-hand an example of a nonsensical waste of public funds in my own suburban community of Redwood City, CA. Because of a requirement of the Americans With Disabilities Act that “wheelchair ramps shall be included at all intersections,” work crews installed hundreds of these ramps at a cost of at least hundreds of thousands of dollars, perhaps more—at a time when counties and cities here were cutting essential services to the bone.

Lest anyone accuse me of being callously indifferent to the plight of the handicapped, let me explain. The houses that line the streets here are all single-family homes, with a driveway that connects the garage to the street. In other words, there are already about 30 driveway “ramps” per block that could be used by a person in a wheelchair. (One ramp was installed literally inches from a driveway!)

Now, I do realize that using them would sometimes require that the wheelchair-bound enter the street at places other than in a crosswalk, but there is very little traffic on most of these sleepy suburban streets. I’m also aware that the driveways might not precisely meet the design standards for wheelchair ramps, and for that reason, I performed an experiment. I borrowed a nonmotorized wheelchair and tried it on about a dozen local driveways; I had no trouble going up or down them. 

These sorts of flawed (read: dumb) cost-benefit decisions are vexing to those of us who study public policy. Guidelines or staff manuals are supposed to ensure consistency and transparency, but they are often viewed by government functionaries as immutable commands from on high. On the other hand, if we grant wide discretion and flexibility to bureaucrats, the result can be decision-making that is arbitrary and inconsistent.

If only we could have bureaucrats who were smart, common-sensical, and public-spirited. But as economist Milton Friedman pointed out, that’s like trying to design a cat that barks. So what’s the solution? We must strive to create appropriate incentives and disincentives that will induce regulators to act responsibly and intelligently. That, in turn, presents another problem: It requires those who oversee the bureaucrats—legislators—to get it right. This is all so discouraging that I think I’ll just unwind with a cold glass of fresh Citrus Hill orange juice and forget about public policy for a while.

Henry I. Miller, M.D.

Henry I. Miller, M.D. ([email protected]), a physician and fellow at Stanford University’s Hoover Institution, was at the National Institutes of Health and Food & Drug Administration from 1977 to 1994.

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