What Kennedy Must Do To Defeat Regulatory Capture

Authored by Bretigne Shaffer via The Brownstone Institute,

President-Elect Donald Trump’s nomination of Robert F. Kennedy, Jr. to head the Department of Health and Human Services is cause for celebration for anyone who cares about the pharmaceutical industry’s influence over regulatory agencies, and the deleterious effect it has had on the health of Americans. 

It is nearly impossible to express just how remarkable and potentially world-changing this is. Only a few years ago, it would have been beyond the imagination of any serious political commentator. Those of us who believe in the freedom of medical choice – and especially those who have been personally harmed by the industry – have every reason to be ecstatic.

But even if Kennedy is confirmed, and even if he manages to implement his ideas, will they be enough to bring about real, lasting, change?

One of Kennedy’s primary targets will be the regulatory capture that practically defines the pharmaceutical industry and the agencies tasked with overseeing it. He has spent decades tirelessly battling this particular beast, and has recently articulated a number of specific policy ideas aimed at rooting out the “corruption” that characterizes the regulatory agencies as well as the world of medical research. But is that even possible?

In order to answer this question, we need to examine the nature of the regulatory state itself.

The Regulatory State

There is nothing new about private commercial interests seeking to use government force to subvert the free market to their advantage – and to the disadvantage of everyone else. The medical and pharmaceutical industries are hardly unique in this regard. Generally, interest groups, or individual corporations, do this by convincing politicians to erect barriers – in the form of laws and regulations – to those who would compete with them.

Much has been written about the extent to which the regulation of business sprang, not from a desire to protect consumers, but rather from the desire on the part of a few businesses to secure for themselves an environment in which they are insulated from competition. In their 1993 paper, “The Protectionist Roots of Antitrust,” for example, Don Boudreaux and Tom DiLorenzo look at some specific examples of business interests lobbying government to enact antitrust legislation that would stifle their competition.

They write:

“(F)or over a century the antitrust laws have routinely been used to thwart competition by providing a vehicle for uncompetitive businesses to sue their competitors for cutting prices, innovating new products and processes, and expanding output. This paper has argued that, moreover, antitrust was a protectionist institution from the very beginning; there never was a ‘golden age of antitrust’ besieged by rampant cartelization, as the standard account of the origins of antitrust attests.“

The world of health care as we know it today in America is the result of similar efforts by some practitioners and professional associations to defeat their competitors, not by outperforming them in the marketplace, but by enacting laws to limit their ability to practice.

Most notorious among these efforts was the 1910 Flexner Report. Commissioned by the Carnegie Foundation, the Report recommended closing down the vast majority of medical schools; streamlining medical education to exclude non-allopathic modalities (and mostly eliminating medical schools for women and African Americans); giving state governments the power to approve medical schools; and dramatically tightening medical licensing restrictions.

In fact, the Flexner Report was, for the most part, an unpublished 1906 report written by the American Medical Association (AMA). At the time, the AMA made no secret about its motives in seeking the reforms to which Abraham Flexner lent his name. It sought to reduce the supply of physicians in order to further enrich its own members. In 1847, the Association’s committee on educational standards reported that:

“The very large number of physicians in the United States…has frequently been the subject of remark. To relieve the diseases of something more than twenty millions of people, we have an army of Doctors amounting by a recent computation to forty thousand, which allows one to about every five hundred inhabitants…No wonder, then, that the profession of medicine has measurably ceased to occupy the elevated position which once it did; no wonder that the merest pittance in the way of remuneration is scantily doled out even to the most industrious in our ranks…”

The very history of the regulatory state informs us that it was not implemented for the purpose of protecting consumers from powerful corporate interests, but to protect the interests of certain powerful corporations and groups of professionals. It is important to remember this when we hear critics bemoan the “corruption” in the regulatory agencies, and insist that this can be remedied if we just put the right people in charge of them.

No. “Corruption” is the primordial swamp from which these agencies emerged. It is in their DNA. It is, in fact, their very reason for being. There is no “reforming” that which is operating precisely as it was designed to operate.

Moreover, even if these agencies had been designed with the interests of the public in mind (and never mind that “the public” is not a single entity with uniform interests to begin with), the reality remains that there is no mechanism by which they can be made accountable to us.

Accountability between two parties can only come when each party has choice regarding whether or not they interact with the other. This is not the case with regulatory agencies. These are imposed upon us. We are forced to use their “services” whether we are happy with them or not; whether they do a good job or not; whether they make our lives more dangerous than they otherwise would be or not. No matter how badly regulatory agencies perform, we are not free to take our business elsewhere.

The FDA

What this means is that – just as with all other political actors – the leaders of these agencies are removed from the consequences that their actions have on others. In the case of the US Food and Drug Administration (FDA), this has led to decades of malfeasance and error that have cost many, many, lives.

Perhaps the most infamous example in recent times is the FDA’s complete failure to protect the public from the painkiller Vioxx. The agency approved the drug in 1999, following which it is believed to have killed as many as 55,000 Americans before being withdrawn in 2004. Significantly, the FDA did not withdraw Vioxx from the market, Merck did that itself. In fact, it appears that the regulatory agency worked to suppress information about the known risks of the drug:

“A Merck memo uncovered in November showed that Merck scientists were aware in 1996 that the drug might contribute to heart problems. Then in 2000, a Merck study found that patients taking Vioxx were twice as likely to suffer heart attacks as patients taking older painkillers. Meanwhile, mid-level FDA officials who warned of these dangers were shunned by the agency. In FDA parlance, those with a “point of view” on Vioxx were unwelcome in certain meetings concerning the drug.’”

To believe that the Vioxx scandal was an isolated event would be a mistake. 

Indeed, the history of the agency is littered with similar stories. Worse, it also uses its power to prevent people from having access to treatments that may help them, but that would not be very profitable, or which might otherwise go against the interests of the agency’s industry benefactors. We witnessed this in the extreme during the past few years, when the FDA and the rest o