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Chapter 794 of 943 · Business Tides: The Newsweek Era of Henry Hazlitt by Henry Hazlitt

Overregulation

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September 10, 1962

Everything possible must be done to prevent a recurrence of the kind of tragedy brought about by thalidomide, a sleeping pill that, when taken by pregnant women, was found to have the frightful side effect of causing deformity in infants.

Stricter legal controls are no doubt part of the answer. And yet they may also bring with them the danger of an overregulation that may itself have the side effect of retarding medical progress without being more than partially effective in curing the evil against which it is aimed.

Take the drug-control bill in the form in which it was unanimously passed by the Senate. If such a bill had already been law, could it have averted the thalidomide tragedy? Would such a law give assurance that no similar tragedy could occur again?

One answer to these questions is that even under existing law Dr. Frances Kelsey did have authority to keep thalidomide off the market and exercised it. What is ironic, as one scientist has put it, is that the real tragedy occurred in Germany (where the drug originated), “a country that has no drug laws that would have prevented it,” and yet it is the U.S. that “takes immediate action to drastically change the strong drug laws it has which actually had prevented that tragedy from occurring here.”

MUST TEST ON MAN

One of the provisions of the Senate bill gives the Secretary of Health, Education, and Welfare discretionary authority to require that new drugs be tested first on animals. Most pharmaceutical firms already make such tests. But an irony of the thalidomide case is that no tests on animals showed the dreadful side effect that developed in pregnant women. Soon or late, a new drug must be tested on human beings. And no one can know in advance what side effects will develop, or in what number of cases, or how long after the drug is taken.

Some of the provisions in the Senate bill could do more harm than good. Among the most serious are those giving the Food and Drug Administration the right to pass on the “efficacy” of new drugs and not merely, as heretofore, on their safety. More than this, the bill puts the burden of proof on the industry rather than on the government. It requires “substantial evidence” that a drug is effective before permitting it on the market. It is a dangerous legal precedent to allow any bureaucrat to keep off the market something that, even though harmless, is in his opinion “ineffective.” This is trying to protect the patient against the judgment of his doctor, trying to protect the consumer against his own judgment. Efficacy can be determined only by freedom of trial, and in no other way.

PROFITS AND PROGRESS

Present legal provisions give the government power to prevent the marketing only of unsafe drugs. They permit a new drug to be marketed if the government takes no action within 60 days after an application is filed. This seems much sounder in principle than provisions that allow a government official to hold up a drug indefinitely until the manufacturer can prove to the official’s satisfaction that it is not only safe but “effective.” This could give a bureaucrat power of life or death over a company.

It is fortunate that the Senate threw out proposed amendments to abridge drug patent rights. Those who sincerely want the American consumer to benefit from more miracle drugs will not begrudge the drug industry its profits. They will want the industry to have maximum incentive to develop new drugs. Sterling Drug, Inc., estimates that already each new drug that reaches the market costs the company an average of $5 million in development costs. Such great sums must come from somewhere. They can only come out of past or prospective profits. Initial high profit margins are the greatest stimulus to expansion of the industry and the entry of new firms. This expansion increases output, stimulates further research, and brings down prices.

It would be tragic if we hastily passed laws whose chief effect was not to safeguard the health of the American public but to slow down the very medical progress that in the last generation has extended the span of life and almost eradicated some of the most dreaded diseases of mankind.

Business Tides: The Newsweek Era of Henry Hazlitt

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