It's Economics 101! (The Continuing Series)

Government regulation stifles economic growth and innovation. Lift the dead weight of government from the backs of our entrepreneurial class and we'll all be more prosperous and free. And oh yeah -- I'm actually Brad Pitt.

Commissioner Margaret Hamburg reviews the history of the FDA in the new NEJM, which, quaking before the mighty power of Stayin' Alive, makes her essay available to you, the undoctorated. As Hamburg tells us, before the FDA came along, heroin was marketed as a remedy for coughs and asthma. It does actually work, unlike most of the crap that was sold as medicine in those days.

At first though, the FDA couldn't require proof of safety before medications were marketed. In 1937, a company sold sulfanilamide (an antibiotic) in a solution of diethylene glycol, otherwise known as antifreeze, which as you probably know is not good for you. In fact it killed more than 100 people. So Congress passed the Food, Drug and Cosmetic Act to require prior evidence of safety. The FDCA, by the way, spared the United States from the Thalidomide disaster which resulted in thousands of babies born with severe birth defects in Europe.

It wasn't until 1962, however, that the FDA could require good evidence of effectiveness before approving drugs and approving marketing claims. One third of drugs then in common use ended up being withdrawn from the market because they just didn't work.

It was regulation that spurred the immense explosion of pharmaceutical innovation since that time. Only when they were required to develop good scientific evidence of safety and effectiveness did drug companies actually start spending the money to get it -- big investments that have had big payoffs for human health.

We still have a long way to go -- publication bias, me too drugs, and aggressive marketing of drugs that are no better or even worse than their cheaper competitors still plague us. We need better, stronger regulation. But it's the regulation we do have that has spurred scientific knowledge, technological development, and the wealth generated by the pharmaceutical industry. Without it, we'd still be swallowing snake oil.

BTW, the specific flaw in the totally bogus theory of the Free Market™ in this case is the requirement of perfect information. Consumers don't have information about whether drugs are safe and effective unless the government requires it. That's why we need government intervention in the market to give us drugs that help, rather than hurt us. There's no other way.