Congress Can Make Regulators Accountable

Published March 25, 2017

It’s tough to make predictions, especially about the future,” Yogi Berra famously (and apocryphally) said — but we’re going to hazard one anyway. Because the need for less-intrusive and more-cost-effective regulation is a core belief in both the GOP majority in Congress and the Trump administration, much-needed regulatory rollbacks will be an ongoing storyline in 2017 and beyond.

In a December 60 Minutes interview, House speaker Paul Ryan spoke of the need for regulatory reform:

There are a lot of regulations that are really just crushing jobs. Look at the coal miners in the Rust Belt that are getting out of work, . . . the loggers and the timber workers and the paper mills on the West Coast, . . . the ranchers or farmers in the Midwest. . . . We’re talking about smarter regulations that actually help us grow jobs in this country.

Leaving no doubt about the centrality of regulatory reform on the congressional to-do list, Speaker Ryan also said, “So we think regulatory relief is very, very important. And that’s something we’re going to work on day one.”

He wasn’t kidding. Within the first weeks of the new session of Congress, two important pieces of legislation that could be major steps forward on regulatory reform had been approved by the House of Representatives. The first is the aptly named Regulations from the Executive in Need of Scrutiny (REINS) Act, which would require affirmative congressional approval of any “significant” rule — defined as one that imposes compliance costs of more than $100 million a year. If Congress failed to approve a rule within 70 legislative days after its promulgation, it would not become law.

The “opt-in” nature of this legislation instead of the “opt-out” character of the Congressional Review Act (CRA) would make it far more effective. That said, as of March 13 the House and Senate had both voted to overturn seven regulations under the CRA, and three of those bills had been signed by the president. Once they have all been enacted, the seven withdrawn regulations will have eliminated $3.7 billion in regulatory costs and the burden of 4.2 million paperwork-hours. Many more withdrawals are in the pipeline.

Second, making the CRA potentially even more effective, in January the House passed the Midnight Rules Regulation Act, which would allow Congress “to consider a joint resolution to disapprove multiple regulations that federal agencies have submitted for congressional review within the last 60 legislative days of a session of Congress during the final year of a President’s term.” In other words, Congress would be able to withdraw a group of such regulations together (“en bloc”) instead of having to use the current procedure of considering one regulation at a time.

Greater politicization of regulation is a risk itself, but it’s a reasonable price to pay for curbing the kind of rogue regulation found in recent years across the executive branch’s departments and agencies.

Another important development was the House’s reinstatement of a procedure called the Holman Rule, which empowers any member of Congress to propose an amendment to appropriations bills that would single out a government employee for salary reduction or cut a specific program. A majority of the House and the Senate would have to approve any such amendment. That could be an important factor in redressing the excessive risk-aversion of many of our “gatekeeper” regulatory agencies. For example, bureaucrats who unnecessarily delay approval of an important new product or project (such as a life-saving drug, or the Keystone pipeline) could be sanctioned.

Another potentially important development was the introduction by Representative Barry Loudermilk (R., Ga.) of the Modern Employment Reform, Improvement, and Transformation (MERIT) Act, H.R. 559, which would make it easier to “drain the swamp” by removing federal employees for poor performance or misconduct. This would be something of a sibling to the Holman Rule, but possibly less unwieldy.

Currently, trying to discharge a federal employee can take upward of a year, usually distracts managers from the substance of their agencies’ work, and is often unsuccessful in the end. According to a 2015 Government Accountability Office report, only 0.18 percent of the federal workforce had been fired for poor performance or bad conduct during the previous year. Many federal departments and agencies must simply soldier on with underperforming or insubordinate employees.

The MERIT Act allows for due process: It requires notice in writing to the employee in question from the head of an agency and provides an opportunity to respond with an appeal. The Merit Systems Protection Board is required to issue a decision within 30 days of the appeal.

If these new measures become law, the Food and Drug Administration (FDA) would be a good place to start applying them. The nation’s most ubiquitous regulator, it regulates products accounting for more than a trillion dollars annually — 25 cents of every consumer dollar, encompassing food, drugs, vaccines, medical devices, and your dog’s flea medicine. In recent years, in both the formulation of policy and the evaluation of individual products, the FDA has made egregious errors and arbitrarily expanded its authority in extra-statutory ways that have had important consequences. Most of these missteps have been in the direction of excessive risk-aversion or heavy-handed regulation, although a few, such as oversight of herbal dietary supplements and compounding pharmacies, have been marked by laxity, timidity, or outright incompetence.

President Trump agrees. In addition to signing the Congressional Review Act measures, on March 13 he directed the director of the Office of Management and Budget “to propose a plan to reorganize governmental functions and eliminate unnecessary agencies (as defined in section 551(1) of title 5, United States Code), components of agencies, and agency programs.” The list of these redundant bodies should be long, though eliminating agencies and programs will be difficult to accomplish with the “gatekeeper” agencies, such as the FDA, which must issue affirmative approvals before certain classes of products can be legally marketed. Nevertheless, drastic reforms are needed.

Bringing a new drug to market now requires ten to 15 years, and the costs have skyrocketed to an average of more than $2.5 billion (including both out-of-pocket and opportunity costs) — largely because FDA requirements have increased the length and number of clinical trials per marketing application, along with their complexity.

The detrimental effects of FDA delays in approving certain new drugs already available in other industrialized countries are well documented and deserve as much attention as drugs’ high costs. At times, FDA officials seem to have forgotten that their decisions are literally a matter of life or death.

An example is the sorry saga of a drug called pirfenidone, used to treat a pulmonary disorder called idiopathic pulmonary fibrosis (IPF), which kills tens of thousands of Americans annually. The cause of the disease is unknown, and there were no drug treatments approved for it in the United States until October 2014, although pirfenidone had already been marketed in Europe (since 2011), Japan (2008), Canada (2012), and China. Pirfenidone was approved in the EU on the basis of three randomized, double-blind, placebo-controlled studies, conducted in Japan, Europe, and the United States.

Despite a recommendation for approval by an FDA advisory committee (composed of outside experts) in 2010, agency officials opted not to approve the drug and demanded another major clinical study. The results, published in May 2014, were impressive, and the FDA finally approved the drug in October of that year; but between 2010 and the approval, more than 150,000 patients died of IPF in the United States. Had pirfenidone been available, a significant fraction of them could have had their lives prolonged.

The pirfenidone example illustrates an endemic problem at the gatekeeper regulatory agencies: Timidity, fear of “false positives” (approving a drug that proves to be deficient or dangerous), and lack of accountability can have calamitous impacts.

Another common problem at federal agencies that must be reined in is “regulatory creep,” the invention of authority or requirements that are not found in statutes or regulations. The FDA has pushed the envelope of its statutory authority in many ways. In 2007, for example, the agency announced what amounts to a new, extra-statutory criterion for marketing approval. For a drug to be marketed, the law requires only that it be shown to be safe and effective. In denying approval of Merck’s new drug Arcoxia, a COX-2 inhibitor for the relief of arthritis pain, however, the FDA said that the drug had to be shown to be superior to existing drugs to merit approval. Robert Meyer, the director of the FDA office that oversees arthritis drugs, claimed that the agency’s advisory committee had sent a clear message that “simply having another drug on the market . . . didn’t seem to be sufficient reason” for approval. But whether or not the advisory committee actually meant to convey that message (and in any case, advisory committees’ recommendations are not binding), it is specious reasoning.

In fact, for a variety of reasons, having “another drug on the market” that appears from clinical-trial data to be no better than alternatives may be important. First, there are important differences between drugs that act through similar mechanisms: Different COX-2 inhibitors and statins, for example, were shown long after the initial approvals to have distinct and critical advantages and disadvantages, so physicians can select one over another, depending on how their patient responds.

Second, if two drugs are both effective in 40 percent of patients with a given symptom or disease, it may not be known whether they work in the same 40 percent. Thus the failure of regulators to approve the second drug could deprive a large number of patients of access to an efficacious medicine.

Third, a substantial fraction of the prescribing of many drugs falls outside the primary indications specified in the original approval; these subsequent uses may be either approved or “off-label” indications. But if the FDA won’t approve a drug for its initial indication because it is not sufficiently superior to a previously approved medicine, further testing might not be performed, and other uses, therefore, might never be discovered.

Wyeth’s former chairman and CEO, Robert Essner, described the implications of the requirement to show superiority this way: “If you’re the first company to get approved in a certain area and competitors can’t get on the market, the FDA is now establishing monopolies. And that’s certainly not their mandate.” Whatever one thinks of regulation to ensure safety and efficacy, surely we should not have an FDA that aggressively discourages and undermines competition.

The extra-statutory superiority criterion should be explicitly repudiated by the FDA, perhaps in a “clarification” in the Federal Register.

The FDA’s intransigence has virtually annihilated entire once-promising industrial sectors — for example, “biopharming,” the production of high-value substances in plants. One early application was the production by the biotech company Ventria Bioscience of rice that contained two human proteins, lactoferrin and lysozyme. Once grown and harvested, the rice kernel is processed to extract and purify the proteins for use in oral-rehydration solution for treating diarrhea, which is surpassed only by respiratory diseases as the leading infectious killer of children under the age of five in developing countries.

The proteins have the same structure and functional properties as those found naturally in breast milk, and the process for extracting them is analogous to that used routinely to produce therapeutic proteins from organisms such as bacteria and yeast. Research in Peru showed that fortifying an oral-rehydration solution with the proteins extracted from Ventria’s rice substantially lessens the duration of diarrhea and reduces the rate of recurrence — a near-miraculous advance for people in the developing world.

But regulators can undo miracles. When Ventria approached the FDA in 2010 for affirmation that these proteins are “generally recognized as safe” (a regulatory term of art), it received no response. Without an endorsement by the FDA, the company was unwilling to market the product, and so it remains unavailable, tragically depriving children in developing countries of a life-saving therapy.

The current state of affairs, not only at the FDA but at many federal regulatory agencies, is bad for public health and for inspiring trust in the government. We need a new ethic, one that better considers the underappreciated dangers of excessive risk-aversion. And with an eye toward more evidence-based decision-making, the FDA and its congressional overseers must find ways to introduce accountability for misdeeds and missteps. Reform-minded political appointees at the agency will be essential, and Congress will need to be a constructive partner.

[Originally Published at the National Review]