Welcoming Our New OIRA Overlords

Monday, June 18, 2012

"...each agency shall ... consider ... reforms to existing significant regulations that address unnecessary differences in regulatory requirements between the United States and its major trading partners ... when stakeholders provide adequate information to the agency establishing that the differences are unnecessary"
—Exectutive Order 13609, "Promoting International Regulatory Competition"

It's tough to know how seriously to take Executive Orders sometimes. Some of them shape US policy for generations, others end up being less momentous than the annual White House Christmas/holiday card. It might take years to fully appreciate what you're really looking at, so if you wanted to create a truly massive amount of uncertainty, there's almost nothing better than a vaguely ominous, overly-broad EO.

In that light, we're distressed and/or pleased to read EO 13609. This incredibly broad mandate might create a reasonable forum for noted intellectual Cass Sunstein to fine-tune US regulations in a thoughtful way. Or it might give a single political appointee virtual veto authority over the entire Federal apparatus and touch off a global race to the bottom in regulation. Applying roughly the same rubric to all Federal regulations (regardless of purpose or impact) is either a key commitment to consistency, or a preemptive surrender of all relevant political high ground.

We'll leave it to others to debate what this all means (or doesn't mean) in a larger context. On first read, however, we have a generally negative impression what it might look like if this were applied to IVDs and fear that imposition of the "necessary" standard opens the door to some shockingly terrible policy changes.

Let's start with a silly example. You could, perhaps, make an argument that our array of state and national laws against bank robbery are largely responsible for preventing the growth of many thousands of high-earning potential "jobs" that could otherwise be had in the bank robbing industry. It would be absurd, however, to relax our rules against bank robbery on this basis alone. Doing so would conspicuously overlook the significantly larger value we all derive from living in a society that maintains a commitment to property rights and sets a high value on institutional trust.

IVD regulation is not so dramatic or unsubtle as laws against robbery. In each case, however, the relevant question is not simply what harm is caused by inhibiting some people's activity, but how that harm balances against the benefit being derived. Regulation is not good or bad per se; specific regulations are bad or good depending on how you weigh their specific costs and specific benefits. 

In many elements of IVD regulation, our higher regulatory standards are a key element of our success, they aren't holding us back. FDA has taken a strong lead, internationally, on insisting on clinical evidence for a broad range of IVDs. This insistence has been controversial at times but it has contributed, by and large, to a far more robust market for such tests in the US than you'll find most other places. You can generally get an IVD on the market a lot faster in the EU, but it's also typically worth a lot less to do so. In the long run, consumer confidence can be worth a whole lot more than the costs you might save by adopting a more permissive attitude.

FDA's leadership on IVD regulations is not, strictly speaking, necessary. That much is demonstrated by the fact that it is possible to have lower standards. By the same token, our robust marketplace is also not necessary... it is simply what we currently enjoy thanks in part to our high standards. 

We frequently frame the question of regulation as though our robust markets exist despite high regulatory burdens. That view may have merit in many cases, maybe even a lot of cases. In the IVD case, however, our robust medical marketplace is at least partly a direct consequence of our high standards. Let's have the discussion about harmonization and reducing truly pointless burdens, but let's also reaffirm our commitment to distinguishing the baby from the bathwater.

Regulations have costs, but let's always remember to consider their benefits as well. It would be tragic if our efforts to harmonize with lower regulatory standards leads us to harmonize with reduced economic results.

Tags: Obama Administration, Policy

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