The FDA Ensuring the Next Disaster in the U.S.
Politics / Healthcare Sector Jan 29, 2010 - 12:28 AM GMTBy: Mike_Stathis
The Food and Drug Administration (FDA) is like many federal regulatory bodies that were established for the sole purpose of protecting U.S. consumers.
As you might imagine, like other regulatory bodies, a properly functioning FDA is critical for ensuring the nation’s health and safety.
One could reasonably argue that the importance of the FDA is much greater than the Securities and Exchange Commission (SEC), and even the Federal Trade Commission (FTC).
Unlike the SEC and FTC, there are no partnering agencies or outside bodies to oversee the actions of the FDA.
While the SEC and FTC are held accountable to the largely useless and irresponsible U.S. Congress, there are other regulatory and enforcement bodies that help serve as checks and balances.
For instance, the SEC works with FINRA, the CFTC and the FBI, in addition to state securities regulators.
While these regulatory agencies have been largely useless and disastrous for investors, the SEC also relies on investment professionals and experts in academia who most often uncover widespread fraud.
I am still waiting for the day when the SEC acts responsibly in pursuing a full investigation of the Washington Mutual heist and blatant insider trading. I’m not holding my breath.
Also we cannot forget about the New York Attorney General, who also has a good deal of clout in fighting securities fraud. They have also done a good deal of work missed by the FTC.
In fact, former New York Attorney General Elliot Spitzer and current NY Attorney General Andrew Cuomo have actually done much more to go after large scale securities fraud than the SEC, FINRA and the FBI. See here, here and here.
The New York Attorney General has also gone after a long list of corporations that have engaged in illegal business practices against both consumers and competitors.
But what price will Cuomo pay for doing the job he was sworn to do? We have already seen what happened to Spitzer.
The list is extensive.
It would appear that the NY Attorney General is fighting more for U.S. consumers than any other government agency in America.
The FTC works with a host of state and federal agencies, including the FBI. Certainly, the FBI has become incompetent and largely unreliable, but let’s be honest; they are not entirely useless. Unlike the SEC, the FTC is very responsive to consumer complaints regarding fraud and other illegal activities. And as mentioned, they most certainly work with the Attorneys General of each state.
In contrast, unlike the SEC and FTC, who work with numerous agencies and departments, helping to provide a bit of accountability and oversight, there is no real body that really works with the FDA.
While the FDA claims to work closely with the Drug Enforcement Administration, the Consumer Product Safety Commission, the Department of Agriculture and many other agencies, both state and federal, this is simply not true for practical purposes.
The lack or real oversight and accountability seen in the FDA has become a huge problem that could lead to one or more episodes of widespread disaster as you shall see.
So let’s have a brief look at the responsibilities of the FDA.
The FDA was established in 1906 as a branch of the Health and Human Services Department (HHSD). Although most of its legal authority was established by the Food, Drug and Cosmetic Act of 1938, it has been granted additional legal authority by Public Health Service Act, portions of the Controlled Substances Act, the Federal Anti-Tampering Act, and many other pieces of legislation.
Prior to 1970, the FDA was primarily a law enforcement Agency and relied far less on science: the issues of adulteration and misbranding could be handled by well-trained inspectors. The need for PhDs and MDs was modest, and very few were employed by the Agency.
Beginning in the 1970s however, FDA became a modern science-based regulatory agency. The bulk of its work shifted from the courts to regulatory decisions made within the Agency with the advent of pre-market review and approval requirements for FDA-regulated products.
Science forms the basis of all regulatory decisions. FDA employees lacking adequate scientific support subject the approval process to delays, or worse, poor decisions. Therefore, effective regulation requires that the scientific competency within FDA matches or exceeds an applicant’s knowledge.
Today, the FDA is entrusted with the critical responsibility of regulating and supervising the safety of drugs, foods, vaccines, medical devices, blood products, dietary supplements and cosmetics. Thus, this agency serves a very important role in the U.S. economy by ensuring the safety of approximately $1 trillion in consumer products, or 25 cents of every consumer dollar spent annually.
The importance of the FDA in the nation’s security is similarly profound. The FDA plays a central role in protecting the nation from the potential effects of terrorist attacks, such as anthrax, smallpox, attacks on the food supply, nerve agent attacks and radioactive contamination, as well as from naturally occurring threats, such as SARS, West Nile virus and avian influenza.
Despite the awesome responsibility entrusted to the FDA, there is compelling evidence of dangerous inadequacies within its many divisions.
I have previously discussed how the prescription drug industry continues to engage in fraud. So where is the FDA amidst all of this?
Due to constrained resources and lack of adequate staff, FDA is engaged in reactive regulatory priority setting or a fire-fighting regulatory posture instead of pursuing a culture of proactive regulatory science.
But the drug industry does it part to assist with the FDA’s lack of consumer protection by shuttling over $500 million each year in drug user fees.
An internal review of the FDA concluded that the agency is “structurally broken,” and as a result, has placed the health and safety of the entire U.S. population at risk. An internal investigation of the FDA identified numerous areas of concern addressing the weaknesses and critical need for a radical restructuring of the agency.
Below are just a few of the findings from the report:
Finding: The FDA cannot fulfill its mission because its scientific base has eroded and its scientific organizational structure is weak.
Finding: The FDA cannot fulfill its mission because its scientific workforce does not have sufficient capacity and capability.
Finding: FDA does not have the capacity to ensure the safety of food for the nation. During the past 35 years, the decrease in FDA funding for inspection of our food supply has forced FDA to impose a 78 percent reduction in food inspections, at a time when the food industry has been rapidly expanding and food importation has exponentially increased. FDA estimates that, at most, it inspects food manufacturers once every 10 years, and cosmetic manufacturers even less frequently. The Agency conducts no inspections of retail food establishments or of food-producing farms.
Finding: The development of medical products based on “new science” cannot be adequately regulated by the FDA.
Finding: There is insufficient capacity in modeling, risk assessment and analysis.
Finding: The FDA science agenda lacks a coherent structure and vision, as well as effective coordination and prioritization.
Finding: The FDA IT infrastructure is obsolete, unstable, and lacks sufficient controls to ensure continuity of operations or to provide effective disaster recovery services.
Finding: The IT workforce is insufficient and suboptimally organized.
Finding: The FDA has experienced decreasing resources in the face of increasing responsibilities.
Finding: Recommendations of excellent FDA reviews are seldom followed.
These findings illustrate just a few of the many problems found within America’s healthcare system.
I want you to think carefully about the vital responsibility of the FDA, combined with the agency’s own analysis of its capabilities.
Next, imagine the possibilities of a national disaster just waiting to happen.
Perhaps the FDA really stands for the Federal Disaster Authority.
I address all of the problems within America’s healthcare system, from HMOs and drug makers, to Washington and physicians, in America’s Healthcare Solution.
Once I have detailed the problems, I present a detailed solution; a solution that does not depend on a free-market or universal healthcare approach.
As you shall see, all current proposals for healthcare reform fall way short of what is needed.
America’s Healthcare Solution
http://www.avaresearch.com/files/20091111085557.pdf
If you want to be exposed to the truth about America’s healthcare system, if you want to know the solution to America’s healthcare crisis, order your copy of my latest book, America’s Healthcare Solution today.
By Mike Stathis
www.avaresearch.com
Copyright © 2009. All Rights Reserved. Mike Stathis.
Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted hedge funds with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Prior to Apex Advisors, Mike worked at UBS and Bear Stearns, focusing on asset management and merchant banking.
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