The Food and Drug Administration is one of the most important government agencies. The FDA has an interesting history and below I will review some important dates.
- 1938 Federal Food, Drug and Cosmetic Act. This law was enacted after the drug Elixer Sulfanilamide killed over 100 people. Firms were required to submit new drugs to the FDA. “If the FDA was not convinced of a drug’s safety then it had 180 days from the receipt of the application to block the drug’s introduction into the market.” The law required that drugs have an appropriate label for safe use.
- 1951 Durham-Humphrey Amendment. The amendment divided the drug world into prescription and over-the-counter drugs. Patients using over-the-counter drugs did not need a physicians prescription.
- 1962 Kefauver Amendments. These amendments removed the 180 day limit. Further, the law required not only that new drugs be safe, but also that they are effective. The FDA also gained control of all drug testing in the U.S.
- 1992 Prescription Drug User Fee Act. Due to lengthy approval times, this law allowed the FDA to charge drug companies user fees in order to receive guarantees on review times.
Presently, there are 4 phases that a drug must go through in order to gain FDA approval.
- Phase I. These are smaller (20-80 participants), clinical trials which determine a drug’s safety and pharmacologic properties among healthy volunteers.
- Phase II. This phase tests a drug’s efficacy and optimal dosage. Typically 100-300 individuals are enrolled and these volunteers have the disease which the drug is supposed to treat.
- Phase III. The third phase is very similar to phase 2, except that the study is much larger. Often there are over 1000 participants in these trials. A drug can receive approval from the FDA if Phase III proves successful.
- Phase IV. This is the least formal stage. It involves post-market surveillance. Often the FDA will request that the pharmaceutical company conducts a study to determine the long term safety of the drug.
A paper by Philipson and Sun (2007) looks at whether having the FDA and product liability is an efficient use of societal resources. If the FDA approves a drug as safe, then why would there be product liability? The chance of an enormous lawsuit will only lead to higher drug prices as companies have to find a way to fund lawyers and damage awarded during lawsuits. “For example, firms seldom do more clinical testing than what the FDA requires, which suggests that at least for this investment in safety, product liability may sometimes duplicate the role of the FDA.” If the drug companies will not preform more clinical trials, having a product liability system will only add the cost of drugs.
One issue not taken into account is one of fairness. If an individual is harmed by an unsafe drug, without a product liability system they will not be compensated. Further, if we believe that individuals harmed by the drug have more medical expenses (from drug complications) and thus lower income, it is possible that an efficiency argument could be made by which product liability redistributes income from those with lower marginal utility of income to those with higher marginal utilities of income. Since I am not in favor of having the courts decide cases based on issues of income inequality, I think the fairness is the most compelling argument for a product liability system.
- Philipson TJ, Sun E (2007) “Is the Food and Drug Administration Safe and Effective” NBER WP #13561.