Markets Can Protect Patients Better than the FDA
Jonathan Nelson

An essential component of every free market is a civil justice system that enables parties to seek redress for harms. At a most basic level, contracts are useless if courts won’t enforce them. At a slightly less basic level, the primary incentive someone has to not cause harm to another is the threat of being held legally responsible for that harm. If we’re going to turn pharmaceuticals into a free-for-all, then we need to ensure the manufacturers’ incentives are properly lined up.

Even in our current system, drug manufacturers treat adverse events like an externality: if a drug hurts somebody, the cost of that is someone else’s problem. Indeed, the cost is usually passed on to taxpayers. If Humira (the best-selling prescription drug) gives someone lymphoma (which is listed in the black box warning), then who pays for it? You do, of course. If the patient has private insurance, you pay through higher insurance rates. If the patient doesn’t, then you pay through Medicaid/Medicare.

In very rare circumstances (compared to the whole world of drug injuries), the drug manufacturer can be held responsible for the injury — but that’s usually only where the adverse event wasn’t listed anywhere in the prescribing information and where the pharmaceutical company can be shown to have ignored/concealed safety data and where the plaintiffs can assemble an overwhelming amount of scientific proof.

If we’re going to take away FDA control, then we’ll need to dramatically expand the circumstances in which drug manufacturers are held liable for the harms they cause. Otherwise, there is little incentive to avoid or mitigate risk.

We’ll also need to expand liability for drug manufacturers for inflated claims about efficacy. Right now, it’s exceedingly difficult to sue a drug manufacturer for lying about the merits of its drugs — such lawsuits typically only happen in the context of a parallel criminal prosecution against the companies. Yet, if we’re removing the FDA’s oversight, then we need to make sure companies have a sufficient incentive against overstating the benefits of their medications, and there’s really no way to do that without extensive civil liability.

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