24 Sep 2007  Research & Ideas

The FDA: What Will the Next 100 Years Bring?

With the possible exception of the Internal Revenue Service, no other governmental agency touches the lives of more Americans than the U.S. Food and Drug Administration, which ensures the safety of $1.5 trillion worth of consumer goods and medicines. Harvard Business School professor Arthur A. Daemmrich discusses the impact and challenges of the agency and his new book, Perspectives on Risk and Regulation: The FDA at 100. Key concepts include:

  • The FDA has made competition possible in consumer products and even in pharmaceuticals by removing the issue of basic product safety from the purchase decision.
  • The agency has found it increasingly difficult to navigate between 2 forces: the need to make science-based decisions, and to operate as a political and governing agency whose outcomes sometimes reach beyond determinations of scientific or medical facts.
  • The challenge for FDA leaders is to maintain morale and focus, and to back up decisions with solid data on benefits and risks to different consumer populations.

 

The U.S. Food and Drug Administration, which was created by the passage of the 1906 Federal Food and Drugs Act, regulates companies and industries accounting for one-quarter of all consumer spending, roughly $1.5 trillion worth of consumer goods and medicines. It conducts visits to more than 16,000 facilities each year, an increasing number of which are on foreign soil.

"Without the FDA, each of us would individually spend a lot more time researching where products come from and what ingredients they contain," says Harvard Business School professor Arthur A. Daemmrich, whose new edited volume (coauthored with Joanna Radin), Perspectives on Risk and Regulation: The FDA at 100, has just been released. The book collects views on the work and challenges of the agency from FDA officials past and present, as well as from executives whose industries are regulated by the FDA.

The agency is responsible for the safety and effectiveness of prescription drugs, biologics (biotech products derived from living sources such as cells), over-the-counter medicines, medical devices, cosmetics, nutritional supplements, and all food products, with the exception of meat and poultry. And the breadth of the work, not to mention the volume, is staggering. Just a few of the actions taken by the agency this past summer include:

  • Licensed a new vaccine, ACAM2000, to protect against smallpox.
  • Warned consumers not to eat raw oysters harvested from an area of the southern tip of Hood Canal in Washington state after an outbreak of illness.
  • Approved the first generic versions of Coreg, a widely used medication for high blood pressure and chronic heart failure.
  • Proposed new standards for formulating, testing, and labeling sunscreen drug products and established a UVA rating system on a scale of 1 to 4 stars.
  • Announced actions against an Iowa dairy after illegal drug residues were found in the dairy's cows; a Tennessee company for selling a substance billed as both a preventative against skin cancer and a tanning agent; and a medical device firm suspected of shipping unsterile products.

But the agency is also feeling growing pains. Its 9,000 employees and $1.95 billion budget are straining to meet the demands of technological and global change. It has lost key senior managers, and low morale is a growing problem. Can the FDA retain its leadership role in the next 100 years? We asked Daemmrich to provide insights.

Sean Silverthorne: What has been the impact of the FDA in daily life over the last 100 years? Without the FDA, what would change about how we live our lives?

Arthur A. Daemmrich: Picture yourself walking into a grocery store to buy food for lunch: a loaf of bread, a jar of mayonnaise, a container of mustard, cold cuts, processed cheese spread (I'm from Philly, and we love Whiz), and pickles. Now imagine finding sawdust in the pickles, sand in the mustard, and so on. That quite literally was the situation in the early 20th century, and it made shopping more time-consuming and complicated than it is today.

So I would say the primary impact of the FDA over the past century has been to make predictable the safety of food, drugs, cosmetics, and other products regulated by the agency. As consumers we don't have to spend time figuring out if claims about contents match what is in the container. Likewise, responsible manufacturers don't have to worry about competitors cheating by putting bogus ingredients into their products. So the agency's work for consumer protection also acts as a protection for ethical manufacturers.

Without the FDA, each of us would individually spend a lot more time researching where products come from and what ingredients they contain. During recent scares concerning pet food ingredients and some children's toys, people suddenly had to research which products were recalled and which are safe. Imagine trying to do that for every item of food, medicine, or cosmetics you use. Consumers would end up restricting what they buy to a few trusted brands. In effect, the FDA has made competition possible in consumer products and even in pharmaceuticals (particularly through the growing generics market) by removing the issue of basic product safety from the purchase decision.

Q: The FDA has fought morale problems and lost senior talent, and now some 30 percent of its workforce is at a point where it can retire. What is going on organizationally with the agency?

A: The agency has found it increasingly difficult to navigate between 2 'magnetic poles' of sorts.

The FDA's work has a basis in fundamental science, both laboratory-based for product inspections and more clinical for the review of mountains of data produced in drug trials. Agency employees rightfully are drawn toward the pole of making science-based decisions. But as we point out in the book's introduction, the FDA must also operate as a political and governing agency. Decisions are expected to be made in transparent rule- and procedure-based ways, and in many cases they produce outcomes that reach beyond determinations of scientific or medical facts.

The political pole may not appeal to everyone, but it is fundamental to how the FDA functions. Conflagrations concerning products like RU-486 and COX-2 inhibitors are almost inevitable considering how many divergent interests and disputes over evidence the FDA has to balance. The challenge for agency leaders is to maintain morale and focus, and to back up decisions with solid data on benefits and risks to different consumer populations.

Q: What challenges does globalization pose to the FDA?

A: The challenges are strategic and logistic. On the strategic front, the FDA has articulated the goal of serving as the world's premier regulator of food, drugs, cosmetics, and other products and also of helping to lead the transformation of medicine to a molecular level. Current logistical challenges include ever-more rapid movement of products across national borders and increasing manufacturing of core medicine and food ingredients overseas. For example, Chinese firms are eager to get FDA certification, but this involves extensive travel for agency inspectors.

Q: How can the FDA keep pace with the dizzying pace of technology advancement taking place in the industries it regulates?

A: The agency can keep pace based on its current regulatory tools and mandate; however, it clearly needs additional financial resources. 9,000 employees cannot ensure the safety of $1.5 trillion of consumer goods and medicines.

Q: In your book's introduction you call for a "hybrid of private-sector firms and public-sector organizations focused on patients and consumers" to advance health care. Why is this important?

A: Americans are remarkably—sometimes painfully—resistant to acknowledging that we have a health-care system that is national in scope. I don't advocate the bureaucratic monster many people envision when they hear the words "national health insurance," but it is disturbing that we fail to provide health care to so many of our citizens.

At the same time, firms in the United States are global leaders in inventing and bringing to market new drugs, devices, diagnostic tests, and other innovative health products. Markets are excellent at promoting innovation and driving toward efficiency, but they don't function without governments.

As we've been discussing, the FDA protects the public while industry seeks out consumers of health-care products. That balance has not extended to areas such as health insurance, where we face a huge institutional challenge to develop a system with fewer gaps that doesn't inhibit innovation.

Q: What are some of the most significant challenges you think the FDA will face in the next 100 years?

A: In the short term, the FDA needs to work with industry, academic medicine, and health-care providers to resolve current dilemmas around post-market drug safety and consumer product safety. Historically, the United States oriented its regulation to pre-market testing, but the time has come to more effectively manage the safety of ever-more specific medicines and consumer products once on the market.

Longer term, the United States will clearly only become more diverse, with highly differentiated expectations for products and dissimilar risk-tolerances among different ethnic groups or at different income levels. The FDA must regulate to protect the entire population, but not impede innovations targeted to specific subgroups.

Q: What are you working on next?

A: I recently joined the Business, Government & International Economy unit at HBS and am in the early stages of developing a research project that explores boundaries in health care, entrepreneurship, and business. My plan is to compare internationally the legal and regulatory limits countries put on the ability to commercialize health information and what this tells us about the prospects for global health-care businesses. I have been observing that changes in health insurance systems and new technologies together are pushing people to take an increasingly active role in managing their own health records.

So the project will explore the relationship between, on the one hand, new technologies for predicting future disease and for capturing, recording, and transmitting health information, and on the other hand, efforts to contain costs and pioneer new health delivery businesses.

About the author

Sean Silverthorne is the editor of HBS Working Knowledge.