Drugs: The Good, the Bad, and the Ugly

The senseless Batman killings in Aurora, Colorado, as well as those that occurred years earlier in Columbine a few miles away, have something in common with the number one cause of overdose deaths in the United States and an important potential cause of teen suicide: prescription drugs approved as safe and effective by the Food and Drug Administration (FDA).

As an Austrian economist, I am not saying that FDA-approved drugs "caused" these problems. The people who took those drugs and did those things are the people who "caused" those bad outcomes. What I am saying is that the FDA is guilty of manipulating information and people's choices and thereby contributes to all these negative outcomes.[1] I am also not saying that all FDA-approved drugs are inherently harmful, ineffective, or should never be used.

Most importantly, FDA-approved drugs and products help to make Americans fatter, weaker, dumber, sicker, poorer, and in general less healthy. We have been lulled into substituting prescription drugs for healthy lifestyles. "You don't need to correct unhealthy conditions in your life, just take this pill everyday for the rest of your life. The experts at the FDA have approved it and your doctor has advised you to take them." Collectively, this process is unconscionable, even though it is now considered normal.

As the pharmaceutical and medical industries pile up cash, the health crisis grows and spreads across the country. This is the irrational world created by the FDA. This powerful government bureaucracy, coupled with massive government monopolies (e.g., the American Medical Association, drug patents, certificates of need for hospitals), direct government subsidies such as Medicare and Medicaid, and indirect subsidies for comprehensive health insurance, etc., have combined to give America the most expensive medical industry and the least healthy population in the advanced world.

The FDA is a government bureaucracy, which Mises showed must be a rule-driven, rather than market-driven, institution. "Bureaucratic management is management of affairs which cannot be checked by economic calculation."[2] Hence the affairs governed by bureaucracies grow increasingly irrational and out of synch with human wants over time. As Mises demonstrated, the rule-driven bureaucracy is all about violence, not progress: "The ultimate basis of an all around bureaucratic system is violence."[3]

For example, we recently saw the FDA fined GlaxoSmithKline (GSK) $3 billion for illegally marketing their drugs for unapproved uses. They have fined other drug companies for similar practices. But do they ever get the job done?

No, the FDA is habitually slow to react, and even when they do, such fines are just part of the cost of doing business with the FDA. No people have actually been punished; GSK's stock rose significantly when the fine was announced, and hardly anyone even noticed the event. How unlike the free market, where a few tainted pills of Tylenol unleashes weeks of cable-television news coverage, billions of product recalls, crashing stock prices, and billions spent correcting the product-safety issue and assuaging the fears of consumers.[4]

When it comes to drugs, there are the good drugs that are produced and regulated by the real free marketplace. There are the bad drugs that are created as a result of government prohibition. Then, with the FDA, things get ugly. Here there are no social mechanisms to generate solutions, only a bureaucracy concerned with protecting itself and its power. The Big PharmaFDA nexus is just one giant conflict of interest against the general public.[5] Let us now try to make economic sense of all this FDA chaos.

Drugs have been used for thousands of years. We now consume more goods that are considered drugs than ever before. There is no denying the benefits and economic value of drugs. However, the subject does raise an often neglected consideration of "harm." Unexpected harm is the result of underappreciated dangers from the consumption of a good.

In other words, everyone expects to receive more benefits than costs when buying a good. Our expectations include some known uncertainties (Is this going to be a good or bad avocado?) and other possible risks (Is this a potentially dangerous genetically modified avocado?). For our purposes, "harm" comes from the unknown risks of consuming a good. In the case of drugs and drug-like products we can see large systematic errors by consumers who are harmed as a result. For example, the American Medical Association and doctors, as well as the US government, helped promote cigarette smoking, increasing the number of smokers and cigarettes smoked, and thereby increased the amount of lung cancer and heart disease.[6]

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Drugs: The Good, the Bad, and the Ugly