The Profit Motive as Regulator

Defenders of the Food and Drug Administration (FDA) believe that government regulation is necessary to prevent pharmaceutical companies from selling “snake oil” and ineffective drugs. But it turns out that the profit motive is a better regulator than the FDA.

This week nine pharmaceutical companies announced that they won’t be releasing vaccines for COVID-19 until they are convinced that their products are safe and effective. The announcement, intended to reassure the public, comes as the Trump administration puts political pressure on the FDA to give emergency approval of vaccines prior to the upcoming election.

Drug companies–like all rational businesses–know that selling products that harm customers is not a good business practice. They don’t need the FDA to mandate trials. Their self-interest will motivate them to ensure that their products are safe and effective before releasing them.

The FDA’s stamp of approval is hardly infallible. Consider the coronavirus test kits produced by the Centers for Disease Control and Prevention (CDC). After receiving approval from the FDA, the CDC began sending test kits to labs in early February. Within hours, lab technicians discovered that the test kits were flawed.

As has become tragically clear during the pandemic, when science and politics collide, politics will triumph. Leaders at both the CDC and the FDA have caved to political pressure, issuing statements that have damaged the reputations of those agencies.

Drug companies–like all rational businesses–know that their reputation is one of their more important assets. Damage to a company’s reputation can have serious financial consequences. And if the damage is severe enough, the very existence of the company might be threatened.

A growing number of individuals are expressing dismay that the pandemic has turned into a political issue. But politicalization is the inevitable result when government exceeds its proper purpose. If we want to get politics out of health care, then we must get government out of health care.