Topic: Regulatory Studies

The FDA Bends Over Backwards To Get Drug Makers To Ask Them To Make Naloxone OTC

Press reports have created the impression that the opioid overdose antidote naloxone is now available over the counter. But in fact, the drug is still classified in the US as prescription only, so states have developed workarounds to make it easier for patients to obtain it without going to a doctor for a prescription. In most states, patients can get naloxone by going up to the counter and asking the pharmacist, who is legally authorized by the state to dispense it. 

But some states prohibit third parties from obtaining a prescription for another person, so people in those states who wish to have the antidote available because they have a friend or relative who uses opioids cannot obtain it. And experience shows that many pharmacists choose to not stock naloxone or participate in any distribution program. Furthermore, the stigma now attached to opioid use has deterred many patients from going up to the pharmacy counter and explaining to a pharmacist why they need naloxone.

To get around such obstacles, Australia and Italy have designated naloxone as a truly over-the-counter drug. People can discreetly buy it off the shelf and check out at the cash register.

The Food and Drug Administration is on record since at least 2016 as believing that it is probably appropriate for naloxone to be rescheduled as OTC and has encouraged manufacturers to petition the FDA to that end. Yesterday  FDA Commissioner Gottlieb announced the FDA has even gone to the trouble of designing Drug Facts Labels (DFL) required of manufactures for their products to be sold over the counter, and has even tested these labels for “consumer comprehension” in front of focus groups. The Commissioner stated in the announcement that this represents an unprecedented effort to facilitate and speed up the reclassification of naloxone from prescription-only to OTC.

This is commendable. But as I have written herehere, and here, the Commissioner does not have to wait for manufacturers, who may lack the incentive, to request the move to OTC. Under FDA regulations, the FDA can undertake reclassification review at the request of “any interested person,” or the Commissioner himself. States may petition the FDA for reclassification. Finally, if all else fails, Congress can order the reclassification.

The FDA should no longer wait for manufacturers to ask them to make this lifesaving drug more accessible to those in need.

The Impact of The New German Minimum Wage

Germany introduced a new economy-wide minimum wage for the first time in 2015, at a relatively high rate of €8.50 ($9.67 today). This rose to €8.84 in 2017. For reference: between 10 and 14 percent of eligible workers were thought to earn less than €8.50 before the policy was introduced.

This is interesting from a research perspective. Most minimum wage studies examine the impact of minimum wages at low levels or assess small changes to their rate. But here we have a case study of a whole regime change with a high rate introduced for the first time.

A new paper by IZA Institute of Labor Economics provides a clear literature review on the effects so far. Studies have exploited three different strategies to assess the impact: utilizing regional variation of the “bite” of the minimum wage, using treatment and control groups, and assessing the impact on firms. As the table below shows, a broad consensus is emerging, which sits well within the existing minimum wage literature:

  • Unsurprisingly, hourly wages have increased at the bottom of the income distribution, though there is little evidence of a ripple effect further up.
  • Most studies find a small but negative effect on overall employment (up to 260,000 fewer jobs), driven by reduced hiring (not layoffs) and a reduction of casual and atypical employment.
  • All studies that assessed it find a negative effect on contractual hours.
  • As a result, although hourly wages increased, the reduction in hours meant gross monthly earnings does not appear to have increased much for low-paid employees.
  • Since gross monthly earnings have not substantially increased, and those earning minimum wage are often not from the poorest households, the policy hasn’t seemingly reduced the risk of being in poverty.

German minimum wage studies

For more on the state of the academic debate on minimum wages, read my Regulation article.

What’s That Buzzing Overhead? It’s An OSHA Drone

“That buzzing noise over a construction site could be an OSHA drone searching for safety violations,” notes Littler Mendelson lawyer Tammy McCutchen in a piece for the Federalist Society. Quoting a U.S. Department of Labor memorandum from May of last year obtained by Bloomberg Law, McCutchen writes that “your friendly neighborhood OSHA inspector is now authorized by the Labor Department ‘to use camera-carrying drones as part of their inspections of outdoor workplaces.’”

What about the Fourth Amendment, you may ask? Well, court review is unlikely because current procedures call for the agency to obtain employer consent before sending the spycams aloft. Which makes everything okay, right? 

Not really. As McCutchen writes, employers who refuse such consent “risk the ire of the DOL, with serious consequences. Nothing is more likely to put a target on an employer’s back for multiple and frequent future investigations than sending a DOL investigator away from your doors. Refusing consent will label you at the DOL as a bad faith employer that deserves closer scrutiny. This I know through experience practicing before DOL and as a former Administrator of DOL’s Wage & Hour Division.” 

So consent will often, maybe nearly always, be given despite the dangers one might imagine. Some of those dangers: “The drones could record trade secrets or employees doing things they shouldn’t.  But the memo contains not a single word on protecting the privacy of employers or employees caught on video.  How long will OSHA retain the video? Who will have access to the video? Will the videos be obtainable by competitors or unions through a FOIA request?” Or, for that matter, by other law enforcement agencies seeking to build a completely unrelated legal case against the employer, employees, or perhaps even the owners or users of nearby property?

All of which points up one of the problems with trying to turn the abstractions of civil liberties into something real: before a court can act on behalf of your rights, you need to be able to say no to the government’s demand in the first place, or else there will be no dispute for the court to review. And across much of our regulatory and administrative state, that power to say no in the first place has been tending to ebb away.  [adapted from Overlawyered]

Deregulation and Profits

Deregulation and profits are unpopular ideas in some quarters these days. In a major speech last summer, Senator Elizabeth Warren lashed out at the Trump administration’s deregulatory efforts:

Deregulation is code for ‘let the rich guys do whatever they want’ … The Trump administration and an army of lobbyists are determined to rig the game in their favor, to boost their own profit, the cost of the consumer be damned.

… Regulations are about setting the rules of the road, plain and simple. Done right strong fair regulations protect the freedom of every American.

Warren’s comments are internally inconsistent and divorced from the actual workings of politics and the economy. On politics, her latter comments assume that the government works in the public interest, yet her former comments suggest that the government gets hijacked by private interests.

In economics, deregulation is actually code for “undercut the rich guys and their lobbyists by opening the door to new competition.” Deregulation and competition channel the profit-seeking impulses of producers into providing more value to consumers.

The only good part of the recently enacted farm bill was the deregulation of hemp growing. The prospect of high profits is now drawing farmers into hemp and encouraging businesses to develop new consumer products in health, food, and textiles.

A Wall Street Journal story on hemp today illustrates the harmony between deregulation, profits, freedom, and consumer benefits:

Cultivation was largely banned from 1970 until December, when President Trump signed a new $867 billion farm bill that removed hemp from a list of federally controlled substances.

Hemp’s return to farm fields this spring coincides with a surge in demand for cannabidiol, a derivative of hemp or marijuana that has become a popular additive in drinks, foods and dietary supplements. Proponents say it relieves anxiety, inflammation and other maladies without the psychotropic ingredient that delivers a high to marijuana users.

Farmers and processors believe growing demand for cannabidiol will turn hemp into a lucrative cash crop.  

… Hemp flourishes in rocky soils inhospitable to other crops. It also represents a new potential revenue stream for tobacco farmers abandoning that crop. Other growers are eager to diversify away from mainstream crops after several years of low prices spurred by a production glut and trade tensions.

… Growers can earn $200 to $400 an acre growing hemp for use in textiles, plastics, insulation and construction materials, according to Rodale Institute, a farming research agency. Hemp grown for cannabidiol could earn farmers thousands of dollars an acre, according to the institute. Farmers earned net profits of around $11 per acre for soybeans and lost $62 for corn in 2017, federal figures show.

… Processors in the U.S. also are expanding. Folium Biosciences is building a $30 million, 110,000-square-foot hemp extraction facility in Colorado to increase its capacity 10-fold, said Chief Executive Kashif Shan. 

To recap. President Trump and Congress deregulated hemp. Farmers and corporations lured by potentially high profits are producing a range of new and beneficial products. Over the longer-term, high profits will be eroded by competition in markets and prices for the new products will be driven down. Farmers have new freedom to diversify. The nation’s income and output will be higher as investment increases and new jobs are created.

In her speech, Senator Warren said, “To hide what they’re doing big corporations and Republicans here in Washington often claim that regulations are bad for the economy. They go on and on about how big government restricts freedom and makes it harder for businesses to succeed. That is a big greasy baloney sandwich.”

Hemp regulations were bad for the economy, they did restrict freedom, and they made life harder for farm businesses. So Warren’s logic would only make sense to someone smoking a big, greasy cigarette of hemp’s sister species.

On Behavioral Economics

Scott Sumner had a wonderful post on Econlog last week. He was responding to an Atlantic article lamenting behavioral economics not taking a prominent role in introductory economics courses.

Scott’s key point was that many insights in behavioral economics are intuitive, while important economic concepts are not. In a world in which there is so much misunderstanding about trade, migration, the price mechanism and much else, the real value added of introductory economics comes in giving students the toolkit to “think like an economist.” Hence, it makes sense to spend more time teaching standard micro over human heuristics and biases.

I couldn’t agree more. But there is perhaps another point Scott could have made.

Though behavioral economics is interesting and can have beneficial applications to our own life and in policy areas where clear defaults must be set, leaning so heavily on human irrationality in introductory courses risks behavioral economics becoming a kind of “Market Failure version 2.”

What I mean by that is that, absent a thorough treatment in courses with applications about trade-offs, unintended consequences, or case studies, the risk of throwing out basic economics so early in favor of declaring “humans are irrational” is that policy debates become even more heavily weighted towards unthinking intervention to “correct” for our supposed biases.

As with market failure, the undercurrent of lots of behavioral economic contributions – the throwaway implications – are that government intervention is needed to fix the biases of behavioral consumers. Intervention is often thought implicitly pareto improving over non-intervention (helping behavioral consumers without harming others.) But there are at least six reasons why this may not be the case (even if we see what we consider evidence of behavioralism):

1)      Behavioral consumers (BCs) might themselves respond “behaviorally” to interventions or nudges designed to help them, potentially leaving them worse off (e.g. drug prohibition, payday loan restrictions, some smart disclosures on credit costs).

2)      Seemingly behavioral decision-makers may, in fact, be acting rationally, especially given the costs associated with accessing information or switching (e.g. in credit card markets and in relation to fuel economy).

3)      Interventions to correct for irrational decision-making by BCs may impose substantial costs on others, maybe even failing a reasonable overall welfare evaluation (e.g. autoenrollment often comes with lower default savings rates, caps on payday loan interest rates can reduce services for non-BCs too).

4)      Developing policies to correct the biases of BCs may distract attention from policy approaches that are welfare-improving for all groups (e.g. opt-out organ donation vs. organ markets, environmental behavioral approaches vs. more direct tax incentives).

5)      Interventions can increase the complexity of economic decision making or worsen inaccurate perceptions of risk (e.g. disclosure laws, overdraft protection).

6)      Interventions can undermine the “ecological rationality” of the market, dampening incentives to learn from mistakes or for entrepreneurs to deliver new protections for BCs.

Yes, behavioral economics is an important body of economic knowledge. But putting irrationality front and center of very introductory economic courses would both constrain time from teaching more difficult economic concepts, and worsen economic policy debates absent teaching the difficulties associated with correcting perceived biases through interventions or nudges.

Are Anti-Airbnb Laws Unconstitutional?

Maybe:

A federal judge on Thursday blocked a recent New York City law intended to crack down on Airbnb and other online home-sharing sites that city officials say have essentially turned residential apartments into illegal hotels and have aggravated the city’s housing shortage.

The law, which was enacted last summer and was to go into effect next month, would have required online home-sharing services like Airbnb to disclose to the city on a monthly basis detailed information about tens of thousands of listings, and the identities and addresses of their hosts.

But the judge, Paul A. Engelmayer of United States District Court in Manhattan, granted a request for a preliminary injunction by Airbnb and another firm, HomeAway. He wrote the companies were likely to prevail on their claim that the ordinance violated the guarantee against illegal searches and seizures in the Fourth Amendment.

And, while I am no constitutional scholar, I would have thought such laws are also takings that violate the Fifth Amendment. 

In any case, such laws are inane as a matter of economic policy, as Cato’s Peter Van Doren explains here.

Supreme Court Shouldn’t Let Agencies Get Away with Animal House Rules

Businesses in regulated industries rely on the advice of the regulating agency when making decisions. But, with so many businesses asking the agency for advice, sometimes the agency will need its professional staff (rather than the commissioners or other principals) to help answering questions. If a staff member issues advice, should that be considered the agency’s advice? If not—and if it can neither be relied upon for legal purposes nor be subject to judicial review—isn’t it worse than not getting any advice at all?

Soundboard Association, an industry group representing call centers and others using new phone-dialing technology, wants to know the answer to those questions. In 2009, a Federal Trade Commission staff member sent a letter to a telemarketing company that used soundboard technology. The letter stated that soundboard technology was not subject to regulation under the Telemarketing Sales Rule, which prohibits, with some exceptions, making phone calls that deliver a pre-recorded message. Although soundboard technology does deliver pre-recorded messages, a live operator selects which audio file to play in response to the customer’s answers. The staff member said that, because this made calls using soundboard technology “virtually indistinguishable” from calls between two people, they were not subject to the rule.

In 2016, seven years after that letter, the same staff member sent another letter to the telemarketing company. This letter said that, because the FTC had received complaints about soundboard calls, the technology would now be subject to the Telemarketing Sales Rule. The letter demanded that companies cease using the technology until the technology improved. But if the FTC wants to change its mind on a rule, there’s a process for that—the scope of judicial deference to agency reinterpretations is a live legal debate—and regardless, regulatory determinations are supposed to be subject to judicial review, if they’re final.

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