08 Jan 2015

The FDA’s Vioxx Scandal

Health Legislation 23 Comments

I’m co-authoring a book on US health care and we deal with the Vioxx scandal. This is a great example of a major shortcoming in the standard economic argument against the FDA. Typically, libertarian economists will say that the FDA faces incentives such that if it approves a drug that kills people, the FDA will be blamed, whereas if the FDA refrains from approving a beneficial drug, the people who end up dead will be attributed to the disease. Hence, the FDA errs on the side of caution.

This argument is correct as far as it goes, but it ignores mountains of evidence that the FDA approves very dangerous drugs and then doesn’t respond when later evidence documents the risks. For the rest of my post, let me quote from a 2005 interview of Dr. David Graham, then a 20-year FDA employee. He had led a study showing that Vioxx was extremely dangerous (perhaps causing 60,000 fatalities), and claims that his superiors at the FDA tried to suppress the study. Here are some key portions of the interview:

DR. GRAHAM: Since November [2004], when I appeared before the Senate Finance Committee and announced to the world that the FDA was incapable of protecting America from unsafe drugs or from another Vioxx®, very little has changed on the surface and substantively nothing has changed. The structural problems that exist within the FDA, where the people who approve the drugs are also the ones who oversee the post marketing regulation of the drug, remain unchanged. The people who approve a drug when they see that there is a safety problem with it are very reluctant to do anything about it because it will reflect badly on them. They continue to let the damage occur. America is just as at risk now, as it was in November, as it was two years ago, and as it was five years ago.

MANETTE: In that same PBS program, you were also quoted saying, “The organizational structure within the CDER is currently geared towards the review and approval of new drugs. When a serious safety issue arises at post marketing, the immediate reaction is almost always one of denial, rejection and heat. They approved the drugs, so there can’t possibly be anything wrong with it. This is an inherent conflict of interest.” Based on what you’re saying it appears that the FDA is responsible for protecting the interests of pharmaceutical companies and not the American people. Do you believe the FDA can protect the public from dangerous drugs?

DR. GRAHAM: As currently configured, the FDA is not able to adequately protect the American public. It’s more interested in protecting the interests of industry. It views industry as its client, and the client is someone whose interest you represent. Unfortunately, that is the way the FDA is currently structured. Within the Center for Drug Evaluation and Research about 80 percent of the resources are geared towards the approval of new drugs and 20 percent is for everything else. Drug safety is about five percent. The “gorilla in the living room” is new drugs and approval. Congress has not only created that structure, they have also worsened that structure through the PDUFA, the Prescription Drug User Fee Act, by which drug companies pay money to the FDA so they will review and approve its drug. So you have that conflict as well.

23 Responses to “The FDA’s Vioxx Scandal”

  1. Major.Freedom says:

    Let it not be mistaken to believe that if the structure of the FDA was geared to “the people” or “society” or some other abstract collective instead, that it would no longer have an incentive to approve unsafe drugs or disapprove safe drugs. State institutions are special interest group institutions.

    It is also important to note that it is not all “private” drug manufacturers the FDA caters towards. They cater towards some, i.e special interest group, drug manufacturers. The rest are treated as potential and actual hostile threats, even if they produce safe and effective drugs.

    • Keshav Srinivasan says:

      Why wouldn’t disfavor end pharmaceutical companies sell their patents to more favored pharmaceutical companies then?

      • Keshav Srinivasan says:


        • Major.Freedom says:

          They don’t? Ever?

        • Major.Freedom says:

          Maybe I don’t get your question.

          • Keshav Srinivasan says:

            Why wouldn’t disfavored companies sell all their patents to favored companies?

            • Harold says:

              Presumably a patent would be worth much more to a favored company, since it would get the drug accepted. The favored companies are very large. What often happens is the favored company acquires the less favored company entirely because the smaller does not have the resources to push the drug through regulation. GSK’s possible Ebola vaccine came through a timely acquisition of a smaller company

            • Major.Freedom says:


              OK Harold’s response helps in knowing what you’re asking.

              I don’t know why any specific disfavored company executive would not sell a patent. I can only say that if they don’t, then it must be worth more than the price to them, given the circumstances. Not much help, but I can’t speak for others like that.

  2. Brent says:

    I’d rather they approve everything and let me decide to take it or not. Libertarians correctly identify the false semse of security the government promotes as the real problem.

    • Harold says:

      It would be hard not to acknowledge that serious harm can be caused by unregulated drugs. As mentioned above, harm is also done by regulating drugs. How do you know which is bigger, or doesn’t it matter? Would you go for no regulation even if it resulted in more harm?

      • Dan says:

        No governmental regulation doesn’t mean there wouldn’t be regulators. They would just be private companies, and they would face competition.

        • Harold says:

          I have though about private protection / police etc, but I have not considered it in the context of regulation. I don’t see how it would be regulation, as much as an endorsement. A strict company would only endorse drugs that had been rigorously tested, a lax one would endorse anything. As a consumer I might be expected to trust the former more, and use only drugs that had been endorsed by the reputable company. However, if I wished could I not use drugs endorsed by the less reputable one, or no-one at all? I am not sure how it would be possible to keep dangerous drugs off the market.

          • Anonymous says:

            Personally, I wouldn’t go to a doctor that wasn’t backed by a reputable insurance company that could give me assurances that the doctor and the drugs he was recommending were on the up and up. I’m not sure what the best way to give customers those kind of assurances, but I’d spend my money with the companies doing the best job at it at the lowest price.

          • Dan says:

            It’s impossible to know how it would work, exactly. I’d guess your insurance company would be the one making sure the doctors they would cover you under were reputable and the drugs they recommended were tested. Regardless, I’d spend my money with the company that showed they were best at protecting their customers at the best price.

          • Dan says:

            Also, I wouldn’t attempt to keep dangerous drugs off the market. I’m sure insurance companies would incentivise their customers to not take them, just like they give lower rates to non-smokers. The big problem is that the FDA was a private company they would’ve gone out of business by now. Who would trust a company that recommended drugs that turned out to be deadly. Everybody would’ve started using their competitors by now. But with no competition, they face no risk of going out of business. In fact, the more the F up, the more money they say they need to make sure they do better next time. I don’t know the exact solution, but I know that giving the FDA a monopoly is a terrible way to keep dangerous drugs off the market.

      • Brent says:

        I would just like to be my own regulator, Harold. That is all.

  3. Bob Murphy says:

    Just to be clear, obviously I am not for the FDA using the State’s power to prevent people from using drugs that they want to try. Rather, my problem is that the FDA gives a seal of approval to drugs under the current system, and hinders the ability of other “authorities” from communicating to consumers risks more accurately. The general public has no idea how shady some of the FDA’s actions have been.

    • Keshav Srinivasan says:

      Bob, how does the FDA hinder the ability of outside experts to speak out about risks?

      • dave s says:

        I think the question (and it’s a good question) is whether the mere presence of the mighty FDA creates a situation where there is doubt as to whether there is a need for independent experts. This need would be driven by the general population. Does the general population think there is a need, given that the FDA exists? The average U.S. citizen doesn’t think much about this, doesn’t want to and is happy having a little money routinely taken from their paycheck so they don’t have to think about it.

        I don’t think it’s realistic for the average layman to do independent drug research. It would have to be funded and the source of the funding can influence outcomes and is unlikely to come from average citizens voluntarily since they generally view the risk as small.

        Another factor here is that there seems to a perception that there can exist a solution that will provide easy access when needed AND prevent unwanted side affects. That’s not going to happen.

        I personally would like to believe that a solution that doesn’t involve a monopoly backed by guns would be at least as effective as what we have now. How did it work prior to 1938? Yes, 107 people died of Sulfanilamide, launching food and drug act. But of note, the AMA had not approved Sulfanilamide use. And did people stop dying from approved drug use after 1938?

      • Major.Freedom says:

        It is not the existence of the FDA, it is the ideas surrounding it.

        The ideas surrounding the FDA are that it is the be all and end all of pharmaceutical knowledge, safety, and health risks.

        Indepedendent researchers are in this intellectual environment corrupted in some respect, because they are not the FDA.

        I am sure you can think of possible reasons for them to be corrupted, and it is likely something to do with capitalism.

  4. Scott H. says:

    My biases lead me to oscillate between an overly cautious FDA and regulatory capture for the FDA. I suppose that if each effect offset the other in precisely the right way we could just be living in the best of all possible worlds.

  5. Skip says:

    Consumer Reports does just fine without any government force. The public seems capable of picking out all sorts of electronics without governmental “help”.

  6. senyoreconomist says:

    Do you khow when will the book be coming out? Is it okay for you to say who the co-author is? Thank you.

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