Comment to the Healthy Future Task Force Security Subcommittee

Dear Representatives Hudson, Banks, and Cole:

Thank you for the opportunity to respond to the Healthy Future Task Force Security Subcommittee’s request for information (RFI) on Pandemic Preparedness, Public Health, and Supply Chains and Medical Independence from China. My name is James Broughel, and I am a senior research fellow at the Mercatus Center at George Mason University and an adjunct professor of law at the Antonin Scalia Law School. I specialize in regulatory institutions, cost-benefit analysis, and the impact of regulations on economic growth. The Fourth Branch project at the Mercatus Center is dedicated to advancing knowledge about the effects of regulation on society. As part of the project’s mission, scholars conduct careful and independent nonpartisan analysis that employs contemporary economic scholarship to assess regulations and their effects on economic opportunities and societal well-being.

This letter will focus on four areas of my research that I believe are relevant to the subcommittee’s mission, as well as to the RFI:

• Vaccination and testing. Emergency deregulatory actions taken by the US Department of Health and Human Services (HHS) have allowed pharmacists and pharmacy support staff members to vaccinate for COVID-19. These regulatory changes should be made permanent, and further expansions of pharmacy authority should be considered, such as making it easier to obtain waivers under the Clinical Laboratory Improvement Amendments (CLIA).
• Drug shortages. Drug shortages have been a recurring feature in pharmaceutical markets in recent years. During the pandemic, emergency deregulation made it easier for compounding pharmacies around the country to produce medicines when those medicines went into shortage and were not available from another supplier. This process worked well and should be continued during ordinary times and even expanded upon.
• Retrospective review of regulations. Currently, approximately 1.1 million restrictive terms are contained in federal regulations. About 65,000 of these can be found in regulations from HHS. A logical response to the pandemic is to conduct a review of healthcare regulations to determine which requirements are working well and which are not working. Instead, HHS is moving in the opposite direction. The department is refusing to review its regulations, as evidenced by the fact that HHS recently proposed repealing a self-binding regulation that would require HHS to review its own rules on a 10-year recurring basis. More retrospective review and analysis is needed at federal agencies, especially at healthcare regulators such as HHS.
• Mortality costs of regulations. Any regulation that imposes a cost displaces activities that could otherwise provide benefits to society. When regulatory costs displace expenditures aimed at risk reduction, health and safety risks can inadvertently rise, including risks to life. Consideration of these opportunity costs should be a regular feature of regulatory analysis, but in general, such opportunity costs are overlooked by federal agencies.

Subcommittee Questions

The subcommittee RFI includes 32 questions of interest to the subcommittee. Rather than answer all of them, many of which lie outside my expertise, I will instead summarize lessons of research I have produced in the past few years. These lessons are most relevant to four specific subcommittee questions, numbers 5, 14, 15, and 20:

In the following sections, I refer to various regulatory reform proposals for each of the four areas I outlined earlier, but I will reference the subcommittee’s questions when relevant. In particular, I believe pharmacy reform, retrospective review, and better analysis of health opportunity costs owing to regulatory costs would be beneficial to address the topics discussed in the four questions. Research in these areas is also attached at the end of this letter.

Vaccination and Testing

Pharmacists have been some of the unsung heroes of the COVID-19 pandemic. Through the Federal Retail Pharmacy Program, retail pharmacies have administered and reported more than 200 million doses of COVID-19 vaccine since a vaccine has been available. This would not have been possible were it not for emergency actions taken by the FDA to authorize pharmacists, as well as pharmacy support staff members, to vaccinate for COVID-19. These changes should be made permanent.

Moreover, the federal government can expand pharmacists’ scope of practice even further. Under the CLIA, pharmacies and other medical offices can receive a waiver from federal laboratory testing requirements, thereby authorizing them to conduct low-risk tests for ailments such as flu or strep throat. In some cases, pharmacists can even prescribe on the basis of the results of a test.

The subcommittee’s question 5 asks what regulatory barriers stand in the way of a better response to future pandemics. Fortunately, COVID-19 tests have been added to the list of CLIA-waived devices. Unfortunately, many states enact roadblocks that make it difficult for pharmacies to obtain CLIA waivers. Congress should consider legislation that would create a simpler process for pharmacies to obtain CLIA waivers. More important, it should look for ways to either override state regulatory barriers or provide incentives to states to remove their own regulatory barriers.

Fortunately, hospitals in the United States have not been overwhelmed by COVID-19 to the extent observed in some other countries, such as Italy. That said, America may not be so lucky next time. Pharmacists can play an important role by triaging, testing, and prescribing for minor ailments, as well as directing patients to physicians or other healthcare professionals for more serious ailments. But without the permanent ability to test, vaccinate, and prescribe some medications, pharmacists’ public health role will be unnecessarily restricted.

Pharmacy reforms along these lines would be especially beneficial to Americans living in rural areas (relevant to the subcommittee’s question 14b), given that more than three-quarters of independent community pharmacies serve areas with populations of less than 50,000.

Drug Shortages

Supply chain problems now fill the daily headlines, but one area of recurring supply chain problems even before the pandemic is pharmaceutical drug shortages. Drug shortages often arise when an important manufacturer goes offline. However, the COVID-19 pandemic has also highlighted that drug shortages can arise when demand for certain medications spikes. During the pandemic, the United States has seen ventilator drugs go into shortage, as well as ordinary medicines such as acetaminophen.

Compounding pharmacies produce tailor-made medicines for individuals with specific medical needs, but they can also be a vital resource to alleviate drug shortages. The FDA recognizes this fact and has created a pathway for compounders to address shortages when they arise. However, that pathway has proved inadequate for at least two reasons. First, the FDA’s drug shortage list does not always reflect the realities of the marketplace. Sometimes, patients have trouble obtaining medicines that have not or will not show up on the FDA’s list. Second, some compounders are limited by a requirement that they obtain a prescription before filling an order. The FDA relaxed requirements on compounding pharmacies during the pandemic so that they could better address shortages. This relaxation included creating a pathway for pharmacies subject to the prescription requirement to fill a shortage order without a prescription in hand. A survey of compounding pharmacies finds that, in response to the relaxation of rules, 87 of 665 respondents compounded COVID-19 shortage drugs for hospitals under the temporary guidance from the FDA and with approval from state boards of pharmacy. Legislation has now been introduced to make aspects of these changes permanent, but it is unclear whether Congress will act on the legislation. Among other things, the legislation would expand the list of drugs considered to be in shortage to include drugs on a more comprehensive shortage list, and it would allow compounding pharmacies subject to the prescription requirement to obtain patient-specific information after filling an order, so long as the drug is in shortage and other options available to buyers have been exhausted.

Retrospective Review of Regulations

The COVID-19 pandemic revealed many shortcomings with the current regulatory system. All throughout the pandemic, regulations have had to be waived or suspended at all levels of government in order to facilitate a rapid and flexible public health response. Moreover, in the early days of the pandemic, the first COVID-19 tests distributed around the country by the Centers for Disease Control and Prevention (CDC) produced unreliable results. At the same time, commercial labs and public health officials in the states could not get initial approval to perform their own tests. These examples again highlight how the CLIA process for gaining permission to conduct diagnostic testing is too complicated. These failures are not anomalies. Even now the country continues to live with the FDA’s precautionary decision to keep many COVID-19 rapid tests off the market, which has no doubt inhibited the response to the SARS-CoV-2 omicron variant, which emerged winter 2021.

Owing to the need to roll back so many regulations during the pandemic, states are reasonably concluding that regulations should be reviewed to ascertain which ones are working and which are not. This approach would help public health agencies become more agile and adaptable, unencumbered by excessive bureaucracy (relevant to the subcommittee’s question 20). Two notable examples are Idaho and Arizona, which have both begun a process of reviewing regulations suspended during the pandemic.

Retrospective review of regulations is common sense. Unless rules are periodically reviewed for their impacts, one will never know whether they are achieving their objectives and doing so at a reasonable cost. And yet, a study from the consulting firm Deloitte published in 2018 finds that 68 percent of federal regulations have never been updated. A similar study, conducted by HHS, finds that approximately 85 percent of HHS regulations older than 1990 have never been edited. Although regulatory agencies may assert that the lack of updating is evidence that older regulations are working just fine, the reality is that, without a system-wide process for reviewing regulations, many of these rules are likely to be obsolete.

The closest thing to a general retrospective review requirement for federal regulatory agencies is section 610 of the Regulatory Flexibility Act, which requires federal agencies to review regulations 10 years after the regulations go into effect for their impacts on small businesses. However, compliance with this provision has always been spotty, which is why, in early 2021, HHS finalized a regulation that would have added an enforcement mechanism to section 610 reviews: the Securing Updated and Necessary Statutory Evaluations Timely (SUNSET) rule. The SUNSET rule would have required HHS to conduct section 610 reviews on a revolving basis. Failure to do so would cause the regulations to expire. Like Odysseus binding himself to the mast of his ship to avoid succumbing to the sirens’ call, enforcement mechanisms are needed to ensure regulators commit to reviewing regulations on a timely basis.

The subcommittee’s question 15 asks for ways to help bolster confidence in America’s public health institutions. Given that trust may be declining in HHS subagencies such as the CDC and the FDA, HHS may be able to raise public confidence in the department by committing to review its rules on a more regular basis. Identifying best and worst practices among its existing rules should also make HHS more adaptable when responding to future public health emergencies (subcommittee question 20). Bewilderingly, HHS has instead proposed repealing the SUNSET rule, signaling an intent to go in the opposite direction. The agency is resisting reviewing its own regulations, arguing—ironically—that it has too many regulations and that a review would be too time consuming and burdensome for the agency.

Requiring a review of regulations suspended during the pandemic, as well as encouraging more retrospective review generally, especially at agencies like HHS, could help revive the public’s ailing faith in federal health regulators. Demanding that HHS maintain the SUNSET rule, or propose an alternative retrospective review regulation, would be beneficial and would add teeth to instructions Congress has already given federal agencies.

Mortality Costs of Regulations

The subcommittee has asked how Congress can best address the factors that influence health outcomes, including social determinants of health (question 14). It is well known that socioeconomic factors contribute to health, and moreover, many, if not most, regulations have some regressive impacts. Regulations raise prices, for example, which often poses a larger burden to low-income people than to high-income people.

It turns out that any regulation that imposes costs will likely have a health opportunity cost because the expenditures needed to comply with regulations displace some expenditures intended to reduce risks. This issue tends to be a larger issue for minorities and low-income individuals. presumably because a dollar of additional health spending goes further for low-income individuals than for high-income individuals.

For example, a regulation that requires a business to spend money on a new piece of equipment redirects spending away from productive activities and toward compliance activities. In the process, workers and shareholders forgo some income, a fraction of which would be spent on risk-reducing activities. One recent study estimates that approximately 10 percent of every additional dollar earned goes toward reducing health risks.

When regulations impose large enough costs, they can induce deaths in the population by reducing income and, by extension, reducing private expenditures to mitigate health risks. This phenomenon is known as the mortality cost of expenditures. Two recent papers, using different methodologies, arrive at different estimates of the amount of economic cost likely to induce one death in the US population. One paper estimates the cost at around $38.6 million, another at around $108.6 million.

Information like this can be combined with estimates of the cost-effectiveness of a regulation in order to ascertain whether a regulation is likely to increase or decrease mortality risk. For example, if a regulation costs $100 million per life expected to be saved, but the expected cost to induce one death in the population is $75 million, then the regulation in question is likely to increase mortality risk. It fails what economists call a “mortality risk analysis.”

Regulatory agencies are already required to produce cost-effectiveness analysis for rules. However, this requirement is generally not obeyed. The Office of Management and Budget (OMB) at one time reported cost-effectiveness estimates for lifesaving regulations in its annual report to Congress. Such information has not appeared in more recent reports, however.

In order to address health disparities associated with regulatory costs, the subcommittee should promote mortality risk analysis in the federal bureaucracy. It should also encourage regulatory agencies to conduct more cost-effectiveness analysis (something already required by OMB). Cost-effectiveness analysis and mortality risk analysis should both be routine features of regulatory impact analysis. Finally, reducing the costs of regulations generally is likely to improve health outcomes on some margins by raising the incomes of members of the population, thereby resulting in more risk-reducing expenditures.

Conclusion

This letter addresses four different areas of my research relevant to the task force’s request for information: (a) vaccination and testing, (b) drug shortages, (c) retrospective review of regulations; and (d) mortality costs of regulations. Regulations surrounding the first two areas could be permanently rolled back to facilitate an improved public health response to pandemics and especially to benefit Americans living in rural areas (subcommittee questions 5 and 14b). The third area offers ways to promote trust in public health institutions and facilitate a more agile and adaptable public health response during emergencies (questions 15 and 20). The fourth area sheds light on the social determinants of health (question 14).

Attached to this letter are some recommended readings related to the earlier-mentioned topics. These readings go into the issues in more depth than is possible in this letter. Please do not hesitate to reach out to me with questions or additional requests for follow-up information.

Sincerely,

James Broughel