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The FDA’s “Pleasure Principle”

This week’s news has included a flurry of interest in a previously unnoticed wrinkle in the recent “deeming” proposals of the US Food and Drug Administration in April. Part of the study leading up to the proposals included a cost-benefits analysis, conducted by the office of FDA economist Clark Nardinelli. The benefits of e-cig regulation should be offset by as much as 70%, argue Nardinelli’s economists, in view of the pleasure lost by those whose use of the product may be curtailed. They cited the work of MIT economist Jonathan Gruber in arriving at the 70% figure. Gruber commented “I think this is really a misapplication of my work,” as cited by Reuters.

The rationale for the argument is presented in the online source Health Economics, in an article (abstract) by Nardinelli with his colleague Rosemarie Lavaty, along with Elizabeth Ashley of the US Office of Management and Budget, which was responsible for vetting the deeming regs before publication. With regulation of potentially harmful products, users “gain utility from improvements in lifetime health and longevity but also lose utility associated with the activity of consuming the product.”

Got that? In other words, when adding up the cost, subtract the cash value of your enjoyment from the cash value of your enhanced health. Still confused? The authors go on: “In the case of anti-smoking policies, even though published estimates of gross health and longevity benefits are up to 900 times higher than the net consumer benefits suggested by a more direct willingness-to-pay estimation approach, there is little recognition in the cost-benefit and cost-effectiveness literature that gross estimates will overstate intrapersonal welfare improvements when utility losses are not netted out.”

There. Clear enough, right?

And finally: “where there exists a plausible estimate of the tax that would allow consumers to fully internalize health costs, the ratio of the tax to the per-unit long-term cost can provide an upper bound on the ratio of net to gross benefits.”

So glad they cleared that up! In case your eyes remain insufficiently glazed over, the abstract linked above provides links for purchasing access to the full article, either in html or pdf format.

As might be imagined, supporters of stiff regulation are not pleased. “This makes it a lot harder to justify regulations on cost-benefit grounds….” remarked Stanton Glantz. “It will undermine anything they try to do about anything.” Altria and Lorillard/Blu declined to comment, but the CEO of the Tobacco Vapor Electronic Cigarette Association, Ray Story, commented that e-cig industry professionals are “not focusing” on the issue. An FDA spokesperson opined that the offset calculation will not affect the ultimate benefit value of the regulation as proposed. Comment on the Reuters article has not been particularly kind.

The inclusion of cost-benefit analysis in regulatory proposals was mandated by an executive order signed in 1993 by Bill Clinton, seen by many as a pleasure advocate. But with nicotine products “the FDA is putting its thumb on the cost-benefit scale in a way no other agency has before,” says Reuters. But John Graham, responsible for vetting cost-benefit analyses under George W. Bush, says he cannot think of an instance “where lost enjoyment played a significant analytical role.” To be sure, the Environmental Protection Agency may calculate the negative impact of a price rise for fruits and vegetables if a certain pesticide is banned. Economists call this the “consumer surplus” or the difference between the actual price of a product and the amount people would be willing to pay for it. Most economists commenting on the current instance seem to think 70% is a tad high.

Still, vapers should probably be glad of this development, however abstruse it may appear. Someone cares about your pleasure.

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