Michael Mandel at the Progressive Policy Institute has recently published a paper called “How the FDA Impedes Innovation: A Case Study in Overregulation.” Before getting into the paper, I want to point out that  this is a good illustration of just how far left the current Democratic party has moved. The PPI is affiliated with the Democratic Leadership Council, that group of “New Democrats” which at one time held considerable clout (President Clinton was a member), and believed the Democratic Party should move away from the leftism of the 60’s era party. Last I heard the DLC had dissolved, their politicians replaced by hard-left ideologue Democrats like Barack Obama who would never in their wildest dreams consider such as thing as “overregulation” even possible. If a Republican or conservative group pushed a paper like this, they’d be demagogued by the current Democratic party as wanting to kill people with tainted food, or some such nonsense.

But let’s get to the topic at hand: the Food and Drug Administration. The FDA, an organization I’ve picked on a good bit already, is probably one of the more destructive government agencies in existence. It has a perverse incentive structure (if bad drugs are approved then heads roll, if good ones are denied then no one notices) that guarantees that many good, life-saving drugs take extra long to make it to market, or might not at all. It also suppresses innovation by raising costs of development. But it’s not just drugs that suffer the burdens of the FDA. As the paper demonstrates (Hat-tip: Marginal Revolution), other medical innovations are kept from the market, harming us all.

I … show how the FDA is clearly applying “too-high” standards in the case of one noninvasive device currently under consideration—MelaFind, a handheld computer vision system intended to help dermatologists decide which suspicious skin lesions should be biopsied for potential melanoma, a lifethreatening skin cancer.

If we look back at the economic history of the past 200 years, one pattern stands out clearly—new technologies start out expensive, but then end up cutting costs over time. For example, gasoline-driven tractors were initially much costlier and less reliable than horses. Over time, however, tractors were improved and made much less expensive, and the resulting shift to mechanized agriculture helped drive down the cost of producing food.

Similarly, when cell phones were first introduced in the 1980s, they were bulky, heavy devices which retailed for $4000, provided terrible reception and could barely fit in a briefcase, much less a pocket. After 20 years of  evolution, iPhones and Android smartphones are slender, light, relatively cheap and far more capable than their ancestors.

…Three facts are clear. First, the FDA’s regulatory reach and intensity has increased over the past 10 years. FDA employment grew by 33 percent between 2000 and 2011, even as employment in the regulated industries—pharmaceuticals, medical devices, and biotech–only rose by 3 percent.

Second, in the wake of high-profile episodes such as the Vioxx case, the FDA has gotten stricter about requiring evidence of safety and effectiveness before approving new  drugs. Third, the number of new drugs approved fell sharply over the past decade compared to the decade before.

…[T]here is one ongoing example that suggests the FDA might have crossed the line into over-regulating and suppressing innovation. This is the case of MelaFind, which as noted above, is a handheld computer vision device intended to help dermatologists decide which suspicious skin lesions should be biopsied for potential melanoma. The device is pointed at a lesion, the visual image is rapidly compared to a computerized database, and the results are reported to the doctor.

A device such as MelaFind, if approved, could be a very useful tool, since melanoma is easy and cheap to treat when caught early, and expensive and difficult to treat if detection is delayed. MelaFind would provide an immediate second opinion for dermatologists, and a dermatologist working long hours in an inner city or rural clinic could use MelaFind’s expert system to provide consistent advice. This availability of this tool is especially important as cost pressures force doctors to spend less time with each patient.

In order to get approval, Mela Sciences, the company that created MelaFind, did a multi-year study of the accuracy of the device compared to a panel of dermatologists. The company claims that it passed the test that the FDA had agreed to.2 Indeed, on some dimensions of the study the device did better than the panel of dermatologists.

Nevertheless, the FDA staff deemed the device “not approvable,” saying that MelaFind “puts the health of the public at risk.”3 Despite the strong negative response from the FDA, the company requested that the device be assessed by a panel of dermatologists, statisticians, and other medical experts. The advisory panel met in November 2010 and voted narrowly to recommend approving MelaFind.4 Nevertheless, the FDA has not yet approved the device.

The FDA rationale is incredibly weak. They claim the device did not do better than the experienced dermatologists, that it did not find every melanoma in the sample, and that it did not make inexperienced dermatologists the equal of experienced dermatologists.

Let me be clear: these are profoundly stupid criteria. As the paper did a good job illustrating, technology develops rapidly after introduction. That it is presently not better than, but is no worse than, existing dermatologists is not a reason to prevent technology from entering the market, where it can continue to get better and more efficient. Or as the paper said:

To summarize, the FDA seems to be saying that it cannot approve MelaFind unless the device can:

• Outperform experienced dermatologists
• Perform well on any lesion that an inexperienced doctor might find suspicious
• Never miss any melanomas
• Turn an inexperienced doctor into the equivalent of a board-certified dermatologist.

This is a standard that no first-generation device can ever reach. If the FDA fails to approve MelaFind, it would be the equivalent of rejecting the first cell phone on the grounds that callers might mishear important messages.

This is a prime example of how big government stifles innovation and reduces well-being.