Captured Regulators

cropped-bob-shapiro.jpg   By Bob Shapiro

Regulatory agencies are set up to protect the public welfare. Aside from the usual bad stuff that such an agency causes, they sometimes (usually?) are captured by the very companies that they were set up to regulate. By Bob Shapiro

Regulatory Handshake

One result is that regulations are written to keep out upstart competition through mountains of paperwork and additional costs. I’d like to give a few anecdotal examples of this, looking specifically at the FDA, the Food and Drug Administration.

  1. Among the drugs which hospitals use in great volume is Heparin, an injectable blood thinner. One entrepreneur noticed that, while there were numerous injectables available as pre-filled syringes, Heparin was not one of them. The entrepeneur contacted a few hospitals, reached supply agreements, and then set up the Rocap company. Rocap invested in various machinery and clean room equipment, set up quality control and batch procedures, and began supplying Heparin in pre-filled syringes. The hospitals were saving a lot of money, while avoiding their own quality issues of filling their own syringes one at a time by dozens of nurses throughout the hospital. Rocap was happy because, even at the low price they were charging, they still were making a nice profit, while providing a couple of dozen jobs. There were no quality issues, there were no availability issues, and there were no complaints.However! The FDA was made aware of the new company and the service it was providing, using FDA approved Heparin and FDA approved syringes. The FDA insisted that Rocap obtain regulatory approval for its pre-filled syringes. The agency convinced (coerced?) Rocap to “temporarily” suspend its Heparin operation pending what was supposed to be a speedy approval process. But, once Rocap’s operation was suspended, the approval process disappeared, and Rocap was forced out of business.
  2. During the late 1980s, Biocontrol Technologies (BICO) developed a non-invasive glucose monitor. It received approval from the European Union to distribute the machine in the EU, and was gearing up to produce and distribute the monitor in the US, pending regulatory approval, which looked like a done deal.However! BICO was stunned to learn that approval was denied. It had made a major investment, which became worthless overnight, and a few years later it filed for bankruptcy. Today, another company makes a non-invasive glucose monitor.
  3. During the Vietnam War, cyanoacrylate spray saved many lives during MASH unit operations. The spray was applied to large open wounds and burns, formed a skin within 90 seconds, and prevented the massive loss of fluids which otherwise would have killed the wounded.After the war, this body glue was used successfully in the VA hospitals to save many lives. It was safe, it was effective, it was inexpensive – a truly wonder treatment! For its special niche, it was far superior to the competition, mainly needle & thread sutures.However! Because cyanoacrylate had been invented many years earlier, the spray body glue could not be patented. Because of the long and expensive regulatory process, and the lack of patentability, no start-up company would try to market it with FDA approval, because it couldn’t hope to earn the $100+ Million in profits needed to pay for approval. Today, several companies market it over-the-counter (but not to save lives). BTW, you may have known it in the 1970s under it’s original trade name of Krazy Glue. Krazy Glue
  1. Many drug companies market their products worldwide, frequently under different drug brand or generic names. Rules and local economics vary greatly from country to country, so companies may sell their products at different prices in the various markets.Prescription drugs in the US are an expensive proposition, especially for seniors or others taking a lot of meds. With the advent of the internet, and internet marketing, numerous companies in Canada and elsewhere began promoting their lower cost – same drugs under different names – here in the US.However! Drug manufacturers, and US pharmacies, made a big stink to the FDA (their captured regulator), and now it is illegal to save money by buying the same product from outside the US. The FDA says it is to protect consumers, but that’s a crock.

Regulatory agencies cause less competition and higher prices. At the same time, there are private agencies that actually provide needed regulatory type services.

  • Underwriters Laboratories UL sticker is virtually mandatory to sell many products in the US
  • Consumer Reports and other similar magazines do private testing on thousands of products, and many consumers depend on their reports when deciding what brand to buy
  • Private standards organizations like ISO and NIMS are almost indispensable in manufacturing.

We’ve been running Budget Deficits since Eisenhower was President (the National Debt INCREASED during Clinton’s surplus) , and the headline National Debt is over $17 Trillion. Here’s an easy way to trim federal spending while helping Americans.

Action Item: Congress should enact, and the President should sign, legislation to turn over the consumer assurance regulatory process to the Free Market. Allow competing, private product testers to provide consumers with safe, effective products, at zero cost to the Taxpayer. Stop letting drug companies outlaw small, new competitors, including pharmacies in Canada.


After I wrote this post, I came across this from economist Walter Williams in Capitalism Magazine talking about how many deaths likely have been caused (and why) due to the FDA’s innate problems. It’s well worth the read. – Bob First time commenters, please enter your zip code.

Officially Killing Americans Courtesy of the FDA


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