Recent headline: Trump to Pharma CEOs: 75% to 80% of FDA Regulations Will be Eliminated
Our take…
Yeah…not so fast. I expect the Trump-team follow up to be, “we meant 75-80% of the really bad regulations will disappear — and most likely only in the 2fer1 program.”
So, doing the math…that means at least 20-25% of the really bad regulations will stay put, plus we will get another 35-40% new really bad regulations. That results in a net retention rate of really bad regulations of 55-65% — oh, and 100% of the just basically bad ones will still be around.
“Yeah, I used to be the Regulatory Counsel to FDA’s Associate Commissioner for Regulatory Affairs, so I’ve written my share of regulatory spin,” comments Ben England, CEO and Founder of FDAImports.com. He adds, “But for those who still believe in “common sense,” here’s a little bit.”
Imagine if — suddenly — 75% of FDA’s regulations governing food safety, drug or medical device manufacturing or USDA’s Organic Labeling requirements don’t apply anymore! (Poof). Now consider that most of the drugs, devices, foods and cosmetics consumed or used in this country are made elsewhere and imported into the USA from other countries! No “knock-it off!” bully-pulpit speeches are going to change that last factoid.
Here’s the thing — FDA, USDA, Customs, FTC, EPA, INS — only have to enforce the existing regulations (and applicability of international treaties) in order to have significant impact on international (e.g., importing/exporting) regulated industries. Note, this can cut both ways. That is, the government can reduce enforcement of some regulations (say, the “really bad ones”) and increase enforcement resources for others (say, the ones that promote USA producers and discriminate against foreign ones).
Take NAFTA, for example, which is the favorite hobby-horse of many who claim that free trade among USA, Mexico and Canada somehow damages US businesses. The Trump administration does not have to make any changes to NAFTA at all in order to have an immediate impact on goods coming here from Mexico. All Customs needs to do is to enforce NAFTA on its terms and it will significantly increase actions against imported goods that are non-NAFTA eligible yet are coming in on the back of NAFTA. That’s big (big) money for the US Treasury.
Now, add that Customs (a Tax/Duty Collection, Revenue-Generating agency) can impose taxes and penalties by taking your stuff or taking your Customs importation bond! We call these seizure, forfeiture and liquidated damages actions. The more complicated the regulatory requirements for the imported (or exported) goods, the greater the risk that Customs and other government agencies will look for ways to get your stuff or get the bond that was posted to permit importation of your stuff. So FDA, USDA, EPA, and Commerce regulations become the underlying bases for Customs to initiate seizure, forfeiture, liquidated damages claims or civil monetary penalty actions. Money talks.
Let’s turn now to these higher regulatory agencies. For pharmaceuticals, medical devices, foods, dietary supplements, cosmetics, tobacco or alcohol, it is highly unlikely there will be substantially lower regulatory burdens after four years of Trump. This is primarily because most of the rest of the world has already raised the level of their regulatory requirements so they can compete with the US. Our trading partners’ regulatory requirements will not be going through a similar review and revision. Why would China, for instance, permit importation of drugs made according to new, lower (US) standards now that China (with its burgeoning middle class) requires higher standards of its own drug manufacturing industry? Won’t happen. When you look at the next 20 years of growth occurring in China, India and Indonesia, the USA will have to become a producing nation to survive — meaning, our drug, device, food, cosmetic, tobacco and alcohol producers will have to comply with foreign regulatory requirements to compete. I don’t see the U.S. requirements going down.
The thing to watch is how the Trump administration enforces existing regulations. England concludes, “We predict federal agencies will increase enforcement actions that produce revenue and also make them look “tough” on foreign suppliers (or multinational companies) that make goods elsewhere for consumption here. Nothing new is required for Trump to accomplish this. But new thinking is required to see how it could affect you and your business.”
For more information on our thoughts regarding the elimination of FDA regulations please contact us.
