The FDA’s New Leaders Can Unleash Innovation
Streamlining effectiveness evaluations à la Operation Warp Speed would unlock trillions in economic value.
With the Food and Drug Administration undergoing management changes, the huge amount of time and bureaucracy involved in ensuring that medical products are safe and effective has come into focus. Cutting a year off the FDA’s decade-long approval process would generate about $10 trillion in economic value, according to a new study from Unleash Prosperity of which I am a co-author. The enormous cost of delays should motivate the administration and Congress to re-evaluate the FDA’s practices more generally, as that could yield a deregulatory effort of unprecedented value.
Delays due to the FDA bureaucracy are relevant to the change in the agency’s leaders, as these pages have discussed, particularly for the roughly 10,000 rare diseases affecting about 30 million Americans. The FDA seems to have been staffed by regulators opposed to the industry and thereby the patients it helps.
Because of FDA delays, patients don’t have access to products they are willing to use, and future patients won’t benefit from innovations the agency makes prohibitively costly to pursue. In our analysis, we find that speeding up development by one to six years for FDA-approved medical products (small-molecule drugs, biologics and medical devices) would unlock between $10 trillion and $49 trillion in economic value.
This finding, using standard economic methods, mainly results from the value of what consumers gain beyond what they are paying for these products. If you are willing to pay $100 to brush your teeth for a year but a toothbrush costs $5, the multiple of consumer gains above price is 20. A substantial base of economic evidence puts this multiple around 15 for medical products, which had aggregated U.S. net sales of about $676 billion in 2024. Multiply these sales by 15 and you get into multiple trillions, as in our study. This suggests a massive gain from deregulating FDA approval.
Unlike other consumer-protection agencies, the FDA not only ensures the safety of products but also serves as the sole arbiter of product quality. This occurs through effectiveness trials that provide evidence on how well medical products work for an imaginary average patient, as opposed to real heterogeneous patients who differ in their assessments of the risks and rewards. This one-size-fits-all clearance applies to products already proven safe. Unfortunately, consumers and patient groups are often loud critics when it comes to these consumer-protection procedures.
The FDA could unleash trillions in value by taking six steps to shorten effectiveness assessments, akin to the methods of Operation Warp Speed during Covid-19. First, it could improve disease-specific guidance on the use of externally controlled trials and synthetic control arms. Second, it could extend the use of concurrent reviews, now limited to oncology products, to judge products for all serious and life-threatening conditions.
Third, the FDA and the Centers for Medicare and Medicaid Services could jointly publish a coordinated evidence framework to speed up market access. Fourth, the FDA could speed up premarket effectiveness approval through better incentives for manufacturers to report evidence of their products’ efficacy after market launch. Fifth, the FDA could rely more on artificial intelligence for approvals and postmarket assessments. Sixth, existing “right to try” regulations could be strengthened to enable more-widespread use.
The FDA should still ensure the safety of products before they go to market. The accelerated effectiveness assessments would still be complemented by existing postmarket product liability and false-advertising regulations. Most important, effectiveness would be enhanced by private-sector competition, the most valuable form of consumer protection.
The private sector already produces evidence to assess quality for off-label uses of drugs, which don’t require separate FDA approval. Under current procedures, once a product is cleared for safety, the FDA can take up to a decade to establish effectiveness for one particular use of a drug. But it then allows the private sector to judge effectiveness for subsequent off-label uses. That raises a question: Why wait 10 years in the first place?
The deregulation of medical-product approval would improve America’s standing as a medical innovator relative to China, which has a faster and cheaper approval process. China is currently 50% to 70% faster than all competitors and trials there are 50% to 60% cheaper than in the U.S. Consequently, China is growing rapidly in market share of global trial volume.
When installing new leaders at the FDA, the president should look to his own success in cutting permitting delays in infrastructure and real-estate development. In addition, Congress should streamline statutes that demand painfully long effectiveness enforcement by the FDA. Even modest improvements in the FDA’s approval process could yield gains measurable in trillions of dollars. After all, few assets compare to health.
Mr. Philipson is an economist at the University of Chicago and a senior fellow at Unleash Prosperity. He served as a member and acting chairman of the White House’s Council of Economic Advisers 2017-20.