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January 24th, 2014:

UCSF researcher: FDA puts economic theory over empirical evidence in its cost-benefit analysis; undermines sensible public heath regulation

from Dr. Stanton Glantz of the UCSF:

As part of the process of issuing regulations, the FDA (or any other agency) conducts a cost-benefit analysis of the proposed regulation to make sure it is worth doing.  The FDA’s ill-fated regulation on graphic warning labels was no exception.  The Agency’s cost-benefit analysis did find a very small net benefit, but that small showing was not enough to convince the courts that the warning label rule was legal in the face of a constitutional challenge.

Last month Jidong Huang, Frank Chaloupka, and Geoff Fong published an excellent paper showing that the FDA gross underestimated the benefits that graphic warning labels would have on cigarette consumption and made the point that this severe underestimation undermined the FDA’s ability to defend the warning labels in court as necessary.

Today we published a paper in American Journal of Public Health that shows how the FDA grossly overestimated the costs of reducing smoking by counting, as a substantial cost, the lost pleasure people would experience if they were not smoking.

To do this, the FDA counted the lost “consumer surplus,” a concept based on classical economics in which the value of something is completely captured by how much money people would pay for it.  Because nicotine is highly addictive people will pay a lot of money for cigarettes, so, according to the FDA’s logic, will be deprived of a lot of value if they stop (or don’t start) smoking.

While this idea may seem reasonable to some economists, it completely flies in the face of a huge amount of empirical evidence, evidence that the FDA simply ignored.

By so radically underestimating benefits and overstating costs, the FDA’s own analysis (supported, I am told, by the Office of Management of Budget), is making it particularly difficult to justify any regulation designed to protect public health.

Here is the abstract from our paper, “When Health Policy and Empirical Evidence Collide: The Case of Cigarette Package Warning Labels and Economic Consumer Surplus“:

In its graphic warning label regulations on cigarette packages, the Food and Drug Administration severely discounts the benefits of reduced smoking because of the lost “pleasure” smokers experience when they stop smoking; this is quantified as lost “consumer surplus.” Consumer surplus is  grounded in rational choice theory. However, empirical evidence from psychological cognitive science and behavioral economics demonstrates that the assumptions of rational choice are inconsistent with complex multidimensional decisions, particularly smoking. Rational choice does not account for the roles of emotions, misperceptions, optimistic bias, regret, and cognitive inefficiency that are germane to smoking, particularly because most smokers begin smoking in their youth. Continued application of a consumer surplus discount will undermine sensible policies to reduce tobacco use and other policies to promote public health.

We raised many of these issues in our public comment on the original warning label rule; clearly the FDA chose to ignore these issues then.

Last January I had some email correspondence with the FDA economist who prepared the cost-benefit analysis in the final rule in which I asked him to provide citations to the empirical evidence that supported what the agency did.  He could not point to any.

Given the FDA (and OMB most likely) refusal to consider the empirical evidence that its approach is wrong, I expect to see a similarly self-defeating cost-benefit analysis when the much-delayed deeming rule on e-cigarettes is finally released.

12 Dec 2013

SCMP Letters: Tax rise could help young smokers quit

Letter from Heidi Lau, executive director of LEAP, to the SCMP:

The government should consider further increasing tobacco tax to help prevent young people picking up the habit of smoking and motivate more young smokers to quit.

It was reported that 30 per cent of the young smokers who used the Youth Quitline hotline service of the University of Hong Kong cited saving money as the reason for quitting (“University of Hong Kong introduces WhatsApp service to help young smokers quit”, January 7).

The percentage could certainly have been higher if the tobacco tax had been raised to make cigarettes even more unaffordable for young people.

Tobacco, along with alcohol and cannabis, has long been considered a “gateway drug”.

As an organisation that provides preventive drug education to prevent substance abuse, Life Education Activity Programme (LEAP) is convinced that increasing tobacco tax could be an effective way to reduce children’s access to this gateway drug – hence helping to prevent childhood use of cigarettes and the subsequent use of more potent drugs.

Raising tobacco tax further will also help the government to demonstrate its strong determination to build a smoke-free society.

10 Jan 2014