Category: Law

ProPublica on FDA Delay

If you have been following MR for the last 18 months (or 18 years!) you won’t find much new in this ProPublica piece on FDA delay in approving rapid tests but, other than being late to the game, it’s a good piece. Two points are worth emphasizing. First, some of the problem has been simple bureaucratic delay and inefficiency.

In late May, WHPM head of international sales Chris Patterson said, the company got a confusing email from its FDA reviewer asking for information that had in fact already been provided. WHPM responded within two days. Months passed. In September, after a bit more back and forth, the FDA wrote to say it had identified other deficiencies, and wouldn’t review the rest of the application. Even if WHPM fixed the issues, the application would be “deprioritized,” or moved to the back of the line.

“We spent our own million dollars developing this thing, at their encouragement, and then they just treat you like a criminal,” said Patterson. Meanwhile, the WHPM rapid test has been approved in Mexico and the European Union, where the company has received large orders.

An FDA scientist who vetted COVID-19 test applications told ProPublica he became so frustrated by delays that he quit the agency earlier this year. “They’re neither denying the bad ones or approving the good ones,” he said, asking to remain anonymous because his current work requires dealing with the agency.

Recall my review of Joseph Gulfo’s Innovation Breakdown.

Second, the FDA has engaged in regulatory nationalism–refusing to look at trial data from patients in other countries. This is madness when India does it and madness when the US does it.

For example, the biopharmaceutical giant Roche told ProPublica that it submitted a home test in early 2021, but it was rejected by the FDA because the trials had been done partly in Europe. The test had compared favorably with Abbott’s rapid test, and received European Union approval in June. The company plans to resubmit an application by the end of the year.

A smaller company, which didn’t want to be named because it has other contracts with the U.S. government, withdrew its pre-application for a rapid antigen test with integrated smartphone-based reporting because it heard its trial data from India — collected as the delta variant was surging there — wouldn’t be accepted. Doing the trials in the U.S. would have cost millions.

Photo credit: MaxPixel.

Our regulatory state is failing us, edition #1637

The U.S. Food and Drug Administration (FDA) has authorized the SalivaDirect PCR COVID-19 test created by the Yale School of Public Health for use with pooled saliva samples.

Pooled testing allows labs to combine saliva samples from multiple individuals into a single tube and process the batch as a single test. This approach maintains the clinical sensitivity associated with the real-time reverse transcription polymerase chain reaction tests — the gold standard for detecting SARS-CoV-2, the virus that causes COVID-19 — and gives labs the ability to process the tests far more quickly. The FDA authorizes Yale-designated laboratories to use the SalivaDirect test to pool as many as five samples at a time for SARS-CoV-2 testing.

That is November 2021In July 2020, Alex wrote: “Tyler and I have been pushing pooled testing for months.”

Better to have nothing in the meantime I guess!  In the meantime, only a handful of pooled spit tests have been approved.

Here is the full piece, via DR.

The Treasury report on stablecoin regulation

I’ve now read it, and I don’t get it.  OK, so stablecoins should be Fed regulated, brought into the FDIC network, and prohibited from mixing with commerce.  In essence, the stablecoin issuers become like banks in the regulatory sense.  Let’s put aside whether or not you think that is a good idea and ask a simpler question: what about “all of crypto”?  Does that have to be put through the same legal ringer?  What does it mean to ban general crypto from affiliating with commerce at the institutional level?  To guarantee crypto issues with the FDIC?

You might say this is only for “stablecoins,” but does the document give a rigorous legal definition of that term?  No.  How stable does it have to be, to be a stablecoin?  What if there is no stability guarantee, but the issuer acts to create an expectation of relative stability.  Is that a stablecoin?  Or just crypto?  What if the price fluctuates “a bit”?

You may feel “I know a stablecoin when I see one,” and maybe you do, but I very much suspect that under these proposed regulations you either kill all of crypto, or hardly anything ends up being legally classified as a stablecoin, though it still might be pretty stable!

What about a “not quite stable coin,” but you buy a separate contract with a “separately capitalized” intermediary, so that you are each time made whole, and can de facto treat the value as really quite stable?

Maybe they have clever answers to these questions, and just didn’t see fit to include them in a 26-page document.  But I am sooner inclined to think that Treasury is not currently handling this issue at a sufficiently high conceptual level.

The welfare effects of eviction policies

This paper studies the implications of rental market policies that address evictions and homelessness. Policies that make it harder to evict delinquent tenants, for example by providing tax-funded legal counsel in eviction cases (“Right-to-Counsel”) or by instating eviction moratoria, imply eviction and homelessness are less likely given default. But higher default costs to landlords lead to higher equilibrium rents and lower housing supply. I quantify these tradeoffs in a model of rental markets in a city, matched to micro data on rents and evictions as well as shocks to income and family structure. I find that “Right-to-Counsel” drives up rents so much that homelessness increases by 15% and welfare is dampened. Since defaults on rent are driven by persistent income shocks, stronger protections are ineffective in preventing evictions of delinquent tenants, and lead to a large increase in default premia. In contrast, rental assistance lowers renters’ default risk and as a result reduces homelessness by 45% and evictions by 75%, and increases welfare. Eviction moratoria can prevent a spike in evictions following a rare economic downturn, as long as they are used as a temporary measure.

Here is the paper, that is by Boaz Abramson, who is currently on the job market from Stanford.

Revenue Driven Policing

The NYTimes has a good piece on revenue driven policing:

Many municipalities across the country rely heavily on ticket revenue and court fees to pay for government services, and some maintain outsize police departments to help generate that money, according to a review of hundreds of municipal audit reports, town budgets, court files and state highway records.

…In Bratenahl, Ohio, the town government is so dependent on traffic enforcement that the police chief castigated his officers as “badge-wearing slugs” in an email when a downturn in ticket writing jeopardized raises. Ticket revenue helped finance sheriff’s equipment in Amherst County, Va.; a “peace officers annuity and benefit fund” in Doraville, Ga.; and police training in Connecticut, Oklahoma and South Carolina.

Revenue driven policing can be most extreme when the people you are ticketing are not voters.

Newburgh Heights, a frayed industrial village of about a half square mile with 2,000 residents just south of Cleveland, doggedly monitors traffic on the short stretch of Interstate 77 that passes through.

…All told, revenue from traffic citations, which typically accounts for more than half the town’s budget, totaled $3 million in 2019.

My paper, To Serve and Collect (with Mike Makowsky and Thomas Stratmann) shows that there is a notable increase in revenue generating arrests when local governments are facing a deficit. More from Makowsky in this thread.

The religious polity that is Iceland

A proposal to ban clergy from charging or accepting fees for funerals, weddings and baptisms has prompted threats of industrial action by the clergy union of the Church of Iceland (Þjóðkirkjan).

The Church of Iceland is the established Lutheran church of the island nation, and its clergy are paid by the state. Clerical salaries and parochial responsibilities are laid out in a contract negotiated by the Association of Icelandic Clergy and the state. Funerals, baptisms, weddings and confirmations are considered extra work and are governed by a set fee schedule.

On 19 Oct 2022 the Kirkjuráð, the Church of Iceland’s executive council, proposed ending the practice of charging fees. An announcement from the Kirkjuráð said the church would ban priests from charging fees. It believed clergy were sufficiently remunerated for their work, and further stated they believed the ministrations of the church should be available to all, and no one by dint of lack of funds should be denied services. “It is outdated and alienating for the services of the church that priests, who are serving people in moments of joy and sorrow, later send these people a bill for the services. This greatly undermines the credibility of the services of the church,” the Kirkjuráð wrote.

The president of the clergy union, Ninna Sif Svavarsdóttir, issued a statement decrying the proposal and took issue with the tone of Kirkjuráð’s announcement. “It is highly distasteful and indecent for a church council to warn pastors about a lack of Christian love when they exercise their clear fundamental right to collect fees for extra work.”

Ms.Svavarsdóttir stated a collective bargaining agreement had been reached in July 2021, and if the church hierarchy was going to abrogate the contract, the clergy might be compelled to exercise their rights under law and strike.

Here is the full story, via Evan.

Clement and Tribe Predicted the FDA Catastrophe

Paul Clement and Laurence Tribe

Laboratory developed tests are not FDA regulated–never have been–instead the labs are regulated under the Clinical Laboratory Improvement Amendments (CLIA) as overseen by the CMS. Laboratory developed tests are the kind your doctor orders, they are a service not a product and are not sold directly to patients. Labs develop new tests routinely and they do not apply to the FDA for approval. Despite this long history, the FDA has claimed that it has the right to regulate lab tests and they have merely chosen not to exercise this right for forty years. In 2015, Paul Clement the former US Solicitor General under George W. Bush and Laurence Tribe, considered by many to be the leading constitutional lawyer in the United States, wrote an article that rejected the FDA’s claims writing that the “FDA’s assertion of authority over laboratory-developed testing services is clearly foreclosed by the FDA’s own authorizing statute” and “by the broader statutory context.”

Despite lacking statutory authority, the FDA has continued to claim it is authorized to regulate laboratory tests. Indeed, a key failure in the pandemic happened when the FDA issued so-called “guidance documents” saying that any SARS-CoV-II test had to be pre-approved by the FDA. Thus, the FDA reversed the logic of emergency. In ordinary times, pre-approval was not necessary but when speed was of the essence it became necessary to get FDA pre-approval. The FDA’s pre-approval process slowed down testing in the United States and it wasn’t until after the FDA lifted its restrictions in March that tests from the big labs became available.

Clement and Tribe rejected the FDA claims of regulatory authority over laboratory developed tests on historical, statutory, and legal grounds but they also argued that letting the FDA regulate laboratory tests was a dangerous idea. In a remarkably prescient passage, Clement and Tribe (2015, p. 18) warned:

The FDA approval process is protracted and not designed for the rapid clearance of tests. Many clinical laboratories track world trends regarding infectious diseases ranging from SARS to H1N1 and Avian Influenza. In these fast-moving, life-or-death situations, awaiting the development of manufactured test kits and the completion of FDA’s clearance procedures could entail potentially catastrophic delays, with disastrous consequences for patient care.

Clement and Tribe nailed it. Catastrophic delays, with disastrous consequences for patient care is exactly what happened.

Addendum: See also my pre-pandemic piece on this issue, Our DNA, Our Selves.

Further points on the tax on unrealized capital gains

Put simply, this proposal is biased towards people with inherited wealth, invested in non-traded assets and mature businesses, and against people invested in publicly traded equities in growth companies, many of which they have started and built up. If that is the message that the tax law writers want to send, they should at least have the decency to be up front about that message, and to defend it.

Here is much more from Aswath Damodaran, devastating throughout.  And here is Alan Auerbach on retrospective capital gains taxation, not my favorite but a much better idea than what is being put forward.

The tax on unrealized capital gains

Maybe I don’t understand how the supposed plan is supposed to work.  There is no tax credit for unrealized capital losses, right?  So you won’t want to hold volatile asset classes any more, right?  Imagine the value going up, you pay some tax, and then the value falls and you move into loss territory.  You still paid the tax!  You get nothing back.  By exactly how much do the prices of these assets have to fall, ex ante, so that holding them is a good idea in the first place?  Or maybe the wealthy investors subject to this tax are not significant enough to on their own move market prices, in which cases they are just pushed out of these very risk asset classes?

If you can deduct unrealized losses, just how much revenue will the bill raise?  Might the wealthy be incentized to hold ever yet riskier assets in that case?  And how will debt assets be treated?  What exactly is equity anyway?  Do all options and derivatives positions have to be considered as well?  (If not there is a massive arbitrage opportunity, hold some assets with a big chance to take losses but hedge your position with derivatives.)

Has anyone estimated all this and figured it out?  Should we pass such a tax bill without such estimates and public debate?  Isn’t that kind of democracy “good”?  What would The Party of Science say?

What am I missing here?

The whip-banning polity that is Reno

The Reno City Council voted to ban the possession and use of whips without a permit in downtown Reno on Wednesday.

Councilwoman Jenny Brekhus, who said she was not present when the ordinance was introduced, was the only no vote.

Brekhus said that she wants the ordinance applied city-wide and expressed concern that as is, the ban targets certain demographics.

City attorney Karl Hall explained that the ordinance is restricted to the downtown area because complaints to the police were concentrated in that area. He added that there may be areas outside of downtown where whips may be useful.

…Hall also said that those who have a legitimate use for a whip downtown can receive a permit.

This second article I find stranger yet:

The change approved Wednesday comes after police reported a steep increase over the past two years of 911 calls from residents who mistake the sound of a cracking whip for gunfire.

He said they’re also being used in public areas for fights and intimidation.

Lily Baran spoke against the ordinance earlier on behalf of the American Civil Liberties Union. She said that the homeless community is known for using the whips and that the ordinance will “perpetuate the criminalization of the unhoused.”

Model that!  Here is the full main story, via the estimable Chug.

My Conversation with Stanley McChrystal

Here is the audio, video, and transcript.  Here is part of the CWT summary:

He joined Tyler to discuss whether we’ve gotten better or worse at analyzing risk, the dangerous urge among policymakers to oversimplify the past, why being a good military commander is about more than winning battlefield victories, why we’re underestimating the risk that China will invade Taiwan, how to maintain a long view of history, what set Henry Kissinger apart, the usefulness of war games, how well we understand China and Russia, why there haven’t been any major attacks on US soil since 9/11, the danger of a “soldier class” in America, his take on wokeness and the military, what’s needed to have women as truly senior commanders in the armed forces, why officers with bad experiences should still be considered for promotion, how to address extremists in the military, why he supports a draft, the most interesting class he took at West Point, how to care for disabled veterans, his advice to enlisted soldiers on writing a will, the most emotionally difficult part and greatest joys of his military career, the prospect of drone assassinations, what he eats for his only meal of the day, why he’s done writing books, and more.

And:

COWEN: If we had to shrink one capacity of the military, say, by 50 percent, and double the capacity of another, what would you pick to shrink and what to expand?

MCCHRYSTAL: This is always the tough one. I tend to think that the maneuver warfare part that we have created for ground warfare in Europe or in the Mideast is probably somewhere where we have to accept some risk. We have to have fewer capabilities there. You could even argue maybe the number of aircraft carriers — big capital things.

I think where we can’t afford — and therefore, I would invest — is in really good people. Now, that seems like a simplistic answer, but we are going to need very crafty people at things like cyber warfare. We’re going to need very innovative people. We’re going to need people with cultural acuity, which means language skills, and that’s going to be more important. So if I was advocating, I’d be leaning toward resourcing harder in those areas.

COWEN: Now, of course, your father was a general. You come from a military family. Why is it that military recruitment, right now, is so well predicted by having had a parent in the armed forces? What’s driving that? And how can we take advantage of that to recruit additional people?

MCCHRYSTAL: Well, we’ve taken advantage of it to the point where it may be counterproductive now. When I would travel the battlefields and go to small bases, invariably, the sergeant or lieutenant in charge was the son or daughter of a friend of mine. In one way, it’s comforting because you know people have entered the service with open eyes and clear expectations, and they make good soldiers, but you don’t want a soldier class in America.

Definitely recommended, there is also a segment about disabled veterans and their rights.  And again here is Stan’s new book Risk: A User’s Guide, co-authored with Anna Butrico.

Make TeleMedicine Permanent

One of the silver linings of the pandemic was the ability to see a doctor and be prescribed medicine online. I used telemedicine multiple times during the pandemic and it was great–telemedicine saved me at least an hour each visit and I think my medical care was as good as if I had been in person. I already knew I had poison ivy! No need for the doctor to get it also.

Telemedicine has been possible for a long time. What allowed it to take off during the pandemic wasn’t new technology but deregulation. HIPAA rules, for example, were waived for good faith use of standard communication technologies such as Zoom and Facetime even though these would ordinarily have been prohibited.

The Federal Ryan Haight Act was lifted which let physicians prescribe controlled substances (narcotics, depressants, stimulants, hallucinogens, and anabolic steroids) in a telemedicine appointment–prior to COVID an in-person appointment was required.

Prior to COVID Medicaid and Medicare wouldn’t pay for many services delivered over the internet. But during the pandemic the list of telemedicine approved services was expanded. Tennessee, for example, allowed speech therapists to bill for an online session. Alaska allowed mental health and counseling services and West Virginia allowed psychological testing to be delivered via telemedicine. Wisconsin allowed durable medical equipment such as prosthetics and orthotics to be prescribed without a face-to-face meeting.

Another very important lifting of regulation was allowing cross-state licensing which let out-of-state physicians have appointments with in-state patients (so long, of course, as the physicians were licensed in their state of residence.)

The kicker is that almost all of these changes are temporary. Regulatory burdens that were lifted for COVID will all be reinstated once the Public Health Emergency (PHE) expires. The PHE has been repeatedly extended but that will only push off the crux of the issue which is whether many of the innovations that we were forced to adopt during the pandemic shouldn’t be made permanent.

Working from home has worked better and been much more popular than anyone anticipated. Not everyone who was forced to work at home because of COVID wants to continue to work at home but many businesses are finding that allowing some work from home as an option is a valuable benefit they can offer their workers without a loss in productivity.

In the same way, many telemedicine innovations pioneered during the pandemic should remain as options. No one doubts that some medical services are better performed in-person nor that requiring in-person visits limits some types of fraud and abuse. Nevertheless, the goal should be to ensure quality by regulating the provider of medical services not regulating how they perform their services. Communications technology is improving at a record pace. We have moved from telephones to Facetime and soon will have even more sophisticated virtual presence technology that can be integrated with next generation Apple watches and Fitbits that gather medical information. We want medical care to build on the progress in other industries and not be bound to 19th and 20th century technology.

The growth of telemedicine is one of the few benefits of the pandemic. As the pandemic ends, let’s make this silver lining permanent.

Worrying Sentence(s) of the Day

NYTimes: An examination of hundreds of health departments around the country shows that the nation may be less prepared for the next pandemic than it was for the current one.

…State and local public health departments across the country have endured not only the public’s fury, but widespread staff defections, burnout, firings, unpredictable funding and a significant erosion in their authority to impose the health orders that were critical to America’s early response to the pandemic.

People have had it. Let’s hope we aren’t tested again soon.