FDA Bad for Your Health?
Former Food and Drug Administration deputy commissioner says government over-regulation is costing thousands of lives
This is a rush transcript from "Journal Editorial Report," October 8, 2011. This copy may not be in its final form and may be updated.
PAUL GIGOT, HOST: This week on the "Journal Editorial Report," the banker baiters are back. As those Wall Street protests grow, Democrats jump on the band wagon, railing against banks and the fees that the politicians helped create.
Plus, Chris Christie is out. So is Sarah Palin. With the Republican field finally set, we take a closer look at candidates' economic plans. This week, it's Herman Cain and his 999 proposal.
All of that, and how the FDA could cost you your life.
(BEGIN VIDEO CLIP)
PRESIDENT BARACK OBAMA: The protesters are giving voice to a more broad-based frustration about how our financial system works.
(END VIDEO CLIP)
GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.
That was President Obama Thursday when asked about the growing Wall Street protests, now in their third week. A rally in lower Manhattan seemed to be gaining size and momentum. And dozens of sister demonstrations have sprung up in cities across the country.
Just one of the things stoking the protesters anger is Bank of America's plan to charge its debit card customers a $5 monthly fee, a move attacked this week by the president and Senate Democrat Dick Durbin.
(BEGIN VIDEO CLIP)
SEN. DICK DURBIN, D-ILL.: Bank of America customers, vote with your feet. Get the heck out of that bank.
(END VIDEO CLIP)
GIGOT: Joining the panel this week, Wall Street Journal Editorial Board member, Mary Kissel; assistant editorial page editor, James Freeman; and opinionjournal.com editor, James Taranto.
James, let's talk about the protests first. How seriously should we take these as a political movement?
JAMES TARANTO, EDITOR, OPINIONJOURNAL.COM: More serious than I would say I was prepared to take them at the beginning of the week. This started off as your standard-issue left wing protest, your regular assemblage of dopey college students and super annulated (ph) hippies. It was like the nuclear freeze movements of the '80s, the anti-globalizations protests in the '90s, and the anti-war movement of the last decade. But now you see all of these serious political forces on the left joining in. It started with the liberal media, who suffer from what one Washington Post columnist calls Tea Party envy.
(LAUGHTER)
They say, oh, we've got our own populous movement now. This is great. Let's embrace these people. Then you started seeing prominent left wing Democrats, including Nancy Pelosi, the minority leader of the House, and this week, also the unions joined in, the public sector unions joined some of these protests. So I wonder if what we're seeing here might not amount to the functional equivalent of a primary challenge to President Obama.
GIGOT: Because they're raging against his policies? But is that it? Or is this really a liberal Tea Party thing?
MARY KISSEL, EDITORIAL BOARD MEMBER: I'm not sure that this is a liberal Tea Party. The Tea Party works through the political system, goes through your elected representatives and has a clear agenda, smaller government, lower taxes. This movement, it's unclear what they want other than it seems to be a general anti-capitalist movement. I think the real danger here is to have political leaders stoking this, expressing sympathy for it. I think you could see these protests get much larger.
JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Well, I think the political danger for the president, as well, is if the people in the street ever figure out exactly what it is they're protesting. The --
(LAUGHTER)
GIGOT: Well, don't they want --
(CROSSTALK)
FREEMAN: In a general way, they're protesting the banking system.
GIGOT: Right.
FREEMAN: The banking system operates under rules created by Barack Obama and the Democrats, when they ran Congress. He signed the Dodd/Frank Act in 2010, covers essentially all of American finance. That's the banking system authored by Barack Obama. While -- he's probably going to have a problem if these people ever figure that out.
(LAUGHTER)
He's also going to have a problem with Independent voters, looking at this and saying, wow, embracing this protest, is that really the answer to 9.1 percent unemployment.
GIGOT: It's interesting. what does a Democrats do, say, Chuck Schumer, the New York Senator, who gets enormous campaign contributions from Wall Street, constantly up there asking them for money. And here he has core Democratic supporters railing against his funders. How does he handle that?
TARANTO: I think he probably ends up doing something like what President Obama did this week, which is make some vague statements, paying lip service to the protesters, and not helping them behind closed doors.
(LAUGHTER)
KISSEL: Look, I don't -- I think that you're going to see this get bigger because the Democrats have nothing else to run on. President Obama cannot run on his record of the last two years. What is he doing? He's stocking the class-warfare message and going back to his community organizer roots. That's why you see, not just the president, but you see Bernanke and Geithner and others of the administration --
(CROSSTALK)
GIGOT: Whoa. Bernanke and Geithner?
(CROSSTALK)
KISSEL: Expressing sympathy for the protesters.
GIGOT: The head of the --
(CROSSTALK)
GIGOT: -- central bank of the United States --
KISSEL: Expressing sympathy.
GIGOT: -- and the secretary of the treasury expressing sympathy?
KISSEL: Yes. For the protesters.
GIGOT: This sounds -- if that's true, this sounds very political in terms of its being geared to the 2012 election.
FREEMAN: Well, I can understand why Mr. Geithner might want a little secret cred among Democratic voters here. But it is ironic, given that, if you wanted to say, who is the one person who gave us the bailout era of Wall Street, it's Tim Geithner. As president of the Federal Reserve Bank of New York, orchestrated, cheered on, beginning with Bear-Stearns and then AIG, the various government interventions. So for him to try and jump ahead of this parade is just beyond weird. But --
(CROSSTALK)
GIGOT: Go ahead, James.
TARANTO: I was going to say, listen to the president. He keeps saying this is not class warfare, this is just not. You look at what's going on in the park in downtown Manhattan, that's class warfare. These guys really do want war. And I --
(CROSSTALK)
GIGOT: But could it really be that this is going to be the beginning of a populous left wing movement, comparable to what we saw in the conservative populism of the Tea Party, actually become a major political force that has influence not us just over Democratic politics, but over policy?
FREEMAN: I would say no, because the Tea Party is a -- was a reaction among people, small business owners, voters, who thought the government was spending too much and was too big. The crowd that this group is playing to is extremely small. This is not the typical American voter. This is not the mainstream Independent in those swing states. So, I think it's fundamentally different from the Tea Party in that respect.
GIGOT: Good politics, Mary, for the Democrats to jump on this?
KISSEL: No, I think it's terrible politics. And what these people are calling for is more of the same. And even the Democrats in Congress don't want, for example, to vote for more of the same as evidenced by the reactions to President Obama's jobs plan. So they can't go farther to the left. And if they do, I think they become even more unelectable than they are now.
GIGOT: All right, well, we're going to follow this. It's going to be interesting.
Ahead, with Chris Christie and Sarah Palin both out, the Republican presidential field is finally set. So which candidate has the best plan to save our sinking economy? We'll take a look at Herman Cain and his 999 proposal, next.
(COMMERCIAL BREAK)
GIGOT: Well, Sarah Palin and Chris Christie have made it official. Neither will seek the GOP presidential nomination, leaving the primary field all, but set. So, which of the contenders has the best plan to fire up the economy? This week, we take a closer look at Herman Cain and his 999 proposal.
We're back with James Freeman, "Wall Street Journal" columnist and deputy editor, Dan Henninger; and columnist, Mary Anastasia O'Grady.
So, Dan, you wrote last week it's time to take Herman Cain seriously. Why?
DAN HENNINGER, COLUMNIST, DEPUTY EDITOR: For one thing, Paul, the reality is we now live in a world in which outsiders run for the presidency. That's just the way it works now. The party's no longer control the nominations. So we're faced at the moment with Mitt Romney, Rick Perry or someone else. And the media had more or less ordained that these two were the frontrunners. And they're the only people we are going to talk about.
I took a look at Herman Cain and, in fact, he's a serious person who has an accomplished business career. He went to Pillsbury in Minneapolis in 1979. They he sent him to Philadelphia to resurrect Burger King there. He revived it. Then they sent him to Omaha, Nebraska, to do the same thing.
He's running for president. He's got serious ideas on taxes and trade and on Social Security, and I thought he deserved a closer look.
GIGOT: OK, Mary, you've looked at the 999 plan. What do you like about it?
MARY ANASTASIA O'GRADY, COLUMNIST: Well, I mean, Herman Cain understands the importance of not punishing capital. And that's fundamental to getting this economy going again. The 999 plan will not have any taxes on capital gains and it will basically incentivize investors to put their money back to work. That's the most appealing thing about it. And also it --
(CROSSTALK)
GIGOT: No taxes on dividends. No taxes on -- no state tax. And I think it eliminate the payroll tax too.
O'GRADY: Yes.
GIGOT: It's a plan that says nine percent on incomes, nine percent on business receipts. And then it introduces a nine percent national sales tax.
O'GRADY: And I think the cut in income tax, personal income tax is very important. And I like the fairness of it, that everybody starts paying taxes. Right now, there's a big problem that almost half of the voting public does not pay income tax. And, of course, when you go to the polls and you vote, then you have a different set of incentives than someone that's being taxed at the current income tax rate.
GIGOT: Thirty five percent to nine percent income tax rate. You must like that. But what do you think of the --
(LAUGHTER)
But what do you think of the national sales tax idea? Right now, the state and localities have sales taxes, but we don't have it on --
FREEMAN: We don't have a national tax.
GIGOT: Would he introduce one?
FREEMAN: Assuming he could get this enacted, what you'd have is an environment for tremendous growth, but you would also the seeds of potentially European-style massive government because you would have created this 9 percent national sales tax, which we don't have. You also -- the business tax part of it, which he calls the net profit tax, is basically a Value-Added Tax. So, if all of those rates stay at nine percent, it's great. It's simple. It's going to give us economic growth. But if politicians do what they normally do, which is ratchet those rates up over time, we end up getting a very good government and a much more comprehensive tax footprint on us than we have now.
GIGOT: Dan, I think that's really a difficulty here with this plan, a major flaw.
HENNINGER: Yes.
GIGOT: Because if you don't get rid of the income tax and you introduce the sales tax, it's great if the rates stay low, but you see the experience that the United States had with the income tax is that the rates don't stay low forever.
HENNINGER: I agree with that, but I think the important political point is that we're sitting here, having a substantive conversation about his plan. Herman Cain's plan falls right within the context of serious tax reform right now. The Bowles-Simpson Commission proposed three personal rates, eight, 14, 23 and a corporate rate of 26.
GIGOT: Right.
HENNINGER: The Rivlin-Dominici Plan proposed 15 percent personal, 27 percent corporate, and a 6.5 percent sales tax. This is where any serious tax reform is going to occur in a discussion of these issues. And we'll just have to work through whether we'll end up with a sales tax or not.
FREEMAN: I would just say, the other reason Herman Cain is getting taken seriously is you can see -- you know what you're getting, philosophically. If go back and look at old film clips on YouTube of Mitt Romney from the '90s and 2000s, conservative will see pro-abortion, global warming stuff, gun control. He's moved off those positions now. You go back and Google Herman Cain and Bill Clinton and see his legendary clash with the former president over health care costs, and it shows you his philosophy hasn't changed and that he gets small business.
GIGOT: But if you introduce -- you propose, as a Republican, Mary, a national sales tax, won't that give President Obama the opportunity to run against it and muddy the whole tax debate as you get into 2012, and say, I'm against this regressive tax on poor people and what they want to buy in clothes and food and everything, and he wants to give a tax cut for the rich, but impose one on the poor?
O'GRADY: Well, certainly, it will be something that Herman Cain will have to defend vociferously because that's precisely where the president will go after him. But I think he can defend it. I think his bigger problem is that he, right now, is not well-organized. And so, he's not getting to the people he needs to get to in Iowa and New Hampshire. And if he doesn't get organized there, I don't think he's going to make it.
GIGOT: OK, Mary, thanks.
Still ahead, we all know too much government regulation is bad for business. But is it bad for your health? How the Food and Drug Administration could cost you your life, next.
(COMMERCIAL BREAK)
GIGOT: Is the United States Food and Drug Administration bad for your health? My guest this week says government over regulation is costing thousands of Americans lives and driving a once-thriving medical device industry overseas.
Dr. Scott Gottlieb was the deputy commissioner of the FDA from 2005 to 2007. He joins me now.
So, Scott Gottlieb, welcome. Good to have you back on the program.
DR. SCOTT GOTTLIEB, FORMER FDA COMMISSIONER: Thanks for having me.
GIGOT: The medical devices industry has been one of America's great business success stories. This is the industry that makes things like heart valves and joint replacements. But you say it's a danger and maybe heading, in part, at least, overseas. Why?
GOTTLIEB: Well, a lot of companies are starting to move their operations overseas because they just can't get approval here in the United States. They can't get their products through the Food and Drug Administration. So if they want to be able to market their products worldwide they have to -- and they can only get them improved in Europe, they also have to manufacture them in Europe. Because what is happening is a lot of countries like India, China, Brazil have enacted what are called country of origin rules, which means that, if you want to market a device in those countries, you have to also manufacture it in the same place where it was approved by a regulatory authority. So if you know you're going get approved first with your medical device because you can't get it through the FDA, that means you also have to manufacture your device in Europe.
GIGOT: Well, that seems to turn the world upside down, because I have followed this issue for a long time, and I seem to recall when Europe was behind the United States. They were the over regulating -- and they tended to over regulate. What's happened that has now made the United States slower than Europe?
GOTTLIEB: Well, Europe also had a more flexible approach with the approval of medical devices as compared to drugs, where they do have more stringent regulatory requirements, or historically had more stringent regulatory requirements. But I think what's changed in recent years, is that the FDA has significantly increased the bar in terms of getting new products onto the markets here in the U.S. And the management of the process just isn't very good right now at the Food and Drug Administration. You have reviewers that are holding up products, new products, very promising products in animal studies that are, in fact, on the market in Europe. So we're requiring companies to study products in pigs and sheep here in the U.S. and look at long-term outcomes in animals, and meanwhile, you have 5,000, 10,000 Europeans running around with the same product in them.
GIGOT: Give me an example or two of a product that has been approved in Europe for a while and hasn't been approved here?
GOTTLIEB: Well, I think the most compelling right now is the aortic valve replacement. Right now, if you have a bad aortic valve, if they have advanced heart disease, or most people who age develop what's called a sclerotic aortic valve, their aortic valve literally becomes brittle and hard and doesn't open well. Those patients can go into heart failure. And a lot of them are too sick for surgery. Right now, in the U.S., surgery for a bad aortic value requires effectively open-heart surgery.
GIGOT: Wow.
GOTTLIEB: You have to spread the ribs, crack the chest. In Europe, right now, they have two -- four devices -- actually, two were approved this week -- for intervening on the aortic valve, minimally invasively, basically going through an artery in the leg, and threading the replacement valve up through a catheter, into the heart. It's kind of like a coronary angiography, a little bit more complicated than that, but the same basic idea. So it avoids the open-heart surgery. There are about 40,000 Europeans who have had this procedure done. Here in the U.S. --
GIGOT: Forty thousand?
GOTTLIEB: Right. One device should get approved soon. The other major device that's been on the market and put in 15,000 Europeans just got approval from the U.S. Food and Drug Administration to get into a clinical trial. Before that, they were experimenting in pigs and sheep.
GIGOT: OK, so the Food and Drug Administration, though, would say, in response, look, that's fine if Europeans do that, but our job is to protect the lives of American patients. So we need to do these clinical trials in animals because we don't want to experiment first on human beings. So we need to take these precautions to make sure they're both safe and effective. Your response?
GOTTLIEB: Well, my response is, when you have clinical data, when you have a lot of Europeans who have a device and you're requiring companies to go back and experiment in pigs and sheep, there's not a lot you're going to learn in those animal experiments that you can't learn from the clinical data that should be available in Europe. So we're slowing down the approval process here in the U.S. to the point where these devices are on the market in Europe years before they are on the market in the U.S., we should be -- at least leveraging that experience and using the experimentation, if you will, of putting these devices in Europeans to streamline the regulatory process. I've see examples where the U.S. FSA has required long-term outcome studies in animals where the devices are on the market in the Europe. And I would just say, you're not going to learn a whole lot from that from that. These devices don't even fit inside animals very well. When you put the valve replacements inside a pig, for example, most of them go into immediate heart failure because the valve doesn't fit in their heart.
GIGOT: All right, so you've worked at the FDA. You know the culture. How do you change that culture to make it faster, the approval process faster?
GOTTLIEB: Yes. On the one hand, you have pressure on the agency right now to increase the regulatory requirements and to look at more long- term outcomes for medical devices. And that's a separate discussion. So we're following patients along with the devices to look at whether or not the devices actually improve outcomes. And that's a separate debate.
The other issue is just the management of the process. And I think what's lost on the FDA is that these delays in getting back to companies and holding them in limbo and not letting them advance into the clinical studies is putting a lot of companies out of business or forcing them overseas. I think there isn't the culture there that really appreciates the time cost of capital and idea of a six-month delay because you can't make up your mind as a regulatory agency, could be the difference between a company going forward and not being able to raise the venture capital to sustain the business.
Remember, a lot of these medical device companies --
GIGOT: Right.
GOTTLIEB: -- in comparison to the drug industry, are small companies. Seven thousand companies in the U.S., most of them employ fewer than 20 employees.
GIGOT: All right, Scott Gottlieb, thanks. We are going to be following this as we go. Thanks for being here.
GOTTLIEB: Thanks, Paul.
GIGOT: We have to take one more break. When we come back, "Hits and Misses" of the week.
(COMMERCIAL BREAK)
GIGOT: Time now for "Hits and Misses" of the week.
Mary, first to you.
KISSEL: I'd like to give a backhanded hit to the Democratic House subcommittee that released a clutch of e-mails on the Solyndra scandal this week. They said the e-mails, which show a, quote, "vigorous debate within the administration" about whether or not to throw taxpayer money towards this solar panel maker -- indeed, they did show a vigorous debate. Many administration officials were horrified by the company's finances.
GIGOT: Right.
KISSEL: And they also showed how big campaign donors have had access to really the highest reaches of political power. So I'm not sure how releasing these e-mails helped the Democrats' cause for more government spending, but they sure clarified the Obama economic plan for next year's election.
GIGOT: OK.
James?
TARANTO: A reluctant hit to Governor Chris Christie for deciding not to get into the presidential race. I admire Governor Christie. I was hoping he would run. But I don't think you can be an effective candidate if your heart isn't in it, so he probably made the right decision. Besides, as they say about hindsight, there's always 2020.
GIGOT: And 2016, maybe?
(LAUGHTER)
All right, Dan?
HENNINGER: Well, obviously, a hit to Steve Jobs. People in business and investing are always asking, what is the next thing in the American economy, Internet, telecommunications. Well, in fact, the next big thing resides inside the head of a genius innovator or entrepreneur like Steve Jobs. And I think the job for the rest of us is to make sure they have enough personal and economic freedom to bring those ideas to life, the way that Steve Jobs did over his career.
GIGOT: What do you think Jobs' most important legacy is, Dan?
HENNINGER: I think it was -- it will be linking these -- this hardware, iPads and iPods, to the social network system that allowed people to distribute information on a massive scale. It was just unprecedented in our lifetime.
GIGOT: All right, thanks, Dan.
That's it for this week's edition of the "Journal Editorial Report." Thanks to my panel and especially to all of you for watching.
I'm Paul Gigot. We hope to see you right here next week.
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