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Did FDA Make Best-Possible Case for Warning Labels?

December 23, 2013


In November, researchers published a study that concluded the U.S. Food and Drug Administration (FDA) had seriously underestimated the impact that graphic warning labels would have in reducing smoking rates in the United States. Now, another prominent researcher is arguing that the FDA's economic analysis grossly overestimated the cost to the economy of requiring such labels because of the amount of weight that was given to the 'lost pleasure' people would experience if they were not smoking.

In an article published in the American Journal of Public Health (When Health Policy and Empirical Evidence Collide: The Case of Cigarette Package Warning Labels and Economic Consumer Surplus) and in a blog post about the article, Stanton Glantz faults the FDA's cost-benefit analysis. Glantz is the Director of the Center for Tobacco Control Research and Education at the University of California at San Francisco. From his blog:

…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…is making it particularly difficult to justify any regulation designed to protect public health.

The FDA's analyses, in particular the impact of the warnings, were a key factor in the August 2012 decision by the U.S. Court of Appeals for the D.C. Circuit that struck down the proposed warnings. Based on the FDA's conclusion that the proposed warnings would have only a slight impact on smoking rates, the court found that the FDA's analysis 'essentially concedes the agency lacks any evidence that the graphic warnings are likely to reduce smoking rates.' As a result, the court found that the FDA had not met the legal requirement of demonstrating that the proposed warnings would directly advance a substantial government interest.

The graphic cigarette warnings are required by the landmark 2009 law that gave the FDA authority over tobacco products. While the DC Circuit's ruling blocked the specific warnings developed by the FDA, a separate ruling by the U.S. Court of Appeals for the Sixth Circuit upheld the law's underlying requirement for graphic warnings. The U.S. Supreme Court declined to hear a tobacco industry appeal of the Sixth Circuit ruling, preserving the FDA's authority to develop new graphic warnings. The FDA should move quickly to do so.