Regulatory Capture and the Public Interest: The FDA

The head of the Food and Drug Administration, Marty Makary, “resigned” in May, 2026 even though the decision had been made by U.S. Health and Human Services Secretary Robert Kennedy “and then the White House signed off on it.”[1] Although Makary had been annoyance to drug-company executives, and to that extent his removal was due to pressure on President Trump by the CEOs, his “resignation” supports the theory of regulatory capture, wherein the regulated companies control the very regulatory agencies (and regulators therein) that regulate those companies, this case shows that it is possible for an industry’s interests to be aligned with the public (health) interest. Does the alignment regarding getting rid of a particular regulator lessen the unethical quality of the broader conflict of interest between business and government?

Without a doubt, the regulated industry was unhappy with Makery and his deputy, Vinay Prasad. For example, “(v)aping executives told Trump that Makary was blocking approval of their products, including new flavored e-cigarettes seen as crucial to the industry’s survival.”[2] Additionally, Prasad was “pushed out of the agency twice in less than a year for running afoul of specialty drugmakers and groups for patients with rare diseases.”[3] He had “rejection letters or requests to run additional studies” sent to more than six drug companies on drugs for rare or hard-to-treat diseases that had previously been approved by the FDA.[4] I do not have enough information to be able to assess whether his actions were in the public interest, as it is possible that the FDA’s previous approvals had been flawed. I have more confidence in concluding that he operated against the public’s healthy in going after an established coronavirus-vaccine maker. He had “repeatedly overruled vaccine staffers to restrict eligibility for new coronavirus shots.”[5] He even refused to “even consider Moderna’s mRNA shot for flu.” Moderna “called for intervention by the White House.”[6] In an internal memo, Prasad had claimed without evidence “that the FDA had linked COVID-19 shots to the deaths of 10 children.”[7] It seems that he was going more off an ideology than science.

It seems likely that the drug-company executives red-flagged the ideological distortion as it would decrease the companies’ future sales. The only ideology that rules in corporate boardrooms is that of the profit-motive, so any competing ideology coming out of a regulatory agency would be easily flagged. In such a case, the company-specific economic interests would be aligned with the public interest because the government-sourced ideology would be partial, hence partisan, and thus not in line with a bigger picture such as can reflect the public interest. In short, any pressure that the executives could bring on President Trump to remove Makary and his deputy would be in the public interest even though it would be a case of regulated companies getting rid of government officials who regulate those companies.

In general, regulatory capture of a government agency by a company or industry that the agency regulates is unethical because it destroys the power-relationship that is required for government regulation to exist. Another way of looking at the ethical problem is by realizing that a company, and even an industry, look out for their own particular (economic) interests, whereas the public interest is a whole. To put a part before or ahead of the whole of which the part is a part is essentially to have the tail lead the dog—a part leading a whole.

Because it cannot be supposed that a part’s interests are identical to that of the whole of which the part is a part, even cases in which the two are in sync cannot justify permitting the part to call the shots for the whole—to direct the whole. Put another way, it would still be unethical for a regulated company or industry to wield such power as could dominate a government in a republic because companies are private property rather than elected bodies. That specific cases such as Makary and Prasad justify the drug industry pressuring Kennedy and Trump does not mean that either official would be justified in being directed by that industry more generally. The problem is that corporate political-campaign donations can be so large that big pharma can have the political pressure to direct even a U.S. president. Going forward, company executives could try to justify such power by pointing to their “public” role in having shelved an ideology harmful to the public health that was pushed by Makary and Prasad. It is important to keep in mind, however, that regulatory capture is nonetheless unethical and contrary to democratic principles of public governance of private property, including companies.

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1. Matthew Perrone and Seung Min Kim, “Trump FDA Chief Is Leaving After Angering Pharma CEOs, Vaping Lobbyists and Anti-Abortion Groups,” APnews.com, May 12, 2026.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.

7. Ibid.

Betraying an Electorate: On President Obama's Deal with Drug Companies

While campaigning for the U.S. presidency in 2008, Barak Obama decried the greedy Republican lawmakers acting at the behest of the drug companies to keep drug prices artificially high. A year later, those same drug companies wanted Obama to oppose a Democratic proposal that was intended to bring down the prices of medicine. Beyond betraying those voters who voted for him based on his campaign rhetoric on drug prices, Obama belied the trust that is necessary for a viable republic to function democratically.

 “On June 3, 2009,” according to the New York Times, “one of the lobbyists e-mailed Nancy-Ann DeParle, the president’s top health care adviser. Ms. DeParle sent a message back reassuring the lobbyist. Although Mr. Obama was overseas, she wrote, she and other top officials had ‘made decision, based on how constructive you guys have been, to oppose importation on the bill.’ Just like that, Mr. Obama’s staff abandoned his support for the reimportation of prescription medicines at lower prices and with it solidified a growing compact with an industry he had vilified on the campaign trail the year before.” 

As per the quid pro quo, the industry sponsored its own advertising campaign in favor of Obama’s health-insurance proposal. It was not just the guys’ constructiveness that had convinced Obama’s staff to “make the deal.” To be sure, the staff could have been supposing that the subsidies enabling middle-income Americans to afford health insurance and the expansion of Medicaid to cover 30 million uninsured Americans would relieve people from having to pay high prices for medicine (though everyone, even if only as payers of higher taxes, would be paying the price in the form of higher insurance premiums). However, there would be no guarantee that the government would pick up the tab when needed. Furthermore, the higher prices could widen government deficits.

Beyond health-care and budget policy, moreover, is the contradiction between Obama’s campaign speeches and his staff’s decision to oppose the bill. The implication is that Obama went back on his word, essentially betraying anyone who voted for him because he promised to support lower drug prices. Beyond Obama’s public credibility lies the mechanism of democracy wherein voters trust that a candidate’s campaign bears some relation to the candidate’s governance. Otherwise, the “will of the people” breaks down and mistrust sets in on a societal basis. In other words, when representatives say one thing on the trail and quietly do the opposite behind their desks, democracy itself suffers.

In the wake of the financial crisis of 2008, it was said that trust is vital to the financial system. The same can be said of a viable republic. The question, therefore, is how candidates can be held accountable for the assumed congruence when so much of governance is done behind closed doors. In an electoral system where not voting for one candidate benefits the candidate even further from the voter’s preferences, it can be difficult indeed to hold an office-holder accountable at the ballot box. 

Source:

Peter Baker, “LobbyE-Mails Show Depth of Obama Ties to Drug Industry,” The New York Times, June 8, 2012.

Drug Companies as Feeding Machines: Don't Feed the Sharks

In 2008, drug companies raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That added more than $10 billion to the nation’s drug bill, which was on track to exceed $300 billion in 2009. By at least one analysis, this was the highest annual rate of inflation for drug prices since 1992. “When we have major legislation anticipated, we see a run-up in price increases,” says Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota.  A Harvard health economist, Joseph P. Newhouse, said he found a similar pattern of unusual price increases after Congress added drug benefits to Medicare a few years ago, giving tens of millions of older Americans federally subsidized drug insurance. Just as the program was taking effect in 2006, the drug industry raised prices by the widest margin in a half-dozen years.  “They try to maximize their profits,” Mr. Newhouse said. However, the drug companies claimed they were having to raise prices to maintain the profits necessary to invest in research and development of new drugs as the patents on many of their most popular drugs were set to expire in a few years. The drug makers were proudly citing the agreement they had reached with the White House and the Senate Finance Committee chairman to trim $8 billion a year — $80 billion over 10 years — from the nation’s drug bill by giving rebates to older Americans and the government. However, if realized, the price increases in 2009 would effectively cancel out the savings from at least the first year of the Senate Finance agreement. Moreover, some of the critics claimed that the surge in drug prices could change the dynamics of the entire 10-year deal. “It makes it much easier for the drug companies to pony up the $80 billion because they’ll be making more money,” said Steven D. Findlay, senior health care analyst with the advocacy group Consumers Union.

That the firms were trying to maximize their profits ought not be viewed as  new thing.  That is what they do.  To expect a shark not be be a feeding machine is at the very least highly unrealistic.  It is not fair to the shark that was designed to feed.  If a shark is able to feed, it will.  If a drug company is able to charge more for its products, it will.   It is interesting that the question of motive is deemed relevant.  I myself wonder whether the price increases are really motivated by the anticipated expirations of patents or the $80 billion to be paid as part of the health-care reform.  Can I trust the self-serving explanation of the firms in the face of the experts’ studies of historical price patterns before major pieces of legislation affecting the industry?  A shark will feed; we don’t ask about its motives.  Were a shark to have reasons, they would be whatever furthers its feeding. Whether it is lying would be irrelevant.  In fact, the normativity of truth-telling would not register, as it does not have a taste-element.   We project onto the shark when we presume a motive or that a normative judgment is pertinent.   If the shark can feed, it will.  It is a feeding machine. Social responsibility does not make sense to a feeding machine or to those humans in their capacities in running the machine. For them, it is a technical matter. To realize the wider social goals through business, the wider goals must be put in line with the feeding incentives. As the umpire and protector of the chessboard, the government can structure the rules of the game--and there must be rules for any game--such that the incentives match. The question is perhaps whether the rules might function as nets and suffocate the sharks, or channel them as mighty yet dangerous swimmers.

If we as self-governing citizens do not want the sharks to feed on a given plant, we could make it very costly for them to do so. Simply forbidding them is apt to be disobeyed, and thus costly to enforce. Telling them they shouldn’t feed on something tasty simply does not make sense to a shark. They will be like cats circling an open can of tuna, constantly trying to figure a way around the artificial barrior.  As an alternative, leaving the matter to the sharks themselves to regulate would be like having the wolves police the hen house. In terms of social responsibility, getting mad at a shark for having what we presume is the wrong motive is utterly futile.  We tend to assume or project motives on business managers other than simply to feed. If we want to delimit the feeding, we might look into how the tank we have designed permits or even encourages over-feeding. That is to say, we can change the tank. 

We can’t very well change the shark without making it no longer a shark.  We could pass legislation outlawing profits, then we would not have companies, and they produce our products that we consume.  We want some feeding.  We are convinced that we need some feeding in the tank.  We just don't want such feeding that compromises the tank (or us). The question is how to prevent over-feeding at our expense. Presuming the shark will respond to our charges of its immoral motive is a non-starter, but we can redesign the tank, which the shark must take as a required constraint. 

For example, we can apply anti-trust law such that any sharks that become too big for the tank get chopped up and become shark-food.  We can install steel bars in the tank to limit where the sharks can feed (i.e., maximum prices or profits).   That the drug companies are price-setters rather than takers strongly points to the need for anti-trust enforcement.  Of course, if the sharks are threatening to eat our representatives, we can’t count on our politicians to give us straight talk on significant reform of the tank any time soon.  Rather, they will try to convince us that they have sufficiently modified its structure, when in fact they are enabling the sharks to continue over-feeding.  Perhaps the officials are sharks themselves.  Sharks, whether in business or government, policing a tank of sharks while the rest of us wonder why the over-feeding goes on and on is simply a recipe to get gouged, or bitten.

Source:

Duff Wilson, "Drug Makers Raise Prices in Face of Health Care Reform," The New York Times, November 15, 2009.