Regulations: Good And Bad

by Stuart Shapiro

Appearing on opposite ends of the New York Times yesterday were pieces on regulations.  On the front page, a new proposed regulation from the Obama administration was described.  The regulation (mandated by the Affordable Care Act) would require the public disclosure of payments from drug companies to doctors.

Under the new standards, if a company has just one product covered by Medicare or Medicaid, it will have to disclose all its payments to doctors other than its own employees. The federal government will post the payment data on a Web site where it will be available to the public.

Manufacturers of prescription drugs and devices will have to report if they pay a doctor to help develop, assess and promote new products — or if, for example, a pharmaceutical sales agent delivers $25 worth of bagels and coffee to a doctor’s office for a meeting. Royalty payments to doctors, for inventions or discoveries, and payments to teaching hospitals for research or other activities will also have to be reported.

A low cost solution (making information public rather than banning the payments) to a huge problem (doctors influenced by drug $$ to the detriment of their patients).  Inside the back page was an op-ed by Joe Nocera about the problems with regulations implementing Dodd-Frank.

In a paper she wrote in November, [financial consultant Karen] Petrou laid out a number of examples of new regulatory proposals that were either mind-bogglingly complex or contradictory — or both. For instance, she told me recently, bank board directors will have 184 more things they will have to acknowledge responsibility for under the latest systemic standards. “I think boards have to be responsible for what happens at their institutions,” she said, “but requiring them to be on the front lines of forward-looking cash flow is ridiculous.”

Regulations aren’t always good ideas.  And contrary to the rhetoric coming out of the Republican Party, they are not always bad ideas.  Each one needs to be evaluated individually.  One size fits all freezes on regulation (like many of  these) are bad ideas.

By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.