Radical regulatory reform a reality?

March, 2017

Eric F. Greenberg Attorney-at-Law

During the presidential campaign, packagers of products subject to the regulations of the U.S. Food and Drug Administration and other agencies had wondered how realistic Candidate Trump was when he talked about dramatic "regulatory reform." Now that he's President Trump, he's wasted no time in taking concrete steps toward translating his generalities into action.

To give the new President a chance to do what he said he'd do, you have to take at face value what he said, then see how it goes. Many observers, though, hesitate to take that approach because his ideas about regulatory reform sound so simplistic.

I say "simplistic" because just about all he's said is he's going to cut the quantity of regulations by "70-80%", and that for every new regulation, two existing regulations need to be eliminated, in an effort to cut the burdens on businesses, thereby allowing more to start up and grow. He evidently breathes nary a word about the purposes or subject matter of the regulations. Regulations cover products, processes, businesses, and people, and are designed to, and often actually do, enhance safety of products, fairness in competition, truthfulness in commerce, and other goals. It sounds, charitably, like what a person who knows little about what the government does, and why, would say they want. But fair's fair: It's not a stupid idea if it works.

And the administration has already taken the first steps. Specifically, the President signed an Executive Order on January 30 titled "Reducing Regulation and Controlling Regulatory Costs," and then the government's Office of Management and Budget told agencies to propose two regulations for repeal whenever it proposes one for public notice and comment, unless doing so is prohibited by law. Also, "the total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero," again unless prohibited by law or subject to a specific exemption from OMB. Finally, "any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations."

What's more, the guidance document covers both "significant final regulations" and also in some cases "significant guidance documents," perhaps in recognition that many regulatory policies are implemented by mere guidance rather than formal rules. The policy applies to significant final regulations that an agency issues between noon on January 20 and September 30, 2017.

There are certain situations that may qualify for a waiver from some, if not all, of the requirements of the Order, such as emergencies addressing critical health, safety, or financial matters, or another "compelling reason." Presumably, agencies will claim that there's a compelling reason to keep rules that affect public safety, though it will be interesting to see if anti-regulatory regulators interpret that idea narrowly so as to limit the range of rules they can exclude from the new policies.

The requirement to keep the incremental costs at or below zero does not apply to independent agencies, such as the Federal Trade Commission.

The guidance says that it is possible in some cases to combine regulatory and deregulatory actions but that the provisions should be logically connected. Where possible, the regulatory actions should be eliminated before or on the same schedule as the new regulatory action. There is a good deal of guidance on how costs should be accounted for, but OMB says that costs are to be measured as the "opportunity cost to society." Cost savings can be shared within an agency, or can be transferred from one agency to another in certain situations.

The policy, and the Executive Order it implements, doesn't address my pet peeve with the whole effort, namely, the loose reference to "regulations." A regulation, strictly speaking, refers to a single numbered section in the Code of Federal Regulation, and the requirements applicable to virtually all topics are spread out among numerous individual regulations. It's pretty clear the President is speaking about topics of regulation or sets of regulations-it wouldn't make much sense for agencies to add only one, or cut only two, individual sections out of a set. Still, it will be interesting to see if any agencies play with that concept a bit as they try to implement the new order.

Packagers of foods, drugs, and medical devices will want to watch implementation closely. FDA's recently implemented food safety regulations are already in place, as are new revisions to nutrition labeling, but its rules about GMO labeling might be affected if they are proposed this year. Rules relating to the big medical products law signed by President Obama late last year, the 21st Century Cures Act, might be affected, though.

Critics of the policies have already expressed the concern that the 2-for-1 concept is arbitrary, and of course, in a nutshell, it is.

Critics also complain that the approach accounts for costs of regulations but gives no credit for public health benefits the regulations provide, or the costs of adverse consequences of delaying or eliminating them.

It will be interesting to see how this regulatory reform develops. Meanwhile, packagers of drugs and medical devices might find their lives changed more by President Trump's choice for the next FDA commissioner. At presstime, the rumor mill has floated 3 names, and one in particular has advocated really radical changes to how drugs and devices are cleared by FDA. Jim O'Neill specifically has in the past said new products should be examined by FDA for safety only, not for whether they are effective. Even drug and device companies don't universally like the sound of that, because they prefer to have FDA's blessing as it helps with marketing and sales and keeps them from having to compete with worthless products.

The only certainty here is that there will be more developments in coming months and years. PW

Eric Greenberg can be reached at greenberg@efg-law.com,or visit his firm's Web site at www.ericfgreenbergpc.com.

This article is informational only and is not intended as, and should not be considered to be, legal advice.

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