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?

The full essay is at "Regulatory Capture and the Public Interest."

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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.

Perception-Based Healthy Reputational Capital as a Strategic Competitive Advantage: The Case of CVS Health

In 2014, CVS drug-stores stopped selling tobacco products. The strategic choice rendered CVS Health more internally consistent on wellness. To be sure, the company continued to sell alcohol products, such as wine and hard liquor, which are harmful to human health. Yet the incremental correction was significant both in regard to the short-term hits to the bottom-line and the salubrious contribution to the health of customers. If the share of revenue (and profit) from the sale of alcohol increased in the meantime to make up the difference, the net effect on the bottom-line could have been zero or even positive, and the net impact on the health of customers and the company’s healthy image could also have been nugatory or even negative. Writing in 2019, however, Larry Merlo, President and CEO of CVS Health, saw a perfect convergence of the long-term bottom-line and making a contribution to society even at the expense of short-term revenue.

The full essay is at "Perception-Based Healthy Reputational Capital."

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

While campaigning for the U.S. presidency in 2008, U.S. President 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.

The full essay is at "Betraying an Electorate."

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.

The full essay is at "Drug Companies as Feeding Machines."

Source:

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