December 11, 2014

Stanton A. Glantz, PhD

FDA discounts value of menu labeling because of lost pleasure of not eating junk food. What's next?

In our paper, "When health policy and empirical evidence collide: the case of cigarette package warning labels and economic consumer surplus," published in American Journal of Public Health in February 2014, we raised a concern that the FDA would expand its practice of discounting health benefits of other public health regulations that would encourage healthy eating.
 
On December 8, 2014 Reuters reporter Sharon Begley reported that the FDA did just that in their new rule requiring calorie information to be added to many menus in chain restaurants and other food vendors.
 
The FDA estimated that the cost of the lost pleasure could be as much $5.27 billion, essentially wiping out any economic benefits if the medical savings of reduced diabetes, heart disease, and other health problems is at the lower end of the benefits that the FDA estimated ($5.3 billion to $15.8 billion of 20 years).
 
As Reuters noted, "Consumers who eat healthier as a result 'are presumably doing so because they are now better informed,' said Kenneth Warner of the University of Michigan, one of the nation's leading experts on cost-benefit analysis. Anything a consumer freely chooses should not be treated as a forced loss of pleasure, he argued."  (Warner was one a a group of respected economists who submitted a public comment to the FDA on the deeming rule making that case that applying consumer surplus made no sense.)
 
The amazing thing is that, at the same time that the FDA ignored (and continue to ignore a huge body of evidence that consumer surplus does not apply to addictive substances like tobacco), this calculation was almost entirely based on a single working paper by a then-graduate student. 
 
Reuters reported, "According to FDA documents, for the lost-pleasure analysis the agency relied almost solely on a 2011 paper by then-graduate student Jason Abaluck. In an interview, he defended the FDA's decision to reduce its estimate of the health benefits from labeling in part because 'healthier foods are worse off on other dimensions such as taste, price, and convenience.'"  This argument ignores the fact that, as Warner pointed out,nothing in the regulations forces anyone to change what they eat.
 
An interesting question is how the FDA came to rely on this one working paper.  (The FDA would not make any of its economists available to Reuters.) It is my understanding that there was not a consumer surplus dicount in the draft regulation when it was first released for public comment in 2011.  The people at the Center for Tobacco Products keep telling us that if something is not submitted as a public comment it cannot be considered in writing a final rule.  So, who and when gave this not-yet-published paper to the FDA?
 
There seems to be a clear double standard at the FDA:  Public health policies require tons of research and science and economic analysis requires one paper that supports the FDA economists' biases.

Comments

Comment: 

From Sharon Begley’s article some might misinterpret what happened. FDA did <strong;not </strong;actually discount the food labeling rule because of the Lost Pleasure analysis. The Lost Pleasure analysis appears in a section (beginning around page 84) that describes possible alternative ways FDA could have approached the cost-benefit analysis, but were not adopted for the food labeling rule.
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In some respects, the fact that it appeared as an alternative possible analysis makes it even more troubling because it probably didn’t get the same scrutiny internally, was never subject to public comment and could have flown under the radar screen – even while attempting to lend credibility to the Lost Pleasure economic argument. &nbsp;The footnote on tobacco is even more troubling since the authorities it cites are basically the same authors who worte the Warning label and Deemong proposals and the numbers are extraordinary – from a 50% discount in the warning label rule to a 70% discount in the Deeming rule to the 76-93% discount&nbsp;in the&nbsp;footnote. &nbsp;The fact that the author has come up with three disparate numbers with no new meaningful data calls into&nbsp;question the&nbsp;credibility of any of the numbers, the very process by which the numbers have been inserted and, indeed, FDA's process for review.
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Matthew Myers
Campaign for Tobacco-Free Kids
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Comment: 

Interestingly, the pro-business http://mercatus.org/sites/default/files/Scharff_FDANutritionLabelsPIC_v1... " target="_blank";Mercatus Instiutute and http://object.cato.org/sites/cato.org/files/serials/files/regulation/201... target="_blank";Cato institute are critising FDA's use of the Abaluck working paper as part of the FDA's assessment of the benefits of better food labeling.
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I haven't had time to read these comments in detail, but wanted to post them since others may be interested.

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