UCSF economists critique FDA cost-benefit analysis of FDA deeming rule

Wendy Max and Yingning Wang, two economists at UCSF have submitted a public comment on  the FDA's regulatory impact (cost-benefit) analysis.  Here is a summary from the beginning of their comment:

Regulatory impact analysis of any FDA tobacco regulation has to consider the change in benefits and costs that will result from changes in tobacco use resulting from the new regulation.  The proposed deeming rule will impact the use of combustible tobacco products, including cigars, pipe tobacco, and eCigarettes.  There is a substantial literature on medical expenditures attributable to smoking, and also studies on the healthcare cost impact of exposure to secondhand smoke (SHS).  There is no literature on the healthcare costs of the use of other tobacco products.  The components of a comprehensive model of smoking-attributable costs will be described below, indicating how medical expenditures for other tobacco products must also be estimated. 
 
In its Regulatory Impact Analysis of the proposed Deeming Rule the FDA provides an extensive analysis of costs, but makes no attempt to quantify the benefits of the proposed rule, indicating that “we lack sufficient evidence to estimate within acceptable levels of certainty how consumers will use the new label information”.  Because this correctly reflects the status of the literature at present, the FDA's used of "break even" levels of lives quality of life years that would need to be saved by proposed regulations is a reasonable approach.
 
As detailed below, however, the FDA should not be including a discount for lost consumer surplus
 
The statement on page 52 on  the break-even point is confusing.  Life-years and quality adjusted life years are different things, yet the FDA seems to be considering them the same.   In particular it is not clear where the QALYs come from.  Usually life years are not discounted. 
 
As more information on specific costs becomes available, or if the FDA decides to develop more specific benefit estimates, the FDA should avoid making the mistakes it made in its RIA of the previously proposed rule for warning labels for cigarettes.  The comments provided here offer guidance as to how a more detailed RIA should proceed.

Click here for the full comment.  The comment number is 1jy-8ca2-oxv7.