Epipen

Beyond Mylan: FDA Efficacy Requirements Hurt the Poor

Contrary to the popular belief that the U.S. Food and Drug Administration (FDA) protects American consumers from dangerous drugs produced by malicious drug companies, FDA drug regulations actually benefit big pharma. And this benefit occurs by increasing the cost of prescription drugs for the poorest Americans. We can see this injustice in the recent EpiPen controversy.

The drug company Mylan recently announced that they were increasing the price of their drug known as the EpiPen by nearly 500 percent since 2007. The EpiPen is a device that allows someone suffering from potentially fatal allergy symptoms to inject epinephrine into their system, reducing the symptoms and possibly saving their life. Since the drug is widely used and so important for many people, the price increase ignited a political and media firestorm. Pundits from both sides of the aisle are outraged, saying that the company should be forced to lower the price.

But the drug company is not the only organization at fault. Like any other corporation, Mylan is in business to make money. The FDA, on the other hand, whose official vision is that “public health is advanced and protected,” goes against this mission every day.

Continue reading at RealClearHealth.

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U.S. Unnecessarily Continues to Trail in Property Rights Protections

In the Property Right Alliance’s newly-updated International Property Rights Index (IPRI), the United States ranked 15th out of the 128 countries studied. Yet many would presume the United States to be much higher on the list. It seems somewhat intuitive that the United States would be ranked above countries such as New Zealand, Japan and Australia, and possibly above the United Kingdom and Hong Kong, but the study shows this is not the case.

While strong in intellectual property protections, the United States has more work to do in terms of protecting physical property rights and fostering legal and political environments that do not allow for unnecessary seizures. The United States might be tied for first with Japan in its protection of intellectual property rights with a score of 8.63 (out of 10), but the empirical evidence shows that the U.S. protects physical property and its legal and political environments to a lesser extent. Reforming eminent domain abuse and civil asset forfeiture could aid the United States in better protecting citizens’ property rights.

Continue reading at The Daily Caller.

retirement

DOL Fiduciary Rules Hurt Low Income Retirees

Last April, the Department of Labor (DOL) issued new regulations making most financial advisers fiduciaries, thereby requiring them to “give prudent advice that is the customer’s best interest, avoid misleading statements, and receive no more than reasonable compensation.” The intent of these rules is to prevent 401(k) and other retirement account managers from offering financial advice that would earn them high commissions at the expense of their clients’ portfolios. But, policy never occurs in a vacuum. The unintended consequences of these regulations have hurt low-income retirees.

Only a few months after DOL issued these regulations, a number of retirement plans have been subject to lawsuits for allegedly charging excessive fees. This recent wave of cases has been filed against smaller plans, a significant break from previous litigation. It is likely that these new rules will increase the number of plaintiffs on similar lawsuits in the future.

Improving the quality of financial advice given to future retirees would, in a vacuum, be unambiguously good. However, there are still a number of possible outcomes that policymakers should keep a close eye on when evaluating the efficacy of these regulations.

First, these rules would change the way some financial advisers are compensated. Previously, advisers earned money from fees based on the total return of the portfolio, in addition to commissions, by recommending investment products. In many cases, this created a conflict of interest, where advisers earned more by recommending products that are worse for their clients’ portfolios. The White House estimates the total cost of this “conflicted investment advice” to be $17 billion, though some dispute this figure.

Financial advisers will likely try to make up for these losses, and two things may happen. First, they could raise the management fees. Though higher fees would be to the detriment of investors, it is not clear whether the money lost from management fees will be greater than the money lost from these commissions.    

Worse, these investment funds could drop middle- and lower-income clients altogether. Because the fees are based on a commission, some advisers may feel that the returns aren’t high enough. This outcome likely undoes any benefits received by higher-income retirees, as lack of access to professionally managed accounts (even those that offer mediocre advice) puts their ability to retire at risk and widens the savings gap between the rich and the poor.  The combination of a loss of retirement advice and increased fees for smaller investors could amount to $80 billion, according to Senate testimony by former Brookings Institution scholar Robert Litan.

While these regulations are still in their infancy, there is some evidence of their potential effects across the pond. The United Kingdom and Australia implemented similar regulations against financial advisers earning commissions. While regulations in the US are restricted to retirement account managers, the United States could see an “advice gap” where there is a slight reduction in the number of financial advisers.

Those who have access to financial advisers will likely benefit from their advisers being held to a higher legal standard when managing their money.  However, it is unwise to let gains at the top come at the expense of those at the bottom. This problem has become a feature of retirement policy in the United States. In 2012 alone, the federal government lost over $100 billion in revenue due to the tax-deferred status of retirement plans. This policy has only become more regressive now that fewer low-income Americans will benefit from due to these new regulations.

On the margin, these regulations will squeeze out lower-income persons trying to save for retirement. It would be wiser to start out with more robust disclosure mechanisms, which would do far less to reduce access to retirement savings. While progressives may may jump for joy about better retirement advice for those who can afford it, these regulations are just one more piece in the regressive mosaic that is American retirement policy.

Daniel Takash is a Young Voices Advocate who works as a policy analyst in Washington, DC. Follow him @DanielTakash.

 

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John Oliver is Completely Clueless on Charter Schools

On Sunday, liberal comedian and “destroyer” of all worlds John Oliver took school choice to task, pointing out a number of financial abuses shifty charter school operations have perpetrated over the years. The segment was very anecdotal and, as Nick Gillespie dissects in Reason, left out a lot of positive evidence for charters.

What I found most problematic, however, was Oliver’s moral argument against markets in education. Despite having promised at the top of the segment that he would not be arguing against charters as a concept, the funny man seemed to be doing precisely that in his criticism of remarks Ohio Governor John Kasich made about choice.

Kasich said, “We will improve the public schools if there’s a sense of competition. Just like a pizza shop in the town, if there’s only one and there’s not much pepperoni on it, you can call ‘til you’re blue in the face. But the best way to get more pepperoni on that pizza is to open up a second pizza shop, and that’s what’s going to improve our public schools.”

Continue reading at Rare.

college

New Department Of Education Rules Threaten Colleges

The Obama administration’s Department of Education recently proposed new rules to enable more students to sue universities that defrauded them. While the government should punish blatantly deceptive institutions, these proposed rules promise to penalize many high-quality colleges.

The rules will enable students of a university to sue and recoup their tuition if the university offered a “substantial misrepresentation” of elements like the employability of its graduates or the nature of its educational programs. This is a lower standard than mens rea, the legal principle in fraud cases that a crime requires intent. Troublingly, students can successfully sue whether or not the college intended to lie, meaning that universities will be subject to lawsuits over clerical errors.

This could be crippling. My alma mater, the University of Colorado at Boulder, brings in almost one-third of its revenue from tuition. If just one class of 5,000+ students were reimbursed for their tuition, the university with a substantial shortfall. This could mean cuts to valuable services. Because the University of Colorado is a public institution, taxpayers could also be called upon to make up the difference.

Continue reading at The Daily Caller.