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Incentivizing Pharmaceutical Testing in an Age of Off-Label Promotion

Ryan Sila

In 2012, the Second Circuit held that under the First Amendment, pharmaceutical manufacturers have a right to promote their drugs for uses for which that they have neither been clinically tested nor FDA-approved. Weighing heavily in the Second Circuit’s analysis was the argument that the FDA’s prohibition on so-called “off-label speech” inhibited physicians’ access to complete information, thereby harming public health. That line of reasoning has also created skepticism within Congress of the FDA’s policy. Others argue that the prohibition on off-label speech is necessary in order to incentivize manufacturers to clinically test their drugs for all intended uses—a process that not only allows the FDA to certify the drug as safe and effective in each of its uses, but also creates a larger data set about a drug’s effects before it begins to be marketed and prescribed. If manufacturers can market their pharmaceutical products for unapproved uses, they have reduced incentives to seek FDA approval, especially because the required clinical tests are extremely costly. Whatever one believes about a policy of permitting off-label promotion, it is clear that it not only creates benefits, but it also creates costs. This Note considers regulatory and common-law tools to reduce those costs. It rejects available regulatory tools, because either they are too weak to change manufacturers’ incentives to conduct clinical tests, or they suffer from the same constitutional questions that troubled the Second Circuit. Instead, this Note argues that courts can hold manufacturers to a common-law duty to test their drugs for each use for which they market them, and it outlines what such a duty might entail. Such a solution, if properly implemented, would not only mitigate the concerns about the liberalization of off-label promotion, but it would also be supported by modern products liability doctrine.

The Unwarranted Regulatory Preemption of Predatory Lending Laws

Nicholas Bagley

In response to a perceived increase in the incidence of predatory lending, several states have recently enacted laws designed to protect vulnerable borrowers from abusive lenders. Earlier this year, however, the Office of the Comptroller of the Currency (OCC) determined that the new laws conflicted with the National Bank Act and issued a regulation preempting them. This Note argues that the OCC overstepped its congressionally delegated authority when it promulgated the regulation, and that courts should consequently invalidate it in order to allow states to continue to develop novel legislative responses to the growing problem of abusive lending. The Note proceeds in two stages. First, after canvassing the unsettled case law on the issue, it argues that courts should not categorically defer to agency decisions to preempt state laws. Because of the relative ease with which administrative agencies can preempt state laws and the real threat that preemption orders pose to state legislative independence, the judiciary should scrutinize agency preemption decisions to ensure that they are at the very least reasonable. Second, the Note turns to the substance of the OCC order, contending that it reflects an unwarranted, unnecessary, and unwise effort to meddle in states’ purely internal affairs. Because the predatory lending laws only minimally affect national bank lending powers, do not impose costs on the national banking system, and do not generate spillover effects, they do not interfere with national banks in a way that can justify the OCC’s wholesale preemption.

Terminal 250: Federal Regulation of Airline Overbooking

Elliott Blanchard

Every year, hundreds of thousands of passengers arrive at their local airport to discover that their flight is overbooked. Unbeknownst to most travelers, their damages for the airlines’ breach of contract are governed by federal regulation. Since 1978, 14 C.F.R § 250.5 has set a statutory cap of four hundred dollars for all passengers bumped from domestic flights. In this Note, Elliott Blanchard examines the effects of this provision on passenger and airline behavior by applying modern contract theory to the problem of airline overbooking. He begins by examining the economic forces that led airlines to overbook flights and the subsequent federal government regulatory response in the 1970s. He observes that while a uniform system of compensation for all passengers made sense during the period of airline regulation, increased heterogeneity in both carriers and passengers now make such a system inefficient. While the market for airline travel has changed dramatically since the end of regulation, the statutory ceiling on damages has remained constant. The author argues that this cap undercompensates passengers for breach by the airlines, and rewards the carriers that overbook aggressively. Given the information asymmetries regarding the likelihood of being bumped, airlines have the opportunity to exploit passengers who cannot accurately discount an airline’s probability of performance. As a solution, the author suggests a repeal of the maximum damage amount coupled with increased disclosure of airline overbooking rates, which would encourage airlines to compete on performance as well as price.

Towards a New Standard for First Amendment Review of Structural Media Regulation

Michael J. Burstein

The Supreme Court’s decisions in the Turner Broadcasting cases ushered in a new era of rigorous judicial oversight of regulations aimed at shaping the economic structure of the media industry. The Turner decisions, and especially their application by lower courts, have expanded the range of regulations subject to heightened First Amendment scrutiny, consistently granted lower levels of deference to legislative and administrative judgments, and applied a degree of economic scrutiny of regulatory choices unseen since the Lochner era. In this Note, Michael Burstein argues that such scrutiny is inappropriate in light of the quickening pace of technological and economic change that marks the modern information environment. He observes that the technological balkanization of First Amendment jurisprudence has outlived its usefulness and that applying a unitary standard to all activities of a particular type of media fails to focus judicial attention on the entity’s core speech activities. Instead, Burstein proposes that courts draw a distinction between regulations that impact content production or editorial choices and those which aim to structure the distribution of information. The former remain deserving of heightened scrutiny, but the latter implicate a long tradition of allowing government regulation to improve the information order. Because government necessarily must make choices among competing instrumental arrangements, none of which implicates a particular normative theory of the First Amendment, such choices are entitled to judicial deference. As technology blurs the lines between different media outlets, this framework should provide the needed flexibility to protect the First Amendment interests of both media entities and the public they serve.

Group Judgments: Statistical Means, Deliberation, and Information Markets

Cass R. Sunstein

How can groups elicit and aggregate the information held by their individual members? There are three possibilities. Groups might use the statistical mean of individual judgments; they might encourage deliberation; or they might use information markets. In both private and public institutions, deliberation is the standard way of proceeding; but for two reasons, deliberating groups often fail to make good decisions. First, the statements and acts of some group members convey relevant information, and that information often leads other people not to disclose what they know. Second, social pressures, imposed by some group members, often lead other group members to silence themselves because of fear of disapproval and associated harms. As a result, deliberation often produces a series of unfortunate results: the amplification of errors, hidden profiles, cascade effects, and group polarization. A variety of steps can be taken to ensure that deliberating groups obtain the information held by their members; restructuring private incentives, in a way that increases disclosure, is the place to start. Information markets have substantial advantages over group deliberation; such markets count among the most intriguing institutional innovations of the last quarter-century and should be used far more frequently than they now are. One advantage of information markets is that they tend to correct, rather than to amplify, the effects of individual errors. Another advantage is that they create powerful incentives to disclose, rather than to conceal, privately held information. Information markets thus provide the basis for a Hayekian critique of many current celebrations of political deliberation. They also provide a valuable heuristic for understanding how to make deliberation work better. These points bear on the discussion of normative issues, in which deliberation might also fail to improve group thinking, and in which identifiable reforms could produce better outcomes. Applications include the behavior of juries, multimember judicial panels, administrative agencies, and congressional committees; analogies, also involving information aggregation, include open source software, Internet “wikis,” and weblogs.

Evaluating Remand Without Vacatur

Kristina Daugirdas

A New Judicial Remedy for Defective Agency Rulemakings

Once the D.C. Circuit has concluded that a rule promulgated by an agency is in some way arbitrary or capricious, the court has at least two options: It can either vacate the rule, or remand it to the agency without vacating it. In the latter case, the agency can continue to implement the challenged rule while revising its explanation to address the defects identified by the court. This Note analyzes the D.C. Circuit’s application of the remand-without-vacatur (RWV) remedy during the decade since the court articulated a generic test for its use. This Note argues that RWV is most justified in cases where the costs of vacating agency rules are particularly high, and where the benefits in terms of improving the agency’s decisionmaking process are minimal or nonexistent. Based on a survey of the rulemaking cases in which the court has applied RWV, this Note argues that while the test that the D.C. Circuit uses to determine the appropriateness of RWV is consistent with the theoretical underpinnings justifying the remedy, the court’s application of that test is frequently flawed. This Note also documents a response to RWV that is less than ideal; agencies generally respond slowly to RWV judgments, and occasionally do not respond at all. The Note concludes that, while the D.C. Circuit possesses adequate tools to counteract agencies’ tendency to ignore judicial decisions in individual cases, it has employed them too sparingly in recent years. This Note then develops a revised approach that would promote the remedy’s beneficial aspects while limiting its negative effects.

Making the Brand: Using Brand Management To Encourage Market Acceptance of Forestry Certification

Misty L. Archambault

Forestry certification seeks to lessen the environmental impacts of private forestry management practices by providing information to consumers. Certified producers attach a uniform label to their wood products to assure buyers that the products were produced in a sustainable manner. In the United States, forestry certification has existed for more than a decade, yet industry participation in such programs remains low. This Note argues that low industry participation results from a lack of consumer demand for certified forestry products and the failure of certification stakeholders to address this lack of demand. While there are many obstacles to increasing consumer demand, this Note suggests that brand management concepts taken from the field of marketing can help tackle these challenges and, in turn, help increase market acceptance of forestry certification in the United States.

What Commonwealth v. Alger Cannot Tell Us About Regulatory Takings

Kevin P. Arlyck

The most intractable questions in takings law involve determinations as to when compensation must be paid for government regulation of private property. Scholars and judges have looked to the history of takings law in the search for guiding principles that can inform, if not resolve, such questions. The 1851 opinion of Chief Justice Lemuel Shaw of the Massachusetts Supreme Judicial Court in Commonwealth v. Alger has figured prominently in these investigations.

This Note argues that such efforts have overlooked other relevant cases Shaw decided, and therefore do not fully appreciate the extent to which Shaw’s jurisprudence was informed by a flexible and instrumental view of how certain principles in takings law should be applied to decide cases. Accordingly, this new perspective on Shaw raises doubts about the extent to which a resort to history can provide effective guidance in resolving the current takings muddle.

The Carbon-Neutral Individual

Michael P. Vandenbergh, Anne C. Steinemann

Reducing the risk of catastrophic climate change will require leveling off greenhouse gas emissions over the short term and reducing emissions by an estimated 60–80% over the long term. To achieve these reductions, we argue that policymakers and regulators should focus not only on factories and other industrial sources of emissions but also on individuals. We construct a model that demonstrates that individuals contribute roughly one-third of carbon dioxide emissions in the United States. This one-third share accounts for roughly 8% of the world’s total, more than the total emissions of any other country except China, and more than several continents. We contend that it is desirable, if not imperative, that governments address emissions from individual behavior. This task will be difficult because individual behaviors, including idling cars and wasting electricity, are resistant to change, even when the change is rational. Mindful of the costs, we propose measures that have a high likelihood of success. We draw on norms theory and empirical studies to demonstrate how legal reforms can tie the widely held abstract norm of personal responsibility to the emerging concrete norm of carbon neutrality. We suggest that these legal reforms could push carbon neutrality past a tipping point, directly influencing many carbon-emitting individual behaviors and building the public support necessary for policymakers to address the remaining sources.

Asymmetrical Regulation: Risk, Preemption, and the Floor/Ceiling Distinction

William W. Buzbee

If the federal government has constitutional power to address a social ill, and hence has power under the Supremacy Clause to preempt state, local, and common law regimes, is there a principled rationale for distinguishing federal standards that set a federal floor or ceiling? At first blush, the two appear to be mere flip sides of the same federal power: The choice of a floor reflects a goal of minimizing risk, while ceilings reflect concern with excessively stringent regulation.

This Article argues, however, that these two regulatory choices are fundamentally different in their institutional implications. Floors embrace additional and more stringent state and common law action, while ceilings are better labeled a “unitary federal choice” due to how they preclude any other regulatory choice by state regulators and also eliminate the possibility of the different actors, incentives, and modalities of information elicitation and proof that common law settings provide. Advocates of free markets respond that this is precisely the idea—regulatory certainty is enhanced with a unitary federal choice, allowing manufacturers to plan with confident knowledge of the regulatory terrain, unbuffeted by an array of uncoordinated actors.

Debate over floors versus ceilings was, until recently, largely hypothetical, due to the rarity of federal imposition of ceilings. During the past year, however, in settings ranging from product approvals to regulation of risks posed by chemical plants to possible climate change legislation regarding greenhouse gases, legislators and regulators have embraced the broad, preemptive impact of unitary federal choice preemption. The federal action regarding such risks would be the final regulatory choice. But under what theory of regulation and legislation can one be confident that placing all decisionmaking power in one institution at one time will lead to appropriate standard setting? In fact, advocates of risk regulation, “experimentalist regulation” scholars, and skeptics about the likelihood of public-regarding regulation all call for attention to pervasive risks of regulatory failure. Agency and legislative inertia, information uncertainties and asymmetries, outdated information and actions, regulatory capture, and a host of other common regulatory risks create a substantial chance of poor or outdated regulatory choice.

Considering these pervasive risks of regulatory failure, the principled distinctions between floor and ceiling preemption become apparent. Vesting all decisionmaking power in one institution can freeze regulatory developments. Unitary federal choice preemption is an institutional arrangement that threatens to produce poorly tailored regulation and public choice distortions of the political process, whether it is before the legislature or a federal agency. Floor preemption, in contrast, constitutes a partial displacement of state choice in setting a minimum level of protection, but leaves room for other actors and additional regulatory action. Floors anticipate and benefit from the institutional diversity they permit. This Article closes by showing how the institutional diversity engendered by retaining multiple layers of law and regulatory actors creates conditions conducive to reassessment and adjustment of rigid or outdated regulation.