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James Broughel, PhD, is a regulatory economist that studies regulatory effects on pharmacy. https://www.mercatus.org/
Transcript Disclaimer: This transcript is generated using speech-to-text technology and may contain errors or inaccuracies.
Mike Koelzer, Host: [00:00:00] James for those who haven't come across you online, introduce yourself and tell our listeners what we might be talking about today. Sure.
James Broughel, PhD.: My name's James and I'm a senior research fellow at the Mercatus center at George Mason university. My research primarily focuses on regulatory reform, how states or the federal government create rules.
How do they analyze rules to see whether they're effective or how do they go about reviewing the regulations? And as part of this research, I've begun to do some work on pharmacy reform.
Mike Koelzer, Host: Too many rules are not enough rules. That's
James Broughel, PhD.: kind of a difficult question to answer. So, and Mercatus, we've developed some ways of measuring how much regulation different governments produce.
Um, so it turns out actually. For a long time economists haven't really had very good measures of regulation. And even today, a lot of the measures are pretty imperfect. Um, as you can imagine, there's thousands of different requirements on the books. They're doing a lot of different things. Uh, how do you go about ascertaining how much there is essentially?
And so historically we've used metrics like counting pages, um, or looking at the federal register, which is a daily publication that has all kinds of things in it. Not just regulations. It also has notices about hearings or meetings or that, uh, regulatory agencies taking comments or things like that.
So people have done things like count pages or look at how many employees are working at agencies. Um, but at Mercatus we've developed some metrics to analyze the administrative codes that different governments produce. So these are. The, the compilations of all the rules and the books, and they can be about pharmacy requirements.
They could be about anything, environmental regulations, financial regulations. Now a typical administrative code is really too large for individual degreed from start to finish. So for example, the code of federal regulations has about 180,000 pages in it. So if you just read that for 40 hours a week at a normal pace of reading, it would take you about three years to read.
Is anybody
Mike Koelzer, Host: expected to read that?
James Broughel, PhD.: Well, there's a lot of attorneys who make a lot of money trying to understand all these requirements or influence what goes in these roles. But I think, I think often what happens is people try to find the regulations that are most relevant to their industry or sector.
And, and then there are trade associations and groups like that, whose job it is to help inform. Various industries that this regulation is coming, it's gonna affect you, but for research purposes, which is more where my interest is historically, it's just been really hard to make sense of all these different requirements.
And when economists tended to look at rules, they would just look at them one at a time, they'd say, let's do a cost benefit analysis for this particular air pollution regulation or this particular securities regulation, but that's, there's three or 4,000 rules finalized every year. So you can't do that for every regulation.
That's just federal requirements. We developed some tools at Mercatus to analyze administrative rules, using text analysis, technology, and machine learning. So essentially what we're doing is scanning through administrative codes, using computer programs and searching for words that could signify requirements of various kinds.
Or words that could be relevant to whatever industry is being targeted by regulations. Um, and we can combine some of these metrics to produce estimates of how regulated various sectors of the economy are. And we've produced data, uh, looking at the federal regulatory code, looking at state regulatory codes and even looking at some other countries.
I
Mike Koelzer, Host: was listening to some of your stuff earlier, James, and some of those words are like shall and must. And those kinds of things, those are all like indicative of a irregulation
James Broughel, PhD.: basically, right? So we work, we look for words like shell must, may not prohibit it required words. It can signify requirements of various kinds or mandates or prohibitions.
Those words can obviously signify other things like definitions. This term will mean this and that, or, uh, or they can apply to the public sector, civil servants, like administrators must do this or that. Um, but for the most part, they tend to actually relate to requirements. And so we're getting better at [00:05:00] measuring regulation and that's ultimately going to help us improve our understanding of what the effects of regulation are.
Yeah.
Mike Koelzer, Host: It's interesting. Cause I heard you were talking about Alaska versus California and Alaska has like, I dunno, a couple hundred thousand in California is like by half a million or something
James Broughel, PhD.: like that. So at the state level, the average state is about 135,000 regulatory restrictions. So instances of these five terms that I mentioned, uh, but California has about 400,000 and Idaho is actually the least regulated at about 39,000.
Um, Alaska and I think it was somewhere in the 40 to 50,000 range. I don't remember off the top of my head. So it's on the lower end to cares
Mike Koelzer, Host: about the number of regulations and why do they care? There's
James Broughel, PhD.: a few reasons why we care. One is that over time, the amount of regulation is increasing, and has been increasing over the last eight decades.
Say by pretty much any measure, whether you're going by page counts, number of agencies, staff, budgets, restrictions, words, the amount of regulation seems to be going up from an academic perspective. I think we're, we're trying to understand well, is that a good thing? Is that a bad thing? What does that, what is the consequence of that?
It's also from a democratic standpoint, it could be important because it seems as though over time more lawmaking power has moved from our elected representatives. Say in Congress or in state legislatures to these, uh, executive branch regulatory bodies,
Mike Koelzer, Host: Typically a law comes out and then from that law, they say, well, in order to make this law true, we have to have these rules set up because you don't vote on every rule.
It's the larger decisions. And then the administrative rules would come in and make rules for that. But that's where those can almost take over or do more than a primary decision. Is that even close?
James Broughel, PhD.: That's right. So we typically think of the story of how a bill becomes a law. And we think about our elected representatives in Congress, get together.
They negotiate something to pass. They pass a bill, they introduce a bill first debate. It passes the house in the Senate and then the president signs it. Now it's the law. Well, That's often where the story kind of ends. But if you are a regulation researcher like me, that's actually where the story begins because these laws, statutes delegate certain additional lawmaking powers to regulatory bodies.
They're tasked with implementing the law and executing the law.
Mike Koelzer, Host: And like you say, they allow them to make like little laws underneath the bigger law it's supposed to all fit together.
James Broughel, PhD.: But right. So in order for a regulator and it at the department of labor or department of health and human services to write a regulation, they need to be granted some authority from Congress through a statute.
Um, but that authority can be very narrow. It could say the department of health and human services, or you have to, um, pass a regulation that requires calorie counts on menus or something like that, pretty narrow. But even within that, there's a lot of ways you could do it. Or it can be very broad. It could say, uh, environmental protection agency, you have to set air pollution standards for certain pollutants within a range that's protective of public health.
That's pretty broad. And so in some cases, regulatory agencies can regulate for decades really. Um, without any additional authorities from one, one piece of legislation that Congress passes, that delegates them a lot of power. So we're, we're interested in the volume of regulation because we're interested in the effects of it.
We're interested in, um, the implications, I guess, for our democracy. And ultimately we care about what happens to real people on the ground who are just going about their daily lives and are consumers of products that are regulated and have risks associated with them. But also there's regulations that impose post costs.
Are we getting the balance right? Um, and these are the kinds of questions I'm interested
Mike Koelzer, Host: in. All right. So James, I followed your background from being a rockstar and then deciding that studying some economic books and so on while you were not yet in college, thinking of going forward and then kind of falling in love with the same Gusto of economics that you had with music, but how does pharmacy fit into that then once you got your degree and then PhD, where does pharmacy enter into this?
James Broughel, PhD.: [00:10:00] So this interest began, I guess, about two years ago. So I was following a regulatory reform that was happening in Idaho, very carefully. And most people aren't, aren't aware of this, but Idaho had a major regulatory reform effort that happened in 2019. And you said Idaho
Mike Koelzer, Host: was one of the lowest ones or the lowest one.
Idaho
James Broughel, PhD.: is currently the least regulated state by Makeda's right. Data metric count. Yeah, I think at the time it was fourth or fifth least regulated, uh, before these reforms happened, but so it subsequently became the least regulated. Wow. So basically what happened is Idaho has kind of a unique system where their entire regulatory code has to be reauthorized each year by the legislature there.
So this is called a sunset provision and the sunset provision says on July 1st, the administrative code will expire unless the legislature reauthorizes it for an additional year. Uh, this law was passed, I think, in the nineties and until 2019. It had never been exercised. The legislature always reauthorized the code.
Sometimes they made changes or they amended particular regulations. Well, through this re authorization process, but they always passed a reauthorization law. It was just a gimme. Yeah, just kind of a gimmick. The legislature is very involved in rulemaking in Idaho and other areas. So I'm not sure that this part of their process, uh, was necessarily the most important part of their process, but it was an interesting characteristic of Idaho's rulemaking procedures.
And so in 2019, there was some infighting between the house and the Senate. They're both controlled by the same party by Republicans, but they were debating a particular regulatory reform proposal and they couldn't come to an agreement on it. And so basically the session ended and they didn't pass this reauthorization.
Bill, which they're supposed to pass every year. They
Mike Koelzer, Host: basically said all of our regulations are just in limbo now because we weren't able to agree to it again.
James Broughel, PhD.: Right. The reauthorization bill got tied up in this, in this other fight that was going on. And so the session ended in April. I believe it was.
And the rules of walk were all set to expire in July and the state legislature just went home. So essentially what this did, it didn't mean all the regulations in Idaho disappeared, but what it did mean was. The governor of Idaho, whose name is Brad Little, essentially had an opportunity to decide which regulations he wanted to keep and which ones he wanted to let expire.
Now, interestingly, he couldn't let everything expire because there's a lot of statutes in place that require certain rules to be there. So you have to work within those constraints, but essentially his administration did a very rapid review of all their rules.
Mike Koelzer, Host: But like you said, rapid is, is relative because even though it's Idaho with the fourth or fifth lowest to really review, this would really take forever to do so.
It was a review, but even that has to be probably taken lightly.
James Broughel, PhD.: That's right. They did allow a significant amount of their regulations to expire. I think. Maybe 10% of their rules. And it was a higher percentage of chapters, like 25 or 30%, but some of the chapters were very small, so it wasn't necessarily the environmental title or something.
So most of what actually expired was fairly uncontroversial. They didn't take this as an opportunity to rewrite really controversial regulations, but it was an opportunity to rewrite rules in simpler language, reduce fees. In some cases, eliminate some licenses, simplify texts, just by making the rules shorter, easier to follow.
And so this all happened over the span of a couple of months and the governor then re proposed a new administrative code. Essentially the old code expired, they propose a new one, uh, put it in place as emergency regulations and. So that created kind of a seamless transition. And then the legislature returned and eventually got to debate the new rules that had been subsequently enacted.
So I actually went out to Boise while this was all going on, uh, and met with some of the people that were leading this review effort.
Mike Koelzer, Host: Why, why did you go out there? Did someone hire you guys at that point? Or you just went out there out of interest?
James Broughel, PhD.: I was invited, uh, by the little administration. Um, but I wasn't hired in any capacity.
I was just a researcher of regulatory reform efforts. I think they were like, they thought, Hey, you'd be interested in what's going on here. So I went out there [00:15:00] and I met with some of the individuals who were in charge of the review and some of the regulators and the hand of the reform effort. There is an individual named Alex Adams.
He works at the budget department, essentially. He's the budget director kind of like the OMB director in Washington. So he had been leading this review effort and he's actually a pharmacist. And so he said, you know, James, you should come with me to one of our pharmacies and Boise. And he brought me to a pharmacy and showed me how they could conduct certain tests for flu or strep throat or something like that.
And prescribe if need be based on results of those tests, they had a menu of different services like this that were available, prices, uh, things you don't even always see in a doctor's office. And I was, I was really impressed. I thought this was really interesting. And he said, yeah, we've had these regulatory reforms over the last few years that have basically allowed, have expanded the scope of what pharmacists are allowed to do in Idaho.
And so I ended up. Uh, when I returned back to the Washington DC area, um, which is where Mercatus offices are. I started looking into this and I ended up writing a paper about Idaho's regulatory reforms in the area of pharmacy.
Mike Koelzer, Host: When you saw this stuff, was this something pretty novel that Idaho had done?
And in your mind, was it because of lower regulations that they had more freedom that this opened up, or what was the Genesis of the pharmacists having more freedom and more of a role? Was it the idea that there's not as many regulations in rules? And can I make the jump to say, well, that's kind of an answer why regulations and rules can get over bearing?
James Broughel, PhD.: It's certainly the case. Uh, there's a lot of restrictions in place that prevent pharmacists from doing things like giving you a test or prescribing you anything. Um, I didn't realize at the time when I was in Idaho, just how different its regulatory environment is for the practice of pharmacy compared to other states.
Uh, when I started looking into this and talking to people in the industry, they said, oh yeah, Idaho is in this league of its own. They're totally doing their, uh, and it just, they just have, have gone in a completely different direction. And so that really piqued my interest as well. I mean, in Mo in most states, it's kind of a precautionary regulatory regime.
It says basically everything is not allowed unless a law is passed that allows a pharmacist to do something like offer a test or. Or prescribed something. So in some cases you might have a law passed that says a pharmacist can prescribe birth control or a pharmacy. The pharmacist can prescribe an empty pen medication or something like that, or tobacco cessation product, but it'll be one law at a time.
And that's actually how Idaho's reforms started in the early 2010s. They started passing a law here, allowing for a particular product like that to be prescribed a lot there. I'm not sure I have. I know exactly why they ended up, uh, taking much bigger steps. Um, but what ended up happening in subsequent years is in part, it may just be because they got tired of having these battles year after year over single laws, but they basically delegated much broader authority to the board of pharmacy.
Initially, this is what happened. They said the legislature said a board of pharmacy, you can authorize. That pharmacists can prescribe anything within certain categories. Like if there's a low risk test that pharmacists can identify the illness with, it is called CLIA waived test. Um, if, if it's, uh, if it's a mild illness, if it's an emergency, if it doesn't require a new diagnosis, these are certain broad categories.
And so then, the board of pharmacy started passing lots of regulations saying pharmacists can prescribe medication for mob coughs or, um, certain allergy medications and things like that. Then what ended up happening is in 2019, the legislature passed a law that essentially said anything that fits within those categories is allowed by default.
Um, unless the legislature or the board of pharmacy expressly prohibits it.
Mike Koelzer, Host: So if we already made one rule on this. [00:20:00] Any other similar rule is going to be authorized. Anything that's
James Broughel, PhD.: close, right? So, the categories are, if it's a, if it doesn't require a new diagnosis, the illnesses minor and self limiting, if it doesn't, if you're, if you can identify it using a low risk test where if the patient's in immediate danger.
So those four broad categories, uh, basically a pharmacist can prescribe within that doesn't mean they can prescribe controlled substances or Oxycontin or something like that, that doesn't fit in those categories, but low risk medications, uh, for minor ailments, essentially you could walk into a pharmacy very often, get a test for it and get a prescription all in one stop.
And that's unique in Idaho.
Mike Koelzer, Host: Is probably going to be new for a lot of pharmacists, like me that are not in the state legislature, but most states there's probably already either a pharmacy legislator or somebody who's got the ear of a legislator that they want this to happen. And I'm sure that's been going on for a while.
So we talked a little bit about what got out of the way in Idaho, but what is in the way of most states having this happening? I imagine it's the AMA doctors and there's probably a lot of people that are stopping this. It's not like it's being stopped just because people said, oh, I never thought of that before.
I'm sure it's being stopped by someone. Is that fair?
I
James Broughel, PhD.: I think that's fair. So there's, there are certainly some, uh, pretty ferocious. Battles that happen among interest groups. Very often, anytime you start trying to relax requirements like these and the AMA and med physicians very often oppose relaxing some of these restrictions on pharmacists and the pharmacy groups are very often in favor of them.
I think it's fair to say that the power of the physician's groups might explain what in part, why these regulations are there to begin with. Um, and pharmacists as an industry, maybe have grown in influence in recent decades. That may start to explain that. Some of these restrictions are starting to change
Mike Koelzer, Host: at least maybe relative to AMA groups and so on.
Maybe the percent of dominance as well. You know, frankly, I think in medicine in general, people always just kind of bow down to the physicians and kind of get out of the way. And maybe afterwards they said, oh shoot, we should have done this or that. But I think now there's enough people standing up to say, at least we're going to have nice productive arguments to see where things should land.
James Broughel, PhD.: I think as new research has become available, we've gotten better at understanding weather relaxing. These kinds of requirements lead to public health problems. Is it not? Um, as states like Idaho, we're experimenting with it. Are we seeing any problems? So that's one source of friction. Then, there are just general constraints in terms of healthcare costs being very expensive states and households.
Limited budgets. And I think policy makers are looking for ways to increase the supply of healthcare services, maybe bring down costs. Right. Um, and one way to do that is to allow more medical professionals to practice within their, uh, training and abilities.
Mike Koelzer, Host: So James, with Mercatus, then do you guys find yourself even if not on purpose, do you find yourself choosing sides?
And then you end up getting hired by groups that are trying to do more of this or on purpose. Do you try to stay way back and just observe?
James Broughel, PhD.: So, first of all, I'm not hired by anyone. I just, um, Produce research at a nonprofit that's affiliated with George Mason university. So sometime you're not
hired
Mike Koelzer, Host: by,
James Broughel, PhD.: Well, I'm not hired by legislators.
I'm not hired by trade groups. I don't take money from any of those
Mike Koelzer, Host: people. You're hired by Mercato's, but not by these other people. Gotcha.
James Broughel, PhD.: Now I will consult with policymakers, um, and I. I sometimes travel to the state Capitol, especially during the, before the pandemic. But, um, and, and will testify on occasion if, uh, if a bill relevant to any of these kinds of topics comes up.
So I do research and I try to get that research in the hands of people who can [00:25:00] use it. And I try to inform policy in that sense, but, um, Lobbying for or against particular legislation.
Mike Koelzer, Host: I heard before that the government was supposed to go slowly. Maybe I got that from watching Hamilton or something where someone said it was supposed to be a lot of this slowness.
It's a protection cost, a whole lot of money, but there's maybe some protection in this slowness. And so from what you saw then in Idaho, I don't know, personally, do you, would you like to see more of that or was that too quick? Well,
James Broughel, PhD.: I think they're reforms in Idaho or are looking pretty precious right now, especially, I didn't know when I was out there in 2019 that a pandemic was going to hit the country in essentially, I don't know, a year and a half, two years.
It wasn't just the prescribing regulations. They also made it easier. If you had a license from another state to practice pharmacy in Ida. They enacted telepharmacy reforms, which essentially said a pharmacist doesn't always have to be on site at a particular location, uh, for that pharmacy to be an operation, they can consult with patients over a video platform, for example.
Um, and then that led to new pharmacies opening up in some really rural parts of Idaho, um, and all these kinds of changes. They also, they also have, are very liberal in terms of lab testing, and prescribing and vaccinating. So now during the pandemic, we've seen lots of regulations waved in states all over the country and at the federal level to allow for testing, to allow for vaccinating, to allow for out-of -state licenses.
This is to accept tele-health. These are all things that Idaho did before the pandemic. They look pretty smart in retrospect. So it seems to me that. Because the sky hasn't fallen in Idaho and it doesn't appear to be falling in states that have been experimenting with these changes during the pandemic at the very least, states should conduct a review of these rules to see whether they still make sense or where there's, it's time for some changes.
I agree with you that our system of governance in general is pretty slow to evolve. And, and in some ways that can be good. It doesn't mean there's radical, disruptive change that's happening every week, but it also means we can kind of lock in the status quo that may not be the best of all possible worlds.
And so we can make improvements on the margins. Um, I think in general, the biggest problem I see when I look across the country at the regulatory environment, both, both at the federal level and in the states. We don't have very good systems in place to course-correct until we learn from, uh, learn from experience.
So we put it, we issue lots of regulations. They're usually not really analyzed, uh, upfront before they're put in place. If someone has an idea, they do something it's put in place. And then we don't have good systems for reviewing those rules to determine whether they're working. And so the rules tend to just stay in effect.
Um, and we don't have much information about what they're doing and then every year we add more rules. Um, and so the rules, the rule book just tends to grow over time.
Mike Koelzer, Host: Is the reason why rules aren't looked at, is there a legal reason for it or is it more just. Oh guys and gals, we just looked at that damn thing.
Last year, we fought so much and there were so many problems with it. Let's not open this can of worms up again. Are there any rules behind a rule being set and then not being opened up again? Or is it just like, we're not going to tackle that again. That's a pain in the ass.
James Broughel, PhD.: It's a little bit that both every state and the federal government have something called an administrative procedure act and that sets up the process for creating administrative rules.
And these APA is, uh, these laws tend to have a lot of requirements upfront. The agency has to take comments from the public. Uh, you have to issue a notice. You have to collect information. You have to have a hearing. Um, you have to do economic analysis. In some cases at the state level, it's not really very rigorous at the federal level.
It can be rigorous, but it only happens to a very small number of rules. Then once a rule goes into effect, that's pretty much it. Um, the procedures for reviewing rules just have never gotten to be as detailed [00:30:00] for whatever reasons. It sounds like getting
Mike Koelzer, Host: a rule in place in the first place is a pain with all the stuff you just mentioned.
And then they don't write review in there so I can see why they would just sit there
James Broughel, PhD.: forever. And so this gets at the second part of your question, which is there's not much of a constituency for reviewing regulations. There are these battles that happen up front, between industry and various advocacy groups and the regulatory agency, and, uh, each advocate on behalf of their own interests rules come out of a negotiation process.
Maybe not everyone's happy, but once the rules are in place, the industry that complies with it spends whatever resources they have to do that. And then at that point, everyone's kind of like, all right, we don't want to fight that battle. Um, and so there isn't even if that regulation isn't necessarily accomplishing its goals and isn't necessarily, um, advancing whatever, whatever was intended to, or promoting the public interests, there's not really an interest group there to say, we need this regulation reviewed.
Um, because the business community will say, we already comply. We don't, we don't want to revisit
Mike Koelzer, Host: this. If you open the thing up again, a year later, you're going to maybe move something a half a percent. It's just not worth it. And the people that wanted to in the first place know about where they're going to land, everybody knows about where they're going to land.
And it's just not, probably not worth moving that again. Or opening that up again. It's not
worth
James Broughel, PhD.: it from the standpoint of those interest groups. It may be worth it from the standpoint of the public at large. Gotcha. And if you have 300 million people and everybody's spending a couple bucks, extra complying, you know, indirectly through some regulation, it may very well be in the public's interest to revisit the rules, but there isn't an incentive for the public to organize and lobby on behalf of their interests.
The way that some of these narrow constituencies have an interest in doing that, the people,
Mike Koelzer, Host: once I got to the top, they were going to be sure to get about what they could out of that it's kind of like real estate agents, you know, they're real estate agents getting like 3% or whatever each side for your house, and they want to sell your house.
They want the 3%. They want to know if your house is going to sell for a hundred thousand or 300,000. But once they get that, I'll figure it out. And they work through that. They don't care at the very end, whether it itself. 2 97 or 300, they don't care. They'd rather take 3% on something quickly because at the end it just doesn't move that much.
And I can see that with these guys too, once the interest groups get kind of what they want a little bit here or there, it doesn't matter that much, but it sure as hell matters for the 3 million people that are going to be affected.
James Broughel, PhD.: Right. Um, so sometimes this is referred to as the concentrated benefits, dispersed costs, phenomenon, which is associated with a political scientist, his name's Mansour Olsen, um, and he taught, he just, he had some theories of interest group dynamics, and you can also point to the Federalists papers and Madison and, uh, talking about factions and how they tend to kind of gain control over our governance systems.
And it's really the same idea, it's that there are these narrow groups. That it's not that costly for them because they're small to organize and lobby and to have their own interests. It's much more costly for the public at large to organize on behalf of its own interests. Um, and so sometimes the interests of the interest groups align with the interests of the public at large, but not always, obviously.
And so that's one of the main challenges with regulations is just that once the interest groups have kind of agreed to a particular course of action and everyone's on board and the negotiation has been worked out, it's hard to move the needle from that point in any other direction. And so then you're kind of stuck with the status quo for better or worse,
Mike Koelzer, Host: if you are an independent pharmacist and you just heard what we were talking about, would you be encouraged by what you're hearing about these special groups, not being able to move stuff once it's set or would you.
Say, Hey, I could do a lot. I could become a leader there and I could make changes. What do you see? Would you be encouraged or discouraged from some of the things that you see maybe outside of Idaho?
James Broughel, PhD.: I guess in the long run I'm optimistic. I do think that over long periods of time, we've learned what works and what doesn't and research is conducted and, uh, uh, consensus emerges on certain [00:35:00] issues.
I think occupational licensing is actually one of these issues where we're starting to see consensus emerging. We can talk about that, but, and change happens. I think it's slow. And to the extent that your listeners want to get involved and talk to your state board of pharmacy, about problems in the legal system that you're dealing with, bring these examples to their attention.
I think there are good people. Working at regulatory agencies, they want to do the right thing. And so I would encourage people to get involved, but the institutions we have, like we, like we said, are slow to evolve and that's, it's not just in government. It's just kind of true humanity in general. Things don't change that
Mike Koelzer, Host: fast.
Some pharmacists will hear about Idaho and they'll want to speed things up, you know, they'll want to get things moving. However, you also have to watch your tail watch who's coming up behind you because there's also legislation that could say pharmacists aren't needed for this anymore. You know, we're going to take every drug and a pharmacy that is under the jurisdiction of a pharmacist, clear that all off.
And we're just going to have, pharmacists are just going to be in control of controlled drugs, for example, you know, I mean, there's legislation that could speed up and it could hurt a lot of people too. Right? Absolutely.
James Broughel, PhD.: Economists talk about a phenomenon called creative destruction, and this is associated with a famous economist named Joseph Jupiter.
And what it means is that the process of innovation is actually very disruptive in many ways, in order to create a new industry, sometimes it means toppling down other industries. And that means disruption for the people that work in those industries. It can mean you lose your job. Um, it can mean people's lives are offended.
Um, and so I think one of the reasons we have restrictions like we've been talking about in place is that individuals and industries want them there to keep things kind of stable and predictable. Um, but the consequence of that means is less innovation
Mike Koelzer, Host: is coming from both sides.
James Broughel, PhD.: So there's a trade-off.
Do we want stability and predictability or do we? Innovation and growth ultimately raises living standards, but in the long run rising living standards can mean short run disruptions that are not pleasant for a lot of people.
Mike Koelzer, Host: We're probably seeing a lot of that in the, uh, not the same thing, but with the whole taxi thing, you know, the whole token stuff and all that, it's like rules change this way.
And that way can pretty quickly wipe some things out.
James Broughel, PhD.: That's a perfect example. So taxi medallions in New York city, I used to live in New York. I think they were selling for $2 million or something. If the, so imagine right then Uber comes along and wipes out the value of your medallion. So you can, you can imagine a lot of people are pretty upset by that, right.
But at the same time, a lot of consumers benefit from it. Uh, having a much cheaper ride, really didn't have Uber when I lived in New York and those, those calves, I remember how expensive they were in the literary calves too. So
Mike Koelzer, Host: Speaking about some of these things that pharmacists kind of have to watch their back on, you know, it could be that in a pharmacy that a pharmacist wants more authority to do this or that.
Well then they're probably also watching their back, not only from other industries, but maybe even from people coming up in the same industry, let's take, for example, doctors, I'm sure have to be careful about what they allow physician assistants to do, because they probably really make their day a lot better.
But if they don't watch it, they could make their life a lot worse, probably the same with pharmacies. So pharmacy technicians, for example, they're doing a lot in pharmacy, but I imagine there's rules around that where pharmacists probably wanted. Pretty tight leash on them before there would open up too much for them.
James Broughel, PhD.: Yeah. So there are regulations in place affecting pharmacy technicians. Um, so pharmacy technicians are the assistant staff of pharmacies who can handle all kinds of responsibilities, filling prescriptions, um, doing inventory billing. Um, but sometimes they take on, uh, more complicated tasks like compounding medications or doing tests or even vaccinations.
Um, and so there are restrictions in place that limit both what the technicians can do. And, and in some cases limit the number of technicians that can work in a pharmacy, get. Point in time, a pharmacist
Mike Koelzer, Host: business [00:40:00] might want a hundred texts doing something with one pharmacist and with technology. Now there's probably some arguments where that could happen.
What are you guys seeing in that with the ratios?
James Broughel, PhD.: And so on a number of states, more than half of them impose some kind of ratio requirement on pharmacy technicians saying that a licensed pharmacist working in the pharmacy may not oversee more than X number of technicians. And sometimes interns are included in this as well at a given time.
So those ratio requirements tend to range from about one to two, to one to six or one to eight that the high end, uh, but 22 states don't have a ratio requirement, uh, as of 2020. So a lot of states don't have this requirement. Um, so I think these were, these restrictions are interesting because first of all, we have.
We don't typically think of saying to a physician, you may not oversee more than three nurses. That's not there. Usually that's not there. You know? So we usually just trust their professional judgment. Now there are restrictions in place that say maybe in order to do this task or perform this service task test, only a physician can do it.
Not a nurse practitioner physician's assistant. There are lots of restrictions like that. Gotcha. But not these ratio requirements, which are somewhat unique to the pharmacy setting. They're a little unusual. So in 20 16, 18 states did not have a ratio requirement. And now that as of 2020, that's up to 22.
So it appears that some states have been moving away from these restrictions, but more than half the states still have some kind of ratio requirement like this in place, but some states have been waiting. These restrictions during the pandemic. Um, so Montana was the most recent one, just a few weeks ago.
The governor of Montana issued an executive memo or order of some kind and waived the ratio requirement, uh, for pharmacists as a result of the pandemic. So it's one of these emergency provisions. A number of states have relaxed the ratio requirement over the last couple of years in the sense of allowing more texts to work along with a single pharmacist at a given time.
So it seems like there's movement towards relaxing those restrictions. And maybe, maybe we'll see that continue. But in general, also this doesn't seem like a reform that pharmacists are necessarily opposing. I think in general, it can be liberating in some ways for a pharmacist. If they're allowing support staff to take on some of them.
Routine yeah. Responsibilities. And as pharmacists take on more responsibility, that's more in the actual health care provision area. Then it might make sense to allow the support staff to take on more of the responsibilities, like counting pills and billing operations, and those sorts
of
Mike Koelzer, Host: things. This example of the technician pharmacist ratio, it's really interesting to me because everything that we talked about really comes to light as far as regulations and so on.
And here's what I mean by that as an outsider, I think the regulations are usual. Even though I've heard so many things about Washington and attorneys and legislators' politics, all that kind of stuff you think, okay, well, there, there is all that stuff, but they're trying to get to the bottom of something.
They're trying to do something that's really good for the general public and so on. But when I hear that ratio, James, as you're talking about that, the ratio of the pharmacist, what floods into me and I'm coming from both angles. Well, no, I'm coming more as an owner, but what floods into me is just a bunch of economics, the business side of things, because the average independent pharmacy owner, I don't want to ration on mine.
I'll do what's best in my mind for the business. And I know that I can only have so many before. I go crazy and I need another pharmacist there to spread out those questions and all that kind of stuff. So the last thing I really want as a regulation is how many texts that are, are, where if I was an employee somewhere, I would love to have that ratio.
You know, I don't want to be in charge of that many people. If it's not going to affect my pocket book, I want to have more technicians. I also want a regulation on the amount of prescriptions per hour, you know, and all that kind of crap. Yes. In the back of my head, I'm thinking about customer care and patient care and not overworking the pharmacist and all that kind of stuff.
But this is an example where 98% of my thoughts are economic. You know, it's what can I do safe? Where I can be [00:45:00] profitable enough. And so on where, you know, maybe 2% is really thinking about the actual medicinal, the best for the patient and so on. And maybe it's not that I try to give my evilness the benefit of the doubt, and I maybe raise that percentage too high, but basically a ton of it is economic.
And it's like, oh, well, if every other decision is being made this way too, in Washington, we might be in a little bit of trouble.
James Broughel, PhD.: If you're an independent pharmacy. I mean, the cost of hiring an additional pharmacist is much higher than the cost of hiring a technician, a licensed pharmacist, typically as a doctor of pharmacy degree, which is years of a PhD.
So it's tiers of training. So there, they might be making six figures and then the tech might be making that third of that. So you can imagine that once you hit that ratio, That basically you're required to hire another pharmacist at that point, if you want to hire any more sports staff. So it
Mike Koelzer, Host: can really be less about the texts and more about an extra pharmacist.
Right?
James Broughel, PhD.: Right. And so then you might either say, well, I'm not going to hire anyone else. Uh, in which case you may end up overworking your staff and then burnout can become a concern, right. Or you have to hire an, uh, another pharmacist. Um, and that's obviously a major expense. And ultimately I think we should just ask ourselves, do we trust people to make these kinds of decisions for themselves?
Do we trust pharmacists to decide how many technicians they can handle managing at a, at a single time? Do we trust the business owners to decide whether they should get another pharmacist or get another technician? I understand that there are safety concerns and there's, but we also have regulations in place.
We have. Codes. And we have, we have boards of pharmacies that are, uh, that have responsibilities over seeing safety
Mike Koelzer, Host: safety without necessarily a number associated with it. Right.
James Broughel, PhD.: We don't necessarily need to micromanage to this level of detail. We can still have a regulatory environment that's working to protect safety and maybe does, uh, inspections and, and, uh, and that sort of thing without getting into this level of detail.
I remember when I was in Idaho being told that one of the regulations that had gotten written up was that it had mandated that every pharmacy have a bathroom. Um, now the pharmacy part, like CVS or whatever it is, you can imagine there might be a bathroom somewhere on the CVS, but the pharmacy had to have its own bathroom.
You know, it's the kind of thing that could add. A few thousand dollars to the cost of building every pharmacy. If you're a plumber, toilet producer or something like that, maybe you like that regulation, it's good for your industry, but adding these additional costs when you've had them rule after rule, after rule like this, you can see how eventually you're going to have fewer pharmacies than you would have.
Otherwise. I'd like to
Mike Koelzer, Host: say that the free market takes care of a lot of stuff. You know, where if I can't go to the bathroom, I'm not going to work there. And if I'm not going to work there, then they don't need a rule about the bathroom and they'll have to get one before they can find enough pharmacists that will work there that will put up with, you know, not having a bathroom or something like that.
But. I don't know. That's hard to say. And I say the same thing then about, well, if customers come in a separate subject, but customers will come and complain about something on their insurance that their employer gave to them. And I could use the same logic on that and say, well, you don't need a bunch of rules for insurance, for your employers.
Just let the free market take care of it. If the employers aren't offering enough to the employee, they'll quit and they'll go find another job. And then the employer will have to be faced with finding someone who will live under those rules. And if they can't find anybody, then anyways, that could go on and on.
But sometimes as I look at it from an outsider, I might say, well, yeah, but just a few regulations would be nice because that's a pain in the ass to people aren't smart enough for people not smart enough. People aren't even aware of some clauses and insurances. You can't expect them to quit a whole job just because of something they don't kind of like, and I can see where regulations might help in those cases because the free market is great, but it just takes a lot of time sometime then a lot of pain and suffering through people who have had to lose jobs in that we're a little regulation might help.
I don't know.
James Broughel, PhD.: No, that's a great point. And I, I think it's, it's good to raise that point at some point during our conversation, because there's absolutely a role for regulation to play in the marketplace. As an economist, I tend to think regulations are needed when there are market [00:50:00] failures. There was a failure of the private marker in some capacity.
One of those areas can relate to information asymmetry. So if a used car salesman, just as an example, Knows that the car is selling you as a piece of junk. You don't have that information. You are not sure you think it's worth it, it's something better. That can be a case where regulation could help improve the situation.
Maybe certain minimum quality standards are put in place
Mike Koelzer, Host: to have the market take care of itself. You'd have to have the buyer buy two cars before we realized that both are lemons and then he might have to walk to work and then he might lose his job. And then finally, he might realize it's like, I'm not going to buy from that guy anymore.
Well, by this time though, years have gone by and the market it's slow to react. And so let's have some regulations in place. Is that kind of what you're saying about it would take too long for the market to fail. You might
James Broughel, PhD.: expect over time that the sleazy used car salesman would develop a bad reputation and people would stop going to his business.
Uh, word would get around, especially now with Yelp and all these online reviews, it can help spread the word, but yes, there can absolutely be instances where these problems are systemic, where they're ongoing, where maybe the business has a certain amount of market power. So people don't have a lot of alternatives, uh, and then in that case, regulation can be required.
Gotcha. I think one of the best, first questions that a regulatory agency should ask itself before issuing a rule is, is there a problem here? And in fact, at the federal level, in the executive order that governs the modern regulatory review process, the first principle in it is that the regulatory agencies should identify the problem that it's trying to solve with regulation.
And I think you'd be surprised at how often that simple question, just sometimes isn't asked and maybe a good example. With these ratio requirements. So what exactly is the problem that those ratio requirements are intending to address? I mean, in places that don't have them, are we seeing widespread examples of just dozens of texts working, uh, with a single pharmacist that doesn't seem like we're seeing that, right.
So is this really necessary? Is there a problem? There's certainly cases where there is a problem when there's cases of fraud or there's cases of environmental degradation or cases of, um, in the healthcare space, um, people, uh, you know, without certain levels of skill or training, performing services that they really shouldn't be.
So those are, those are examples of things where it probably makes sense to have regulations. Yeah. Um, but it's in some of these other areas where maybe it's not, it's not obvious that there's a systemic problem. Maybe there's an anecdote, one bad thing happened, but is it, is this a problem that's happening recurring, uh, on a recurring basis or is it just something that got a lot of attention in the news one week and then the legislature rushed to pass some piece of legislation.
That's kind of a common story. And so that can lead to problematic
Mike Koelzer, Host: rules. What do you think is going on when there's overregulation? Let's just say that everybody agreed. That was over-regulated. Why does that happen? Who's to blame for that?
James Broughel, PhD.: I think it happens for multiple reasons. Sometimes it happens because there's somebody who benefits from the policy being that way.
So we talked about the physicians trying to prevent pharmacists from encroaching and ligature. So there are certainly examples of regulations being put in place for that reason. Economists call this regulatory capture or sometimes. A regulatory agency will regulate for the benefit of industry rather than for the benefit of the public.
Gotcha. That obviously doesn't explain it all regulations, but it can
Mike Koelzer, Host: happen. Let's say you went the other way and you said we're regulating for the public, but not for industry. I mentioned it's okay to have a mix, right. You'd want to be okay. For both, not just for the public, but you certainly don't want it just for the industry.
James Broughel, PhD.: Right. So I think every regulation will have coalitions form for and against them. Um, and regulations also can create constituencies. Um, and this is one of the reasons why it can be hard to remove regulations, even when they're obviously problematic and occupational licensing regulations are pretty good example of this.[00:55:00]
Um, so over time we've seen a proliferation of different industries. Regulated under occupational licensing regimes, meaning you have to get a license from the state in order to practice as a plumber, carpenter, cut trees or cut hair braid hair. In
Mike Koelzer, Host: some cases can be a technician. That's new in Michigan.
I know
James Broughel, PhD.: pharmacy techs are usually licensed pharmacists. Um, and some of these licenses don't make a lot of sense. Interior designers, uh, hair braiders. These barbers need these professions to be licensed. And if you actually look at what's happened over time, it's usually the industries themselves that are being licensed that asked for these regulations.
Um, and one of the reasons they probably do this is because it makes it harder for people to enter that industry and work in that industry. Um, so it acts as a. Protectionism, essentially for people working in that industry. So there can, there can be good reasons to have licenses
Mike Koelzer, Host: who does that help with over, what do you call it?
Certificates or licensing? What part of the industry does that help?
James Broughel, PhD.: So there's a few different groups. So let's say you need a license to become a beautician, and you need to go to a certain number of hours of training at beauty school. Um, and maybe you need a certain number of hours of experience and pay a certain number of fees.
So if you have already gone through that process, that having to go through that creates a barrier to a new person who wants to enter that into. So, if you're an incumbent in that industry, once you've gone through it, you actually liked having that barrier in place because you don't want lots of people coming in and having to compete with
Mike Koelzer, Host: you more of the workers, not so much the owners, right?
James Broughel, PhD.: In that case. Yeah. I would say it's the, it's the workers in that industry, but sometimes it's
Mike Koelzer, Host: one in the same. Maybe the worker is the owner. Sometimes
James Broughel, PhD.: It's one in the same. If you're a carpenter or a construction business, you probably need some kind of license. If you're a
Mike Koelzer, Host: construction, for example, you own your own little construction company.
You'd rather have a higher barrier of entry from people picking up a hammer and saying that they're part of the trade.
James Broughel, PhD.: Exactly. Once you're an incumbent in that industry, you like that licensed being there because it protects your industry. What's very common when you see any legislative proposals to relax licensing requirements, not even necessarily eliminate it.
Save the we're going to lower. The fees are lower. The number of hours of training you need, the industry that's regulated will come out in full force against that change. And the obvious reason is because they don't want more competition in their industry. I
Mike Koelzer, Host: see. I gotcha.
James Broughel, PhD.: And that won't be their argument.
They'll say, of course we need those restrictions because otherwise things are going to happen, but they also have a financial incentive to do that. Right. Um, and occupational licensing in general is an area where there's been a lot of research done and the evidence that it improves quality a lot is quite weak to mixed, I would say, but it definitely raises wages and prices that the regulated entities can charge, um, can, can charge the consumers or pay themselves.
Um, so there's a financial benefit to regulating. Um, but not always quality improvements.
Mike Koelzer, Host: A few years ago in Michigan, they required technicians to be licensed. And I had always found my favorite technicians were college-aged young adults who were go-getters, quick learners, and had a lot of energy. I just liked that age group.
And I could probably pay them a little bit less than someone who was, you know, older. As soon as that regulation got in there, my level of employees went down and I'll say that now, because none of them are with me anymore so I can dig at them. But the level went down because I had to hire people who already had it, who were older.
They were, I didn't have as big of a pool to get the people from and the skill level, that much training wasn't needed. I could train them on the job a lot quicker and have good people so I can see where. As an industry though, it gave better job security for people that were already technicians.
James Broughel, PhD.: So the effect that these restrictions have is to reduce the supply of services provided and [01:00:00] to raise the price.
of it And that's now, if that comes along with the quality improvement, then that can well be worth it. But that's, it's, it's pretty clear that that's what, that's the effect. And it's often the intended effect is to, um, make, to restrict competition for that industry and to increase the amount paid. And one of the reasons it doesn't always benefit quality is that the lack of competitive pressures can lessen the incentive to innovate over time.
So if you're not facing competition, um, you might have. Offer as good as good a product,
Mike Koelzer, Host: I guess, to be fair. Do. I mean, certainly you want your, um, brain surgeons, you know, you want them licensed and certified in that, I suppose. Right? When people
James Broughel, PhD.: talk about occupational licensing reform, they're almost never talking about the brain surgeons or the physicians, or even the pharmacists.
It's usually some of these other professions where there's not as clear a health and safety need, um, for licensing and there there's also degrees of restriction between no regulation. Full licensing. You could require the people that certain kinds of insurance or just that they register with a
state
Mike Koelzer, Host: just register and get their thumb print.
And they've got to do a certain education, that kind of stuff.
James Broughel, PhD.: Yeah. So there's, there's a group called the Institute for justice, which has something called their inverted pyramid, which basically shows all the degrees of different requirements you can have with licensing that is usually the most stringent.
Oh. But there's a lot of difference between licensing and no regulation. That's interesting,
Mike Koelzer, Host: James, is that your wife? I see you on social media a little bit. Is she a PhD also?
James Broughel, PhD.: Yeah. Uh, she's an economist as well. So that's probably
Mike Koelzer, Host: her. Did you guys meet in economist school? Uh, we were both
James Broughel, PhD.: PhD students at the time we met, so she went, she got her PhD in Syracuse.
I got mine at George Mason university in Virginia. We met at a conference in Fairfax, Virginia. So it was that it was at George Mason. Um, so it was in our little academic kind of bubble. Like that's we,
Mike Koelzer, Host: I bet the common joke as well. Boy, he would probably have some real interesting conversations, but you probably do.
You both enjoy the topic, right? Yeah. I
James Broughel, PhD.: I mean, I can't say we sit around and talk a lot about economics. I think enough, we both get enough of that during our days at AA jobs, but she's a very smart woman and uh, she's, she's got a lot of interesting thoughts on these topics and I like to listen to them. What
Mike Koelzer, Host: Are you both doing in your field 10 years from now?
Similar things is now that's a good
James Broughel, PhD.: question. So my wife is. Consultant. She also does a lot of academic research and on the side, so I could see her moving more in the research direction. Potentially. She's also very entrepreneurial, um, much more so than me, so I can see her starting a business or something.
Yeah. I mean, I'm pretty happy with what I'm doing. I really liked working in the policy world. Um, I like having briefings with policy makers and, uh, putting out research. That's not, that's read by people who can make a difference and not necessarily I. I publish in academic journals too, but, uh, some of that work can just end up kind of behind a paywall and the only people that read it, read it or info of academics.
So I like having a real world impact. Um, so I'm, I'm pretty happy with. It's
Mike Koelzer, Host: really enjoyable to have someone on the show like you, that I just don't know that world at all. So it's been really fun digging into your mind and seeing how it relates to pharmacy and stuff like that. So I really appreciate your time, James.
James Broughel, PhD.: Well, I appreciate you asking me to be on the show. I really like talking about new topics as well, and being introduced to the whole world of pharmacy and industry. And I'm learning a lot of things that I didn't know, even a few months ago. So I, I appreciate being asked, put
Mike Koelzer, Host: together a study on how, uh, old fat guys should be paid a lot more in the industry.
I'll wait for that one. All right, James. Thanks. Take care. All right. Thanks.
James Broughel, PhD.: Bye.
