Economy / Healthcare / Regulation

Economic Freedom Series: Why Do I need a Prescription for Contact Lenses?

The Federal Trade Commission (FTC) and Federal Drug Administration (FDA) have infringed upon my economic liberties. Collectively, these government bodies created an inefficient marketplace that burdens contact lens retailers and consumers. In hopes of curtailing market power granted to contact lens prescribers by FDA regulation, the FTC designed the Fairness to Contact Lens Consumer Act (FTCLCA) to create a “fair” marketplace for contact lens consumers, but in reality only imposed additional unnecessary costs. There is, however, a simple solution to the problem: lift all regulation in the contact lens market.

Why does anyone need a prescription to order contacts from an online retailer in the first place? The FDA considers contact lenses to be medical devices, which means a license or prescription is needed to purchases contact lenses. The FDA regulation on medical devices gives market power— i.e. permits contact lens prescribers to sell contact lenses at an artificially higher price than what would have otherwise prevailed in a non-regulated contact lens market —to contact lens prescribers.

Prior to the FTCLCA, optometrists and ophthalmologists prohibited patients from buying contact lenses from any other retailer (1-800-Contacts, Vision Direct, Drugstore.com, etc.) by withholding prescriptions. At the time, prescribers of contact lenses were not required to provide prescriptions to their patients. They had no legal obligation to inform their customers of any details about an eye examination as it related to contact lenses. Naturally, prescribers refused to provide prescriptions to patients that wanted to purchase contact lenses from discount retailers. The optometrists and ophthalmologist, in effect, required patients to purchase contact lenses directly through them at a higher price than their patients could have gotten through an online retailer. Many Americans complained about this government sanctioned market power granted to doctors. Consequently, the FTCLCA was written, and subsequently passed, limiting the restrictive power of contact lens prescribers. In other words, the Act was designed to create a “fair” marketplace for consumers by limiting the restrictive power of contact lens prescribers. In this simple case, regulation by the FDA was “fixed” by regulation by the FTC.

The FTC regulation on contact lenses distorts the contact lens market and causes a ripple effect throughout other markets. It doesn’t “fix” the damage done by the FDA, but rather places a dirty bandaid on the wound. It imposes extra transaction costs and creates invisible victims by placing implicit costs on contact lens retailers that trickle down to consumers.

It takes an average of 12 years for a pharmaceutical drug to reach the market from the time of its inception. Once approved, the drug can be purchased and used by whomever can obtain a prescription for it. The observable victim is the individual who ingests a pharmaceutical drug and becomes ill or dies, especially those victims who ingested drugs that were “rushed” or “not fully” tested before hitting the market. These tragedies create compelling stories and drive emotional responses that create market-distorting regulations. The invisible victims in the pharmaceutical drugs case are the people that could have benefited from the drug prior to the time it hit the market and those willing to take the risks associated with a newly created drug in hopes of a better life.

The invisible victims of contact lens regulations are the people that must spend money on eye examinations when their prescriptions expire, the people who must wait to receive contact lenses because of communication errors between the optometrist and retailer, and the individuals that must pay higher prices for contact lenses and other goods that are impacted by the market distortion. These effects are hard to measure and may be small on a per capita basis, but in totality they are large.

I understand that the FDA wants to regulate newly created medical devices in hopes of “protecting” the people, but the effects of wearing contact lenses is information that is easily accessible and relatively intuitive. Contact lenses aren’t new medical devices with unanticipated side effects that consumers have to worry about. The FDA regulation and FTC Act place higher costs on contact lenses by creating artificial “rules” the contact lens wearer must obey. Artificial rules, especially unproductive ones, are transaction costs imposed on the consumer that effectively create market distortions and drive up the price the average consumer must pay for contact lenses.

 

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