Innovation in a Regulatory Labyrinth

“Regulations don’t always work as planned,” says Tom W. Bell, Professor of Chapman University’s Dale E. Fowler School of Law in They Say It Can’t Be Done, a documentary highlighting four world-changing technologies and how the people working in those fields view the current regulatory environment. Toward the start of the film, Professor Bell says that when people advocate for regulations, “[t]hey don’t necessarily want more regulations. They want problems fixed.” However, “regulations don’t always work as planned” and can be “like trying to fix a watch with a sledgehammer sometimes.”

To the documentary’s credit, it strays far from platitudes about regulation. Too often, people discuss regulation in abstract terms to which people unfamiliar with the particular statutes will struggle to relate. Other times, people paint regulations—particularly environmental ones—with a broad brush as “necessary,” without any real consideration of the regulations on their own merit or in a way that accounts for their real-world effects. Rather, the documentary includes excerpts from top innovators such as Eat Just, Dr. Anthony Atala, the Catalina Sea Ranch, and the Center for Negative Carbon Emissions. From creating plastic “trees” to remove carbon dioxide from the air to creating organs made of a person’s own cells to transplant into them, these companies are developing innovations with the potential to change the world by solving our most pressing problems. Unfortunately, They Say It Can’t Be Done depicts the numerous places that these innovations find themselves stalled in the face of confusing, outdated, and slow regulations.

Take Eat Just, a company that can grow meat from cells without having to kill the animal. Their technology is more efficient than traditional farming and can reduce emissions. Late last year, USA Today reported that Singapore was the first country to approve Eat Just’s cell-based meat. “The company cited a preliminary report in the peer-reviewed journal Environmental Science & Technology that found lab-produced meats account for 78% to 96% lower greenhouse gas emissions, 99% less land use and 82-96% less water use than conventionally produced meats,” reported Ryan W. Miller. Those are big numbers not just for the environment but for resource use and efficiency.

Unfortunately, as Eat Just’s Founder and CEO Josh Tetrick says in the documentary, “[t]he single biggest limiting step—it’s not the technology, it’s not the funding, it’s not the work ethic. I don’t think it’s even the consumer adoption. It’s regulatory.” Tetrick recently told The Spoon that he thinks “it’s more likely than not” that the United States regulatory system issues approval within the next two years. “It’s hard to tell,” he said. “A lot of companies will go out of business trying to get there.” Regulators and legislators have even tried to prevent “almond milk”—a centuries-old product and term—from using the term “milk.” Similar battles have been fought over “burgers,” “rice,” and more. These contests aren’t driven by consumer protection. No, evidence is extremely thin that “almond milk” or “veggie burgers” are confusing consumers. Indeed, as a lifelong vegetarian, I wouldn’t think to purchase these products if I had any idea that they might contain meat. Rather, existing lobbies are trying to use government to harm their competition.

That Eat Just’s primary dilemma is regulatory gets to the heart of what Clark Neily, senior vice president for criminal justice at the Cato Institute, talks about in the movie. “One of the things economists sometimes talk about is the seen and the unseen,” he explains. “One will see a car recalled because of dysfunctional airbags, and then that car may be fixed through regulation. What we don’t see, oftentimes, are the products that never make it to market, are the innovations that never occur because of too much regulation.”

So we might see Eat Just going through the long regulatory process, but we don’t see all those that didn’t or couldn’t afford to.

Another problem with the regulatory approval process is where there isn’t a process so new technologies remain in purgatory—even new human organs composed of the person’s own cells. Tens of thousands of people are waiting for organ donations, but 3D-printed organs created by Dr. Anthony Atala, founding director of Wake Forest Institute for Regenerative Medicine, and his team, are not approved for general use.

“When we started this work in regenerative medicine, there was no regulatory body, really, that was fit specifically for this area. Because it was fairly new,” said Atala. “And so we ended up being in a situation where there was an agency to regulate drugs, and an agency to regulate devices, but really no agency that would regulate these technologies.” In 2019, Atala wrote about the progress (or lack thereof) of regulatory approval and noted that those advancing through the system were largely made by hand rather than 3D printing.

Atala has already had success with lab-grown bladder transplants. And an article from nearly three years ago noted that the technology was “going through clinical trials for approval by the US Food and Drug Administration” (FDA). But the longer we wait, the fewer people receive the care they need. The dilemma is succinctly explained by Greg McNeal, Professor of Law and Public Policy at Pepperdine’s Caruso School of Law. “If you are suffering from cirrhosis of the liver and your liver’s going to fail in the next 3 months and you could try an experimentally lab-grown liver, but the regulatory approval will take nine months, why not waive the regulatory approval and allow that person to have the new liver sometime within the terminal period of that three months?” he said. “And that’s the type of thing that the regulatory system I think should be flexible enough to experiment with.”

Some federal legislation has increased regulatory flexibility in the medical field, such as Right to Try, which opens pathways for “terminally ill patients who have exhausted their government-approved options and can’t get into a clinical trial to access treatments.” But there is a lot more to do. Dan Troy, former Chief Counsel at the FDA said he regularly asks people how many new drugs are approved by the FDA and put on the market each year. “They guess hundreds, they guess thousands. 40 is a banner year.” And, of course, with the slow regulatory process, he says, “[t]he risk is that they just take too long, and as a result, a lot of patients suffer in the meantime and do not get the benefit of an innovation that might otherwise serve them.” The sense one has from watching this part of the documentary is that the excessive regulation here is more a function of an overly-cautious agency rather than one of regulatory capture. However, regulatory capture exists all over the medical field, from doctors who push to limit the scope of practice for nurses (despite evidence that these reforms would improve outcomes and lower costs) to optometrists who try to prevent patients from accessing online eye exams.

Similarly, for all the urgency around the danger of climate change, technologies that can reduce greenhouse gasses are still struggling through the regulatory process. Klaus Lackner, director of Arizona State University’s Center for Negative Carbon Emissions and professor at the School of Sustainable Engineering, invented a remarkably efficient way to remove carbon from the atmosphere and has a way to store it. “Trees clearly can pull CO2 out of the air. That’s what they are doing,” Klaus explains, conceptualizing his work in simple terms. “Just as airplanes are a lot faster than birds and fly a lot higher, once you have a technology which does nothing but that, you end up being about a thousand times as effective at it as a tree.”

So why don’t you see these installed on private property by people and businesses who could brag about their carbon offsetting? There just isn’t a clear regulatory framework that exists to approve the technology. They may be subject to one of many federal regulations, depending on where and how people hope to construct them—barriers that can stop viable improvements to the climate crisis.

As innovators continue to change the world, They Say It Can’t Be Done ought to make clear to legislators and regulators that their goal should be keeping people safe and encouraging innovation—not preventing it.

The Catalina Sea Ranch isn’t a sustainable farm in SpongeBob Squarepants, but it does grow one of SpongeBob’s favorite foods: kelp. They have found farming mussels extremely efficient and note that mussels don’t get disease. They also believe kelp is the next superfood. Farming both together is not only “symbiotic,” as Scott Schmidt, Co-Founder and CEO of Primary Ocean Producers, says, but helps maintain the health of the environment there and reduce ocean acidification.

In the film, the founders brag about the ability to extract proteins from both the mussels and the kelp and to extract other materials to create marine biodegradable plastics. “We’re offsetting a lot of the products that are causing many of the climate change issues in our world,” says Schmidt.

Once again, the barriers for their work are largely regulatory. “There’s a lot of political risk involved, not only in our grant platform but in just maintaining your operation in federal waters, not only because uncertainty, but because we’re the first to do it,” says Schmidt. “And when you’re the first to do it, there’s a lot more attention, there’s a lot more people that you have to deal with.” And that’s not all. Phil Cruver, CEO of the Catalina Ranch, further explains, that “California has ten different regulatory agencies that must approve something. You’ll never get a permit for even shellfish in aquaculture in California.” He adds that they haven’t issued any new ones in 22 years, and issues regarding NIMBYism (Not In My Backyard) of shorelines to protect scenery are brought up. Here, the issues seem to stem from an overzealous regulatory state. So instead they go to federal waters, where they have a permit, it’s the jurisdiction of only the Army Corps of Engineers. “It’s a building permit. No term on it. And we have one for 100 acres.”

Cruver says they’ve been working with the FDA since 2013. They asked how to test for biotoxins. It wasn’t until May of 2017 that we were informed that all the laboratories on the West coast were not in conformity,” he explained. Ultimately, they had to build their own laboratory to test for biotoxins.

After creating new innovations and then facing this kind of burden, it is no wonder why bigger companies are better equipped to handle regulations or why many even encourage regulation through “regulatory capture” to push out competitors. As Neily said, “Nothing could be further from the truth that big businesses don’t like regulation.” He calls regulation “the thing that most effectively enables them to stifle innovation, to stifle competition.” And Susan Dudley, Former Administrator of the Office of Information and Regulatory Affairs explains why smaller innovators may often hope to be purchased by larger companies. “They would never have the infrastructure in place in order to be able to get their innovation through this complex regulatory framework,” she said.

That innovators saving lives, cleaning up the environment, and finding newer and more efficient ways to create food are all stuck in long and complicated regulatory processes speaks poorly of our regulations. They’re supposed to keep people safe, but after this documentary, the viewer will see how regulations can impede safety. Professor James Otteson of Notre Dame reminds the viewers that that, oftentimes, “regulations say, ‘well whatever we have now we have to keep it exactly as it is.’ But that’s not consistent with the nature of a dynamic, progressive society.” He adds that, “[n]ow these things change so rapidly that we have to remember that if we’re putting rules in place to restrict, to protect, even with the best of intentions, those rules are going to be obsolete almost overnight.”

Otteson’s points resonate not only with regard to the content of the movie, but with endless other regulations. From states having nearly no mechanisms to allow professionals licensed by the government to transfer their licenses into a new state to antiquated and corrupt taxi medallion systems, outdated and rigid regulations prevent all kinds of flexibility and change. Some of these laws are being improved—consider the new wide adoption of universal licensing recognition and new regulatory frameworks that allow for ride-sharing services to compete with taxis. However, until these and many other regulations change, they prevent innovation and growth.

Furthermore, regulatory reform as it relates to medicine, the environment, and food are generally taboo to discuss and lead to cliché opposition. But this documentary presents information in a way that avoids the predictable backlash, and instead invites curiosity, frustration, and if opposition to the ideas—more substantive ones. As Jonathan Haidt would say, it communicates with people’s “elephants.”

As innovators continue to change the world, They Say It Can’t Be Done ought to make clear to legislators and regulators that their goal should be keeping people safe and encouraging innovation—not preventing it.