For a brief period in the late 1960s and early 1970s, responding to lawsuits and studies by Ralph Nader over everything from unsafe cars to overpriced drugs, the commission had gone on a pro-consumer binge under Chairman Miles W. Kirkpatrick, and mainstream business types, the core of the imperiled president's political base, had railed against him during the 1972 election season. To calm them, in 1973 Nixon appointed Engman; he was supposed to "restore order." In other words, to put things back where they were before the Naderites inside the commission got out of control again.
But Nixon, and whoever had done the personnel file work, misjudged Engman's consumer credentials. Although he was a classic 100- percent-free-trade, pro-competition Republican, Engman had developed a strong pro-consumer bent. As Time magazine would later put it, Engman saw the world as a "Ralph Nader out of Adam Smith." You could best serve the consumer, he deduced, by opening up the marketplace.
With that in mind and the national economy in trouble inflation was up and productivity was down Engman went looking for ways to use the FTC's power to make the country more competitive and to make American life more affordable. Quickly he diagnosed a novel cancer on the nation's economic corpus: the regulatory agencies themselves. By making it so hard for small businesspeople to enter their respective industries, the CAB and ICC were hurting the consumer and inhibiting innovation, thereby retarding long-term economic growth and keeping prices unnaturally high. In a brilliant, landmark speech at the normally staid Financial Analysis Conference in 1974, he laid out his thesis: "Much of today's regulatory machinery does little more than shelter producers from the normal competitive consequences of lassitude and inefficiency . . . [it] has simply become perverted." As a result, "the consumer is paying plenty in the form of government- sanctioned price fixing." It was time, Engman said, to consider serious deregulation.
Engman also went after what he called "professional conspiracy." He sued the American Medical Association over its ban on physician advertising something he believed deprived consumers of the ability to get the best doctor for the best price. He went after state medical societies for their bans on the advertisement of prescription drug and eyeglass prices. In fourteen months he filed thirty-four antitrust actions. "The consumer was always the bottom line for Lew," recalls Bob Lewis, who served on Engman's staff. "'Is this going to benefit the consumer?' That was always the question he asked at the end of the debate about anything."
By the time he left the FTC in 1977, when a Democratic administration was about to take office, Engman had succeeded in making deregulation a mainstream Republican goal. At age forty-two, he was a GOP legend.
And so it was hardly surprising that, in the fall of 1980, with a new president named Ronald Reagan onboard who was committed to getting government out of every aspect of American life, Engman would again be sought for his leadership skills. This time the organization in need of help was the Pharmaceutical Manufacturer Associations. The PMA represented the nation's biggest brand-name drug makers, who were often referred to simply as "big pharma" or simply "pharma." (The organization itself formally changed its name to the Pharmaceutical Research and Manufacturers of America, PhRMA, in 1994.) The PMA believed that the industry was in a crisis, suffering from increasing costs, slipping sales, foreign competition, and government over-regulation. It was a crisis so severe as to provoke pharma CEOs to wonder out loud "whether there will even be a U.S. pharmaceuticals industry in twenty years." Then again, just about every major industry wondered something like that in the early 1980s, when it was widely believed that Japan was doing to U.S. industry what it had failed to do with bombs thirty-five years earlier.
Copyright © 2005 by Greg Critser. Reprinted by permission of Houghton Mifflin Company.
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