Citation
Economic considerations in regulating neurotoxic substances

Material Information

Title:
Economic considerations in regulating neurotoxic substances
Creator:
Provenzano, George
Publisher:
U.S. Congress. Office of Technology Assessment
Publication Date:
Language:
English
Physical Description:
99 pages.

Subjects

Subjects / Keywords:
Neurotoxic agents -- Economic aspects -- United States ( LCSH )
drugs ( KWD )
drug commercialization ( LCSH )
pesticide ( KWD )
poisonous ( KWD )
Genre:
federal government publication ( marcgt )

Notes

General Note:
This report discusses economic consideration in regulating neurotoxic substances which involves balancing the economic benefits of utilizing these substances commercially against their actual or potential risks to human health and the environment.

Record Information

Source Institution:
University of North Texas
Holding Location:
University of North Texas
Rights Management:
This item is a work of the U.S. federal government and not subject to copyright pursuant to 17 U.S.C. §105.
Classification:
Y 3.T 22/2:2 N 39/2/econom. ( sudocs )

Aggregation Information

IUF:
University of Florida
OTA:
Office of Technology Assessment

Downloads

This item is only available as the following downloads:


Full Text

PAGE 1

JUl '.\ \ \~ Final Drift (M/21111) Do Not Quote, cne, or Reproduce Economic Conalderatlona In Regulating Neurotoxlc Substances by George Provenzano, Ph.D. Department of Epldemlology a Preventive Medicine 8chool of Medlelne University of Maryland at Baltimore Baltimore, Maryland 21201 Aprll 28, 1989 Thie r-,ott tin bW1 ..,..,.,.. und Connet Number JM271.0 with ~lcal Appllcatlonl P,..am of the Office of Technology (OTA). Thia repo,t -- background lnfonnltlon to eupport OTA'1 alMllmenl of new developments In neur~,.....,'!a. This contractor document was prepared for th~ OT A assesment :Yeuro1oxlcl&y; ldenlll)in1 and Co1&mtll'f PoilOII o.Clbc l!!IJ:aoua S.,u,m. lhis document does not necessarily reflect the analytical 1ndings of OT A. the Advisory Panel. or the Technology Assessment Board. References to this document ~hould cite the ,ontr~ctor. not OT~ as the author. t

PAGE 2

TABLE OF CONTENTS EXECUTIVE SUMMARY 1 INTRODUCTION AND PURPOSE OF THIS CHAPTER 2 ECONOMIC ANALYSIS OF REGULATIONS AFFECTING TOXIC SUBSTANCES, PESTICIDES AND DRUGS 2.1 Economic 1 ..... Auoclltld with Regulating Toxic SubstanCN, PNtlcldN and Dn,g1 2.1.1 Direct Coeta, Benaflta and Economic Efficiency 2. 1.2 Rllkl and Benefb 2. 1.3 Impacts on Market Prtcn and Industry Profits 2.1.4 Regulation and lncentlvel for Innovation 2.2 Hlltoly of the UN of Colt-Benefit Analyal1 In Regulatory Anllyala 2.2. 1 ,,..1170 2.2.2 The 11708 2.2.3 POll-1111 2.3 Utlllty of Regulatory Analyln In Deviling Environmental Regulatory Polley 2.3.1 Improving R1lall111 ... 1m,.-2.3.2 Addltlonal Conlrlbutlona 2.4 Economic PrtnclplN and Method1 of Cost-Benefit and Coat-EtflCtlven-Analyw 2.4.1 Concepla and Detlnltlonl 2.4.2 Method 3 THE COSTS OF NEUROTOXICITY TESTING 3. 1 Dllennlnanta of the Coltl of Neumtoxlclty Teta 3. 1. 1 Sclentltlc Datennlnantl 3.1.2 Flnanclal 091ennlnanta 3.2 Colt htlffllltN for Neurotoxlclty Tntlng 3.2.1 Method for Obtaining COit EltlmatN 3.2.2 Rnulta 3.3 NIWOIOXlclty Tnt COltl Ind Innovation 3.3.1 Drug and PNtlclde Development 3.3.2 Naurotoxlclly TNta and Innovation r;,.:;Na:1-..~.P.e_., .. ~i;~-~--TJfil?.N;~{-~~

PAGE 3

TABLE OF CONTENTS (Cont'd) 4. ECONOMIC BENEFITS OF REGULATING NEUROTOXIC SUBSTANCES 4.1 Knowledge Aequnmenta to Eltlmate Benefits 4.2 r,oc1a1 Com of Mental Dlaordn and Nervou1 Syatem o, __ 4.2.1 The HNlth Coste of Mental Dltord.,. and o-of the Nervou1 Syatem 4.2.2 The COltl of Neurotoxlctty 11 an Element of Dementia 4.2.3 The Neurotoxlctty Coats of Leid Expoaure UST OF TABLES Table 8-1 Table 1-2 Protocol For Which Cott Estlmat11 w .. Sollclted Table 1-3 Estimated C08t Range For Animal Toxicity Testa Combined With Neurotoxlclty Evaluatlone Table 1-4 Median Cost EstlmatN for Animal Toxicity Testa Combined With Neurotoxlclty Evaluatlon1 Table 8-5 Ratio of Survey Estlmatll to Recent EPA Estlmatn For Toxicity TNtl Combined With Functional ObNrvatlon Battery, Motor Activity and Neuropathology Evaluatlona Table a-e Effecta of Occupational Chemlcal1 on the Nervou1 Syetem Table 8-7 Personal Hlth Care Expenditures for the Ten MOit Expen1lve Medlcal Conclltlone In the United States In 1980 Table 1-1 Net Annual Expected COltl in 1983 for an Individual with Alzheimer' 01-H Excluding the Costa of Dlublllty and Premature Duth Table 1-1 Dlaord.,. Producing Dementia: Diagnosis In Nine Cllnlcal Strln Table 8-1 o EltlmatH of the Social Costs of Dementia and Neurotoxlclty Table 8-11 EttlmatH of the Economic Benefltl of Reducing the Neurotoxlc Eflectl of Lead UST OF FIGURES Figura a-1 Figure 1-2 D~ Development In the United States Knowledge Requlremente to Estimate the Health Benefits of Reducing Neurotoxlc Rlu -Jli -

PAGE 4

TABLE OF CONTENTS (Cont'd) UST OF BOXES Box 8-A: Economic Balancing Provlalona of TSCA. FIFAA and FFDCA Box 1-11: Aequlrementa of Executive Ord 12291 Box 1-C: The lnatltutlonallzatlon of Regulatory Analyala: 1971 to 1111 Box 1-D: Four Stepa In Conducting Cost-Benefit or Cost-Effectlvenea Analytla Box 1-E: The ObJectlvN of Toxicity Testing GLOSSARY OF TEAMS APPENDICES A. Questionnaire Used to Obtain Cost Estimates for Toxicity Testl Combined with Neurobehavtoral Evaluations ALPHABETIZED UST OF REFERENCES

PAGE 5

Flnal Draft (4121/11) Do Not Quote, Cite, or Reproduce CHAPTER I ECONOMIC CONSIDERATIONS IN REGULATING NEUROTOXIC SUBSTANCES 1. INTRODUCTION AND PURPOSE OF THIS CHAPTER Broadly spNklng, the ba1lc economic con11deratlon In regulating neurotoxlc eubatanCN lnvolvN balancing the economic benefits of utlllzlng th-1ub1t1ncn commercially 1galn1t their actual or potential rt1ka to human hNlth and the environment. The economic gain, from utlllzlng neurotoxlc 1ub1t1ncn Include coat reduction, and productivity lncru-that drug, peatlclde, and chemlcal technologl Impart to hulth care, agriculture, and Industry. The rlaka ref to the problbllttln of Increased morbidity, mortality and environmental contamination ltemmlng from uncontrolled or excealve uof th-chemical,. Regulltlona that are dealgned reduce or prevent neurotoxlc rl1ka, on the one hand, produce beneflta to 10elety In the form of lmprovementl In publlc hNlth and environmental amenltlea. On the other hand, government and the private MCtor Incur coltl to achieve th-regulatory ends. The COltl of regulatory compliance may also give rlu to a number of addftlonal economic lmpactl 1uch lncreaIn market prlcn, reduction, In lndultry proflta, and decllne1 In new product Innovation. The problem of balancing benefit,, coltl and rl1k1 of regulation 11 not unique to the control of neurotoxlc subatance1; It arlHI In all forms of hutth, ufety and environmental regulatlon. Many of the key 1ec1 .. 1 lawa under which naurotoxlc 1ub1t1ncn have been regulated require regulatory agencl to aacertaln the po1ftlva and negative economic consequencn of regulation (Box 8-A). In Implementing thNe lawa, Congren clrly Intended that agencl prepare regulatory analyNI' and 11n thl1 chapter, the term "regulatory analylla" reten to all tonne of a111lyw / a:t~:. .. N. ... u1ed In Judging the dNlrablllty of a regulation. Th.t.J~. "regulatory / Impact analylla" {AIA) referl 1peclflcally to the m~ ilM performed under Executive Order 12211 ~ANIIR, 188~~. :. m 1

PAGE 6

Final Draft (4121/81) Do Not Quote, Cite, or Reproduce document the balancing of beneflta, costa and rl1k1 of propoud regulatory altlmatlvN. It 11 Important to note, however, Cong,_ typically hie not provided a priority order of Importance that agenclea 1hould aulgn to the different economic luu11 arlalng from regulation. Nor ha1 Cong,_ 1pecltled particular analytical criteria or procedunt1 that agencln must follow In evaluating the economic lmpactl of regulation. The preparation of regulatory analy-,__ propoula to control neurotoxlc / eubllance 11 a two-atep procen. The first atep lnvolvea a8HNlng the hNfth and environmental rlekl poNd by varlou1 levels of exposure to th-1ubltlncn. In other worda, rl1k tlltllfflot provldee scientific ba1l1 for regulatory analyaH of propoHCI toxic 1ubatancn controls. Riek management la the end for which rlak ,_ment 11 conducted. Thia terminology was Introduced by the National Academy of Sciences (NAS) In Its 1983 study: One economic conalderatlon In conducting risk -menta concern, the cOltl and ben1flt1 of acquiring reliable scientific and technical data that are nHdad to regulate neurotoxlc 1ub1tances. Many of th-data mult be obtained through animal toxicity teltl. In thl1 regard, two recent evaluation, of federal efforts to regulate neurotoxlc 1ubetances concluded there la a need for more neurotoxlclty tntlng of exlatlng and new chemlcal1 (NAS, 1984; U.S. Congreea, 19H). To date, the Environmental Protection Agency (EPA), Food and Drug Admlnlatratlon (FDA), and other federal agenclea with authority to regulate toxic 1ub1tancea, have not widely adopted or applied neurotoxlclty teat protocol (U.S. Congm1, 1181). Conaequently, available neurotoxlclty data are lnaufflclent to determine reaaonably or to predict the hNlth or environmental effect for all but a 1mall number of the purported neuro-effectlve 1ub1tancn that are In wldnpread 2

PAGE 7

Fina I Draft ( 4121/11) Do Not Quote, Cite, or Reproduce UN 11 pNtlcldN, druga, food addltlvN and lndultrlal chemlcal1.1 Mont tNtlng of auapected neurotoxlc 1ubatanc11 wlll lncreaH the chance of avoiding any adveru hNlth and environmental effect1 from their Introduction Into commerce. More testing for neurotoxiclty wlll alao lncreaae development and regulatory compllance costa to commercialize certain chemical technologiea. lnduatry and government Incur com In e,rpandlng the knowledge baN that la -ntlal In regulatlng toxic 1ubatancea, but development of thla knowledge, theoretically, lmproVH the precl1lon with which the benefit of regulation can be alCll'tllned. Therefore, the quntlon arl-: whit 11 the appropriate economic balance between the COstl of neurotoxlclty tntlng and the beneflta of the rnultlng tnt data In developing regulations. Al dlecuaed In Chapter 8, the fedtral government ha regulated neurotoxlc subltancn under at INlt 11 lawa. With the exception of regulatlona to reduce human upoaurea to INd,1 the gl'Ntelt amount of regulatory activity 1peclflcally directed toward neurotoxlc concerns ha1 occurred under three laWI: the Toxic Subatancn Control Act (TSCA) fPullllt I.aw 84 418~lflf ; the Federal lnNCtlcldt, Fungicide and Rodtntlclde Act (FIFRA) as amended by the Federal Environmental Pesticide Control Act (FEPCA) (Pwllllle I.aw 11 l~l~llMQ 11.-11; and the Federal Food, Drug and Cosmetic Act (FFDCA) a, amended MHL.J.i;}lm.ta-Each of th-laWII contain authorltle1: (1) to obtain acltntlflc and other data on which to 11n11 rl1k1; and (2) to control the UH of -rile NAS ltudy examined toxicity tntlng re1ult1 for a Hlect umple of 1ubatancn that Included chemicals !n commce (manufactured In both 1mall and large volumn), PHtlcldH, co1metlca, drug and food addhlvH. From a Hat of 53,SOO dlatlnct ch1mlcal1, the NAS CommlttN Hltcted a random umplt of 171 ch1mlcal1. A random aubumple of 100 chemlcal1 with at INlt mlnlmal toxlchy tnt Information was examined In ,,eati) detail. The CommlttN'I conclu1lons wer1 extrapolated from the review o tell data on the 1ubsample of 100 chemicals (NAS, 1914, pp. 1). ~egulatlon1 to reduct occupational and environmental expo1ure1 to lead have been promulgated under at INlt ten different federal atatute1. (SH Appendix C In NAS, 1 tlOI). 3 J J

PAGE 8

Fina I Draft ( 4121/11) Do Not Quote, Cite, or Reproduce toxic aubatanCN. Speclflcally: TICA authorlzN EPA to: (1) require tntlng of ulltlng ch1mlcal1, thON currently In wldprud commercial production and uH; (2) prevent future chemical rl1k1 through premarket acrNnlng and regulatory tracking of new chemical producta; (3) control unreaaonable rlakl from manufacturing, proc-lng, distribution and UM of chemlcall; and (4) gath and dl-mlnate Information about chemical production, UM and poulble adverse chemical eflecta to human hulth and the environment. FIFAA. a, amended by FEPCA, requlrea EPA to reglater all 1ubatance1 aold or dlltrlbuted aa peatlckles and glvea the agency the power to cancel, auapend and Impose other uae llmltatlon1 on these reglllrltlOnL FFDCA requires premarket testing and approval of new druga, food additives, and color addltlvea; and addre11e1 quntlona of the ufety of peatlcldn on raw agricultural commoditlN and environmentally added contaminants In food. Aa with the a1NS1ment of health rlakl, agenclea differ greatly In their approach to evaluating and balancing the economic Impacts of regulation. For regulltlon1 having major economic con1equence1, EPA, for example, has developed rlgorou1 guldellnu for evaluatlng cost,, benefits and altematlvea (EPA, 188311). At the other end of the 1pectrum, FDA, In regulating food addltlvea, canin out balancing In a somewhat vague and arbitrary manner (Lave, 1981; Mlfflll, 1971).4 Th-dlflerencn reflect difference, In leglalatlve requirement, for 'An exception occurs In the regulation of food additive, that are .. or. 1111Pcld carcinogen,. Under the 1912 Delaney Amendment to FFDCA nc :1,11 11 the UH of th-aubstancn In any quantity 11 prohibited rigiri:Hi11 o t e coiTlmpactl to the food aupply or offlattlng benatlta of UN (Merrtll, 1978). 4

PAGE 9

Flnal Draft (4/28/81) Do Not Quote, Cite, or Reproduce balancing benefit,, co1t1 and risks (SH Box 8-A), 11 wall aa dlfferancn In agency vleWII on the appllcablllty of Executive Order 12291 fANleR1 1111~M!IB1ll-/ Executive Order 12291 defines cuff8nt pollcln and requirements for the Executive Branch In evaluating regulatory propo11ls that have major economic lmpacta.(Sae Box 8-B). The purpoN of thl1 chapter 11 to examine and evaluate 1oma of the economic con1lderatlon1 that occur In regulating naurotoxlc subatancn. Economic l11un that arlaa from requirements to teat for neurotoxlclty as well a, from restrictions on production and UN of neurotoxlc subatancn are discussed. These ls1ua1 are common In the regulation of all toxic substances ragardlof the health endpoint of concern. However, (with tl\e exception of lead), because the regulatory record for neurotoxlc subatancN Is stlll relatively sparse, the following exposftlon 11 necn11rlly aomewhat generic. The lectlon that Immediately folloWI dlscu-several ullent economic l11ues that occur In regulating chemicals, pesticides and drugs and the kinda of regulatory analythat agencln have applied In addranlng them. The next section focuon one of th-lnuN: whether requirements to generate neurotoxlcfty talt data are likely to create major regulatory coat burdens for the chemical, pesticide and drug Industries. The final section dl1cu11n the kinda of heafth beneffls derived from controlling neurotoxlc substancea and procedures analyst have employed to evaluate these Improvements. It 11 al10 Important to Indicate what this chapter does not contain. No attempt ha1 bean made to pre1ent a comprehensive cost-benefit analysl1 of a teat rule or uaa regulation for a specific neurotoxlc substance. Nor haa any attempt bean made to conduct a technology as1e1smant of the Impacts of regulating a cla11 of neurotoxlc chemicals. Both of the1a studies are beyond the scope of thl1 chapter for Nveral reasons. Estimates of the costs of naurotoxlclty testing comprise only one component of the costs of regulating a chemical. Other components, for example, the lncrea1ed cost1 of utlllzlng substitutes for the regulated 1ubstance, 5

PAGE 10

Final Draft (4/28/19) Do Not Quote, Cite, or Reproduce may be more Important and NII e11l,iiitiflfjj be eatlmated In the context of 1 epeclflc regulatory caH ltudy. Finally, 111embly of the kinda of expoaure and health rl1k data required to eatlmata the health benaffla of controlllng neurotoxlc eub1t1nc1 la beyond the acopa of thle chapter. 8 J

PAGE 11

Flnal Draft (4/28/81) Do Not Quote, en,, or Reproduce 2. ECONOMIC ANALYSIS OF REGULATIONS AFFECTING TOXIC SUBSTANCES. PESTICIDES AND DRUGS Al noted above, current lawa for controlling neurotoxlc 1ub1t1ncH do not peclfy the approach or ecope of analysis agenclea must follow In evaluating the economic lmpactl of regulatory decllons. Except where leglalatlon ao dlrect1, regulatory agencies hlltorlcally have not lnterp"P.~ed their statutory duties 11 requiring a formal colt-benefit analysla of propoaed regulatory altematlvn. lnltNd, agencl11 llke EPA have taken It upon th1m1elvn to adapt different evaluative approach In order to addreu specific regulatory-economic INu11. The Executive Branch, through the Office of Management and Budget (0MB), haa Independently developed and Implemented a requirement that agenclts produce formal coat-benefit evaluations In support of specific regulatory actions having major economic Impacts. This requirement for regulatory Impact analy1ls (RIA) has evolved through a aeries of executive ordn, and the 0MB has Incorporated the RIA requirement Into lta executive ovll'llght function. Thia following section examines four economic la1u11 that are of continuing concern In decisions to regulate toxic substances. The dlscu11lon lncludts a ~ascription of the analytical approaches that have been used to addrna NCh of theae Issues. A brief history of the development of the regulatory Impact analysis proceas Is then prasentad, and the role of coat-benefit analysl1 In devising regulatory policy Is dl1cu11ad. Finally, the method1 and principles for one widely uaed evaluative methodology, namely cost-be'1eflt and cost-effectiveness analysis, are dlecussad. 2.1 Economic l11ue1 Associated with Regulating Toxic Subatancea, Pesticides and Druaa Thu1 far, the terms "cost.and "benefltl" have bean used In generic fashion to Indicate negative and positive economic lmpact1 of regulation. 7

PAGE 12

Flnal Draft (4121/11) Do Not Quote, Cite, or Reproduce Although thl1 uuge 11 correct, It la Important to recognize that, for the purpoof 1nalyel1, th-term, have more 1peclallnd m11nlng1. Conaequently, their preclN definition, vary depending on the acope of 1nalyal1 and particular economic l11u1 being 1111118d. 2. 1. 1 Dlr:,ct Costa, 01r,c1 aenfflll and Economic Efficiency In the appllcatlon of COit-benefit and coat-effectlven-technlqun to evaluate toxic 1ubatance control,, coat, and ben1flta are generally narrowly defined and mured from the perapectlve of achieving Intended regulatory obJICtlvn of rl1k reduction. Formal co1t-btn1ftt or colt-etfectlven-1nalyal1 11 employed to evaluate whether the benefltl of a regulation exceed ltl colll, or whether a regulation 11 COit-effective. Th-concerns speak to a fundamental luu1 of wheth regulatory activity 11 aconomlcally efficient In achieving tta stated goals. The concept of economic efficiency reftr1 to galn1 achieved from rHOurcn expended In achieving ltated objectives. In COit-benefit and coat-effectlven-analyHs of toxic subltlncea regulatlon1 (e.g., premanufacturtng approval, tell ruin and use rntrlctlon1), the Ncoat_.. con1lat of thou resourcn expended directly for regulatory development, lmplementatlon and compliance. Coat, Include expenditures by both government and the private HCtor. Government Incurs expenIn: (1) d1v1loplng regulatory procedure,, Including toxicity tat methods, test rules, and ch1mlcal production, dlltrlbutlon and UH rlltrlctlona; (2) reviewing premanufacturlng notification, reglatratlon and other requata by lnduatry to produce and 1111 new chemical 1ubltancu; and (3) carrying-out necesury monttorlng, Inspection and enforcement rupon1lbllltln. The prlY4te 1ector u1ually beara compliance coat1 which con1l1t of labor, materlll1, equipment and other expenlff for (1) obtaining premanu-'In practice, It la difficult to apportion the government' regulatory program co1t1 to lndlvldual regulatory propoul1. Consequently they are often omitted lrom analy1l1. 8

PAGE 13

Flnal Draft (4121/lt) Do Not Quote, Cite, or Reproduce tecturlng approval,, (2) conducting animal toxicity tnta, kHplng record 1nd 1ubmlttlng ntpOl1I on chemlcal1 of concern; and (3) 11tertng production procNHI and proctucta to conform with production, dllfrlbutlon 1nd UN f'lltrlctlona. Slmllarty, the blnefltl" of controlling toxic 1ubltan:n refer only to the direct advantagN of regulation. Th-Include prlmarlly reduction In mortality, morbidity, decrementl In hlth atatua and ecological dytfunctlon that may be aaoclatld with excealve expoaure to th-chemlcal1. In co1t-eflecttvena111lyll1, beneffll ire murtd In natural unltl" such ae yNrs-of-llte uvld, Incidence of dlN111 averted, and daya of work-Ion avoided. In C08t-beneflt analylll, both costl and benlffll are evaluated In monetary unltl. For toxic eubltancee control,, mt eftlclncy refn to the dlffnnce NtwNn direct beneflt8 and cOlta or the difference between the value of hNlth, utety 1nd environmental lmprovemlfltl gained through regulation and the value of the rNOUrCN employed In achieving thOM Improvements. It le Important to note that the efficiency crtt.aon of coat-benefit and cost-eflectlven-analylN don not encompau any allOClatld positive or negative Impacts that regulation may hive on lnduatry employment, profltl or new product Innovation. 0th form of economic analyal1, aome of which are dllCUIHd below, are utlllnd In ...... Ing th-so called Indirect" economic lmpactl of regulation. Under TSCA EPA typically ha1 / not conducted cOlt-beneflt or coat-effectlven-analyul In lmplementlng teat ruin or reviewing premanufacturlng notlftcatlon1 (TSCA Section, 4 and 5, rnpectlvely). The economic coltl of complying with lndlvldual teat ruin for txlltlng chemlcal1 or production prohibition, for new chemlcal1 are generally relatively amall 1nd conflntd. 7 They are not likely to rNch the $1 oo mllllon per yr level for major 'Eatlmatn of the coltl of conducting anlmal toxicity teatl that Include certain neurological evaluatlone are preunted In Section 3. 7 Although the total coltl of complying with teat ruin may be amall, they may repr-nt I elgnlflcant portion of the uln revenun for low volume, speclllfy chemlcal1. A diacu1Hd below, EPA recognlZH the dlltrlbutlve efflCtl of tnt rule

PAGE 14

Flnal Draft (4121111) Do Not Quote, cne, or Fleproduc, rule defined by Executlvt Ord 12211. Furthermore, 1nalyal1 of the hNlth 1nd envlronmental beneffla achieved by theN action 11 llktly to be qufte 1pecu1atlv1. To quantity tlleH beneflt8, many aaumptlona are nHdld regarding the rate of market penetration by a chtmlcal, n. projected NIN volume, typN of u ... 1nd llkely dlapoul practlcN. Und TSCA Section I _, EPA con11d_.. all aapect9 of formal COit-benefit analyll1 In evaluating the lmpacta of I propoNCI regulation (EPA, 1117). The balancing language of Section I (Box 8-A) encouragN coat-benefit analy9la whether or not a regulation la llkety to hlw major economic lmpacta. Since the enactment of TICA, however, EPA ha1 promulgated only I handful of regulations unct Section I (U,I, Qer,tn11,11:1..,_ Accounting Office, 111411).' None of tlleH actions haa bNn taken to protect agalnat the rlaka of neurotoxlcfty. EPA' 0fflce of Toxic Submncee recenll)' completed a prellmlnary rl1k aNNSIMflt for envlronmental and occupational expoaurn to acrylamlde, In which rlakl for cancer, reproductive and neurotoxlc etflctl were evaluated (EPA. 11181). Although thle ......,.... may lead to UN l'Ntrlctlon1 for acrylamlde that art beNd on neurotoxlclly, und Section e. further action by EPA la contingent on revltw1 of the acrylamlde rllk aNNSIMflt by Occupatlonal Safety and HNfth Admlnlatratlon and olher aglllCIN having potentially applicable regulatory authorttlN. Und FIFAA, EPA' dtclalona to approve new -reglatrltlons or to cancel, auapend or aner exlatlng registrations, are not regarded rulemaklng that II IUbject to the coat-benefit requlrementa of Executive Ont 12211 (EPA. 1117). However, becaust of the apeclflc balancing language of FIFFIA Sections 3(c) and COltl In 1n 1naly9la of lmpactl on market prtcN and profltl. 80ne ,-ac,n for llmlted regulatory activity und Section I 11 that EP~ TICA _aa "911Ulatory a~ of aat rnort. Undw TSCA Section I f*:=Ul9;G tor example, EPA mutt provide other appropriate fednl ~enclN with the---dni opportunity to regulate aubltances that pment urnaaonable rlaka. 10

PAGE 15

Final Draft (4121111) Do Not Quote, Cite, or Reproduce l(b) (llox I-A), EPA tin developed a rlak-beneflt analyala IMlhodology for .,.1u1111ng the economic lmpac:19 of reg1911allchl decisions. Thia procedure la d1ect 1n the nm NCllon. For p 1111 aldel that .,. applied In the production, 8t0ral or dlllrlbullon of raw lgl1culbnl commodlllN, pert of the reglaliallcM procea may Include ,.._ to t1111bllh p11t1clde tolerance und 11111111 ef FFDCA WW Ill EPA' granllng of IIICh tolerance la conaidered rulemaldng, but coat..,.. ....,_ ot u... declllon8 .,. not dewloped becaUN au of the economic con11q.....a11 of tolerance .,. Npl'ded poeltlve. Finally, the l'9VOClllon of a p1lllclde tolllrlnce by EPA II allo COlllld.,. rulHnaklng. Allhough COIi-benefit ......_. .. developed for thw declllon8, they have bNn of llmlted utlllly In the '9gUlltory developmerll pl'OCIII / .. : ,. ,. / ,, .., Allhough the NCOrd und TICA and FIFRA la 11*N n tar a1 regulatory Impact ....,... of K1lolll to ccnrol lllWOlmdc IUbstancN la concerned, EPA haa conduclld, under GltW enviroMlelltlll ltatutN, coat-benetll lludlN of regulatory propoeall to Nduce human apNUrN to lead. Unds the provlllonl of the CINn All Act tor,......,. full lddlllVN EPA dewloped I coatbenetl 8111.,... of ...a opllone for phulnglll the UN of lead addltlvN out of a-alOIM (Sch MZ. ll II, 1111). Und the Safe Drinking WatlJr Act 11 t Iii& the agency ha ..,.lulted the economic beneftta ot op11ona tor reducing 1111d In community...., IUppllN (Levin, 1111). llolll IIUdlel made lltlmltN of the health benlflla of Nduolng INd'I neurolmdc lflect8 In chlldNn. Two categorlN of health ,.,. WI evaluated: (1) ... lllirulN flllulll111 111 .... IIUMII : chlldrln who raqun ctlnlcal care and managlffllllt becaUH of INd tollclly; and (2) ,111 .. 111 Nllulll111 111 t111 llar lfJJttM 1J11i chlldren who require tpeelll education becaUN of cognitive .,..... OIUNd by lead apo11n. Thi eetlmatlon and valuation of theN benetlla wll be dllOlN In 81ctlon 4. 11

PAGE 16

Flnal Draft (4/28111) Do Not Quote, cne, or Reproduce 2.1.2 Alfkl and S,nlfb A NCOl1d economic luue that arlIn regulating chemlcal1 and drug1 concema balancing the economic benefttl of a 1ubatance that are IOlt through a l'Nlrlctlon or ban on lta UN agalnat the rlskl of continued UN at unregulated levela (NAS, 1975; NAS, 1910b). Risk-benefit 1nalyll1 11 used to addreu this question. Aa noted above, the term benaftW Is u1ually employed to dHCrlbe the economic advantag of a regulation. Benefits consllt of Improvements In public health and environmental qualfty that would result from restricting the UM of toxic chemlcall. However, In Mk-benefit 1nalyll1 of licensing and approval regulations, In particular und FIFRA and FFDCA, the term ha acquired dlff.,.nt meaning. In rwglatratlon declslona for agricultural pntlcldN, for example, EPA' Office of Pesticide Program1 a,, ..... benefits In term, of changes In the value of crop yield and pest control coste (NAS, 118Gb). Slmllarty, In approving new drugs, FDA- benefltl In terms of thnpeutlc efficacy. Alu-benefit analyal1 recognizes that, on the one hand, chernlcal1, patlcldee and drug1 generate economic benefltl that manlfltlt thernaelvel In the form of lncrNIn output and lower product prices. On the oth, the lncreaNd un of toxic chemlcala may Introduce more of thele aubatanc Into the environment, at the tlrM of lnltlal UN or eubNquentty In waste dlapolal. The rl1kl to hutth and the environment due to lncrled expoaurea to toxic chemlcal1, therefore, may alto lncreaN. For a tpeCffted level of regulation, rl1k-beneflt 1nalysl1 compares the change In environmental and hulth rl1kl to the change In economic beneflt9 re1un1ng from regulltlon. H the uN of the chemical I lncnN1Hd, I.e., new chemical, the analylll com..,.. the potential lncreaN In rl1kl with the anticipated lncrun In beneflta. If the uN of chemical 11 reduced, I.e., an ulltlng chemical, the 1naly111 comparn the expected reduction In rl1kl with reduct;lon In benlfltl. 12

PAGE 17

Flnal Draft (4/28181) Do Not Quote, Cite, or Reproduce EPA lnltlatN risk-benefit analysis for proposed pesticide uu rutrlctlon1 when the agency receives toxlctty data that trigger concerns of potential risks to human hNlth. Although th ... analyHI may be made In registering new compound,, they typically are undertaken In response to toxicity data that are generated through the Speclll Review Proceu for existing pesticides <-Chapter 8). When Special Review leads to propoud UN restrictions or suspension or cancellation of a registration for an agrlcuftural pesticide, for example, analystl estimate the heafth rlak8 and nat valu of crop production for projected uncontrolled and the propoNd controlled appllcatlona of the pesticide In question. The rl1k-beneflt ndlol for these 1Ce11arlos are then compared in aUNSing the economic Impact of the propoNd ~ulatlon. To date, EPA has not completed a Special Review or regulatory analy1ls for a pesticide that has been identlftad as posing unreasonable rl1kl for neurotoxlclty. It Is anticipated, however, that this situation may change In the nr future. The 1981 Amenclmenta to FIFRA call for an accelerated review for pntlcld that were find registered uncl the pre-1972 FIFRA guldellnes {Aldala, 1988). Becauae this group lnclude1 number of widely used agrlcunural lnHCtlcidn that were 1peclftcally designed to attack the nervous systems of target organisms, It la likely that special revtewe will trigger some risk-benefit evaluatlon1 for neurotoxlc rl1kl. In conducting rl1k-beneflt analyal1 of new drugs, the FDA 11 much more qualitative In ill approach. In atcertalnlng the benefits of a new drug, the FDA dlatlngulah between the efficacy and the effectlvenof the candidate chemical. Efflclcy ,..,.,_ to the ability of the drug substance to aner the symptom, or pathologlcal condftlon for which it was developed. Effectlvenn1 refn to the degree I drug might achieve reduction, In dl-N or death and, hence, reduction In hNhh care expendlturN, when optimally prescribed and taken. In conducting risk-benefit evaluations of new drug1, FDA weigh test evidence of advll'N drug ructions (rl1k1) agalnlt a drug' demonltrated therapeutic propertlN (beneflta). The 1982 Amendments to the Federal Food, Drug and 13

PAGE 18

Flnal Draft (4128/89) Do Not Quote, cne, or Reproduce Coametlc Act -~~-require that manufacturers In 1Hklng approval to market new drug submn sufficient data to demonstrate the drug's efficacy Its efficacy but not Its effectlven-. 2.1.3 lmpacta on Market Prices and Industry Profits A third luue of economic Importance that arlin the regulation of toxic substances concerns the Impact of the direct costs of regulation on market prices and lnduatry profits. Although Industry lnltlally pays the compliance coats of regulation, firms attempt to pan th-lncreaIn the costs of doing busln on to their custom .. In the form of high product prices. High prices may, In tum, discourage Nies and reduce lnduatry profits. If, as In the 19708, there 11 a major expansion In regulation covering broad range of Industrial and commercial activities, the costs of regulation may also contribute to the nation's rate of Inflation. Section 4fll)(1~ of the Toxic Substances Control Act {15 USC 29038.lffl) stipulates that EPA consider ,he relative costs of the varlou1 tat protocol, and methodologl..when Implementing chemical test rules. In 1980, with the first test rule luued under Section 4 fliPA, 1110~ EPA outlined procedures to estimate the re!atlve costs of protocols well as the projected Impact of th-cOatl on the marketablllty of the chemicals to be tested. Thprocedures remain In uH today for evaluating the potential for significant adv ... economic Impacts that test requirements may Impose on the chemical lnduatry (Shapiro, 1988; liPA, 1818Ll(01f--ffRI ]ID. 0MB and the Rgan Aclmlnlllratlon emphasized the cumulative Inflationary efflct1 of regulation In Implementing Executive Order 12291. 14

PAGE 19

Flnal Draft (4128/89) Do Not Quote, Cite, or Reproduce EPA evaluatN the lmpacta of the anticipated tlltlng C08ta tor each manufacturer or proceaor by ectlmatlng annuallzed10 tnt coata and then comparing them to the market price of the chemical. A market analy1l1 11 also conducted to ...... tour key features of the market for the chemical being tested: (1) demand responalvento changea In price; (2) expectations tor market expanllon or decllne; (3) Industry cost characteristics; and (4) lnduetry structure (Shapiro, 1988). A prellmlnary determination of the potential tor significant advene economic lmpacta can usually be made on the ba1l1 of anticipated tntlng coata. In thl1 regard, the agency uan Informal rule of thumb for datermlnlng adv ... economic Impact. If the annualized coltl of testing a chemical are 1-than one percent of the price of the chemical, then the potential tor advene economic Impact due to the test rule may be low. Conv ... ly, If the annuallzed tell cost exceed one percent of price, then the potential tor a~verse economic Impact may be high (liPAv 108811-2. 1.4 Raaulatton and Incentives tor Innovation An luue that Is related to the Impact of compliance coats on profltablllty concern the effects of regulation on Incentives tor Innovation. From a aocletal perspective, the development and Introduction of new chemicals, pesticides and drug1 has benefltted virtually every area of human. need: food, health, shatter, clothing, tran1portatlon, communication and energy. On the other hand, extensive UH or misuse of th-technologlN ha1 Increased health and tety rlska to publlc heatth and the environment. Hence, the question arises: does regulation 1n annuallzlng tnt costs, EPA use1 the expected product llfetlme tor the annuallzatlon period and the estimated cost of capital In the chemlcal lnduatry for the annuallzatlon rate. If available, uln volume Information Is uNd In estimating expected product llfetlmN. Thare longer tor commodity chemlcal1, I.e., chemlcal1 with multiple uand large volume 11181, than tor 1peclalty chemlcal1. i:..:-=.~u~:,,:; ~r:..ui;-=: -~p~.u=~ .!!tlo~ ~",a;;m.;r-15

PAGE 20

Final Draft (4/28/81) Do Not Quote, Cite, or Reproduce to protect hutth and the environment alter firms Incentives to develop new drugs and chemlcals?11 Firms have lncentlvn to develop and Introduce new product, as a wayffl.of competing In a given market and making a proffl. Anticipated profits depend on potential I volum and cOlt and time requirements to develop, produce and market new products. Profitability also depends on the availability of competing producta and patents and other factors that protect the market position of the Innovating firm. Finally, because there 11 uncertainty surrounding ch facet of the development and commerclallzatlon of new products, Innovation In the private sector will take place only If IMprospectlve risk/reward ratloi leW,j considered favorable. Regulatlon can affect NCh of th-factors (OTA, 1981). First, the eompllanca costs of regulation lncreaM the costs of developing new products. Second, the regulatory process adds time to that required to develop and Introduce new producta; delay In a firm's ability to market a product Iner-opportunity coata In the form of foregone earnings. Third, use restriction, can llmlt the market for a product, or In the extreme case of a ban, eliminate the market altogeth. Fourth, reporting requirements may lead to the dlaclosure of proprietary Information that compromithe competitive position of the Innovating firm. Finally, because regulation can add uncertainty regarding costs, delays, protection of proprietary data, and so on, it adds to the flnanclal risk of developing new products. 11 A 111R1Alllt related but analytically more complicated luue concern whlth the Impact of hNlth and fetv ragulatlon1 on lnc1ntlvn to Innovate producel a net gain or lou to aoclety. To addntU this l11u1 requlrH analpta,g the cOltl and benefltl of regulation from a longrun dynamic ~pectlve (OTA, 1881). The tem~I framework for analysis must be 1ufflcl1nt1y l~ng eno~h to con1lcl the positive and negative Impacts of emerging chemical and drug technologlH under various lev111 of regulatory control. Regulatory analyuaually lack this ptnpectlv1. Risk-benefit analysl of propollcl pesticide controls, for example, uaually focuon 1hort-run economic lmpacta (thrN to five yra) and consldn only currently reglatered chemical and nonchemlcal control, 11 altll'llltlves (NAS, 1117). 18

PAGE 21

Flnal Draft (4/28/89) Do Not Quote, en,, or R,produce An Important lll111eneleR IR Illa IR8RRIP IR r.Tlltl1llmifffir:iffi~-regulation aflecta lncentlvee for Innovation d1N19taaARll1N1t-etaR~IIINa~,~lanijj111.atM11:o:--.;111a In which the regulatory 111e1IIIIRl11RDlJj-j acts as a baffler to the commerclallzatlon of new products. In thla ragardl there are Important dlfferencn between the RMIINIIIR fllllllre111111h-of TSCA IRII Ille ll11111ln1 PIIIUlf81111AII filii .11111! If FIFRA and FFDCA. The key difference I In the way 111111 ,e11ul,a1111n1-aNlgni the burden of proof to demonstrate that a new product does or does not po11 unreasonable rlks (S11 Table 8-1). Under the notification requirement of TSCA, the burden fall on the regulatory agency to make a finding that a product may po11 an unreasonable risk. Under the llcenslng mechanisms of FIFRA and FFDCAi the burden falls on the Innovating firm. The regulatory agency can wtthhold approval for NII fl.ll'm a new product until it Is Ntlsfled that the firm has conducted sufficient testing to establish that the product poses no unreasonable rlskj. 17

PAGE 22

Flnal Draft (4/28/JI) Burden of proof Capa~ of agen~ to compel tntlng of new product Burden of deliy FIFRA or FFDCA Ucenalng Falla on Innovating firm Withhold approval until dalred Information 11 submitted Falla on Innovating firm TSCA Notification lnHlal burden falls on regulatory agency Requlra agency finding that I product may pou an unruaonable risk Falls on public 18

PAGE 23

Flnal Draft (4/28/89) Do Not Quote, Cite, or Reproduce There have been numerous 1t11lll11 111111 M'1e 1eu1111 ta .. i-~i-.1 the aggregative effects of federal regulatory chang11 on Innovation In the drug, plltlclde and chemical lndustrles.12 These studies have 11waAtllellW of rilalllae 1u1t. ffii total r-rch and development (R&D) expendhur11 per year; RID expenditures as a percentage of annual 11111 or profits; time from Initial dlacovery to ,.,11tatla11 er llanln11-.--& number of new 1t11111INI IJillll registered or llcenaed per yeart Iii effective patent llfetlme1.t lflll 111an1 lfl PNNFltl IRII llvelltJIRIRI ..... "" new thlMINI 1Atlly, These murn ... -.a examined before and after Implementation of a regulatory program II change to ascertain whether there 11 alt.I significant IWIW. dlfferenc4. Although It 11 beyond the scope of this chapter to crttlcally evaluate th-studln, It 11 useful to briefly summarize their findings and dlacu11 aome of the dlfflcuffl11 encountered In measuring the Impact of regulation on Innovation In the chemlcaffiand drug Industries. One dlfflculty In ualng ~-expendlturee measur11 has been that It dlfflcun to distinguish between R&D that Is spent for the development of truly new compound,, I.e., new chemical entltle1 for drugs or new active Ingredients for pesticides, and expendltur11 for new products that are essentially new applications or combination, of nfJ.v lltll'1ry 11111h1nl1Mefor previously discovered compounds. A second dlfllculty Is that a substantial amount of the R&D expenditures for testing of new chemlcal1 Is Integral to their development. For pesticides, for example, toxicity testing, metabolism and residue studl are essential In understanding the -W:or recent revleWI of studl11 of the Impact of federal regulations on Innovation In the drug1, pesticide and chemical Industries IN Gra~9~_kJ. Vernon (1183), National Academy of Science (1987), and &M ~111a1~ ma;~O,-. OTA (1181) contains an earlier review and a11essment of stud" In this area. 19

PAGE 24

Fina I Draft ( 4/28/89) Do Not Quote, Cite, or Reproduce properties and mechanisms of chemical action in target organisms. Similar kinds of test Information are needed In drug development. In other words, there 11 considerable overlap In the generating of test data needed to develop an appllcatlon for a new substance and data needed to ensure Its safety. Drug R&D Studies The most studied area to date regarding the Impacts of regulation on Innovation has been of the effects of the 1982 Amendments to the Federal Food Drug and Cosmetic Act on research and development In the pharmaceutical Industry. For the most part, studln of the outputs of the Innovation process agree that the overall rate of new drug Introductions declined subatantlally from the Inputs to drug Innovation have shown that development time and colt to drug firm, Increased slgnlflcantly after enactment of the 1982 Amendments.14 Although these studies demonstrate the occurrence in the U.S. of conslstently, adverse impacts on drug Innovation-after a change to a more stringent regulatory regime, they do not agree on the m Importance of regulation ., eR I NYNI th818 Impacts. Speclflcally, other Influences not related to regulation, for example, declining drug research opportunltl11 and exogenous lncreal81 In research and development coats, have been hypothesized as being partially responsible for the obllf'Ved declines In drug Innovation -IB.11 data that show the decline In new apprpval1 was already under way before 1982 and International data that demonstrate comparable trends In countr111 other than the U.S. teod to 1'See, for example, studies by Pettzman (1974); Wardell (1973); Grabowski (1978); and Grabowski, Vernon and Thomas (1978). '4See, for example, studies by Clymer (1970); Mund (1970); Sarett (1974) and Jadlow (1971-72). 20

PAGE 25

Flnal Draft (4/28/89) Do Not Quote, Cite, or Reproduce support the conclulon that regulation has been only partially responsible for these xnnu: Pesticide R&D Studlea Although there have been no studies of how regulatory efforts speclflcally directed toward neurotoxlcity have affected pesticide innovation, there have been studl11 of the aggregate effects of pesticide regulations on research and development. A ~udy by the Council on Agricultural Science and Technology (1981) found that from 1988 to 1978-before and attar enactment of the 1972 amendments to FIFRA _-ffl-dlrect costs of bringing a new paetlclde to market Increased; delays from discovery to registration grew; and the composition of research and developrr1ent expenditures shifted from 1ynth11l1, screening and field tlltlng to registration, environmental testing and residue analysis. -::=-~=--t ~'' ,,::~ o ,I, > w. I f.?::: -------~----_, ___ n~~fi.1---?/:WiBJ.-~--~ :::@~_, ... .-,.,. .... ......... >-~ ..... .,.,._.~ '111.-tMri~-\;:flD -affl~i,;11#Hitfli=lllfafflft Hatch (1983) quantified relatlonshlps among: time from discovery to raglatratlon; FIFAA changes; and registration of new compounds per mllllon dollars of ,_rch and development for the period 1987 to 1982. The relatlonahlps predicted that an Increase of 1 iiiiffffl In the time from discovery to registration would resun In a decline of from 7 to 9 percent In new compounds registered. Finally, Grabowski and Vlscusl (1984) showed that for the period 1971 to 1975 pesticide .... rch and development expenses declined 11 a percent of 11111. A decline of this kind might reflect rapidly rising Nies of pesticides rather than a 21

PAGE 26

Final Draft (4/28/89) Do Not Quote, cne, or Reproduce decllne In ,_rch lnveatmenta In response to EPA' regulatory activities. Grabowakl and Vlacual also showed that the effective patent life for commercial peatlclcl11 fell from about 15 years during 1971 to 1978 to 12 yeara during 1977 to 1982. They auggeated that this delay In commerclallzatlon might reflect 1 longer time needed to develop new products or to meet regulatory requirements for new products compared to the registration of reformulations of Ntlbllshed compound.a. Chen,~1 R&D Studln In the late 1970'1 and early 1980'1, prior to EPA's l11uance of a final rule for premanufacturlng notification (PMN), 11 many parties expre11ad concern that the major economic effect of Section 5 of TSCA would be through changes In Innovation actlvltlea of chemlcal companlea :--.y.!.:.. -~ .... M .... ) .. -..... ;ffl.__ ... : .... S:.:: Several atudlea were conducted to estimate the Impacts of the eaete el tlllRI PMNllllll&it.11 on the Introduction of new chemlcala.11 &elllllal Ne,. 111-liR lllif]i.11 for several alternative flllng formats proposed by EPA and l11elMIINI 1t11:u--'"~.-~-f'~ii=:direct costs of e rl and aubmlttl ti'le PMN ..)Zi..~ ~=~~M== ......... pr pa ng ng well Indirect co1t1 from delays and uncertainty associated wfth the uftlmata dl1po1itlon of the PMN. Allll1u9II llully eetlMatae el 111,.et IIIRI 111t1 r.v1 n11RIR1I (ea,oee te ,e1 a,NO par Rawe 111,.,.1111 IRtreduetlaA), 11111 ,,,.111, ne11111, 22

PAGE 27

Flnal Draft (4128/81) Do Not Quote, Cite, or Reproduce ltle QlleMINI 111eellll11 u................ IJlllellllleR, ....... th1 WIUIII MfJ.1e I 111111Nlllnl1Mlt8 lllllflllMllellll IMIIIII ell llllf1ll11Mle111 If IRIIII TJIIUIIII 1tleMINII fliPA, 18111~, One of the dlfflcuttln In aUN1lng the Impacts of the PMN rule on Innovation 11 that, unllke the experience for drug1 and pntlcldn, data on the number of new ch1mlcal1 that were Introduced 1prior to It ha not been poalble, for exampl11, to Ntabll1h a chemical Innovation that occurred prior to Implementation of the PMN rule. Without a baNllne, the effecta of PMN on Innovation cannot be reliably quantified. -~-= tBf .:~-,:- II.'! ...... 2.2 History of The uy of coat-Benefit Analnl 1n Regulatory Analvfl Since 1970, two major development, have made the role of coet-beneffl 1nalysl1 more prominent In evaluating the economic Impacts of regulation. 17 The flrat la the development and extension of colt-benefit analy1l1 a, a methodology 17Thl1 1ectlon draws heavily on the excellent hlatorlcal 1naly1l1 by Andrewa (1184). 23 /

PAGE 28

Flnal Draft (4121/11) Do Not Quote, en,, or Reproduce for ewluatlng the lmpacta of aoclal ragulatlon.1 The HCOnd 11 tht Executive Branch' uu of regulatory analyal .... nd particularly coat-benefit 1nalyal1 of regulatory lmpacta-aa a mn of exerting greater executive control over regulatory agenclN (SN Box 1-C). 2.2.1 p,. 1170 Although the ,...,., government ha1 aought to evaluate publlc pollcy declalonl 1lnce Ila Inception, the 1131 Flood Control Act 18 gennlly cited a containing the thl leglalatlve requirement to apply COit-benefit analylla. Under thla law, fed.,.I tund1 could be UNd In the conatructlon of certain publlc worn pro)ecta only If "the benefttl to whomloever they accrue exceed the coata. (41 Stat. 17IO) It la Important to note thll law did not define objective crlt_.. for claalfylng and comparing COltl and beneflta, nor did It provide any guidance a, to how they ahould be me1IUl'ld. Definition ot criteria and procedur11 tor u1lng COIi-benefit analysll to appralu water rnourcn proJects gradually evolved through the .norta of lnteragency commlttw and the Bureau of Budget (80B now 0MB) over the next 40 ,-,.. Owing thla evolutionary period, two key prtnclplN were developed that ahaped the appllcatlon ot coat-benefit analyala and fllcllltated Ila atenllon to a wider range of pubic lnveetrnent dtclllonl (U.S. Federal lnteragency River Baaln CommlttN, 1IIO; U.S. Congr111, 1N2; l111n-. 19141 AndntWI, 1114). The flrlt "Soclal r911ulltlon llddr111 problem emlronrnental, hellth, occupetlonal and coneumer ~uct -~ where coatl tau on other than thole who c:auao them. Some aamplel Include the heallh, ~lcll and l'ICrNtlonll dlmag1 coate of air and Wltlf' or the llablllty coatl of health rllka lmpo11d by halrdoue work!nll condlllonl, uwte producta and toxic waetN. In the abl1noe ot regulation, flnill and lndlvlduala who create pollution and other rllka would have llttle Incentive to control them. The OOltl of lnduatrlal, ~I, tra~llon and other actlvltlN would for the fflOlt part, not reflect any of the loolal ooll8 allOClated wllh their noxloua or haardoua fllturN. Economllta call thw COltl external COiia. The failure of U""9Ulltld marklta to Im'" theN ooll8 on thole who caUN them ha1 provldtd 1n economic Juatltlcatlon for government lnterwntlon (U.S. lwtl, 1111, pp. 11-17). 24

PAGE 29

Flnal Draft (4121/N) Do NOi Quote, Cite, or Reproduce II that nallonal economic tfflclency II the Hie analytical objtctlve that II tvaluated In I colll beMftl wiylll, Ind the NCOrld, which folowl logically from the flnlt, II that only benetlla and colt8 that add to and 1Ublract from economic lfflclency .. counted In evalultlng the merlll of propoNd proJect or r911ulatlon. 0lher poellw and neptlw economic lmpacta that may accrue towlnl the attainment of albell wo,lhy loclal obflcllvN, I.e., Improving envlror.mental quallly, or ltlmulatlng raglonal economic growth. .,. not lncorporatld In a direct and rlgorout manner In the call ...... calculltlone. In the 1NO'-. the requhmenl to apply formal economic analyllcal tlehnlqUN wa broadened to Include a wld range of pubic apendlbn dectelonl In addition to...., rwurcee proflcll. In 111 1111111111 the Dtpartment of Defen11 lncorpolatN the UN of CNHflecdvlMu analylls Into Ill planning and program budg.Ung (PPB) procedurN. The goala of tlllN proced&ns we to make dlClllontl on apllcll crltlrll In which nNd8 mUII be relltld to COIII; to GOMld ...,_.I altlmltl .-rall1er than I llngle rlCOfflfflendat; and to UN apllclt. open 1na.,.._ of tllON alllmltlwL In 1NI, Pt 11ldent JohMOn extended PPB to the l'Nt of the fed .. l bureaucracy, Ind the 808 WU aulgned to INd Ind monitor the prOCNI (0 ffi 11111-Although 801 limply euppo1ed to provide managerllll alllltlnce In lnfullng the eyatern Into deparlmlntal declllon making, In practlat the BOB became the chief demand and uas of many of the agenclll PPB outputs. For tlllN reuone. well II for I lack of reeourcN 1nd unrNllatlc analytical apealaltcMI, PPB came to be .... with oppoaltlon II I BOB paperwork ..,.. by which the pmldent could force hll view on dlplltmental progra1118 Ind budglll (Marvin and Aw, 1fHPIIIII). Although PPB waa phllld out In 1170, many believe It ltft I legacy of continuing Improvement In government dec191onimaldng ttvough the UN of expllclt tvaluatlvt technlqUII (RMl11t 11,,tara ,,.-111111.

PAGE 30

Flnal Draft (4121111) Do Not Quote, Cite, or Reproduce 2.2.2 Ibt 1,ZO' Beginning In 1170, Congrea enacted several major lawa that provided a number of newly ntablllh Executive Branch agenclN with greatly expanded to promulgate envlronmental, hNtth and 11faty regulatlon1. Becauu of the technical nature of the programa ntablllhed by th-lawa, Cong,_ frequently pw the agenclN wide latitude In determining the stringency and scheduln for promulgating regulatlont.11 Th-lawa were also quite varied In their requlrementa for agenclN to analyze the economic effects of regulation. Until the mid 1170'1, economic appralul of the lmpactl of propoNd fed_..l regulatlona wu conductld In an Informal and casual fllhlon. In addition, a llrong program of eucutlve oversight of regulatory development did not exist. The government-wide requirement for the application of cOlt-blneflt 1nalyll1 that had bNn Ntablllhed for water re10urce1 projecta did not extend to the ..........wt of benefttl and costs of water quality or other environmental, hNlth Ind flly regulatlone. In 1171, 0MB lnltltutld a flrlt attempt by the Executive Branch to provide overalghl over a number of .,.., of regulation. 0MB directed all propoHd regulatlonl that atfecttd environmental qualfty, conaumer protection and occupational and publlc health and ufety be unt to 0MB for review by oth affected agenclN (Shultz, 1171). In whit wa1 known a1 the quality of llfe review, .. the 0MB reqUNted many of the 1tem1 of Information that are now requllted a pert of regulatory Impact analyNI. Among th-..,. a 1ummary of NCh llgnlflcant regulation, Indicating Ill main objectlvel, varlou1 altematlvN thlt were ooneldlrld, the benlfltl and COltl auoclated with Nch altlfflltlve, and raon1 for Nllallng the propOlld altematlve. Thll Information WII to be Nnt to 0MB before the regulatory propoul wa1 made publlc tvttn In draft form. "One exception OCCUINd wllh the leglalatlon of specific numertcal ,~,, '' automotive emlNlona ttandard1 In th1 Cln Air Amendmlfftl of 1170 fdlC 11111 111111 21

PAGE 31

Flnal Draft (4128/89) Do Not Quote, Cite, or Reproduce Dominated by concern, of inflation, President Ford, through Executive Order 11121 In 1974, required agencies to complete an Inflation Impact Statement (11S) for all regulatory proposals that were con11dered 11 major" In term of economic Impact. As with the quality of llfe ravlewa, 11S were to contain analy1l1 of beneffll, costs and alternatlvea and w.,. to be 1ubmltted to 0MB prior to proposal In the Federal Register. The order applied only to proposala for new regulation and legislation and did not affect exlatlng ruin or laWI. Monitoring reeponalbllltlas for the 11S Program were divided between 0MB and the Council on Wage and Price Stability (COWPS). COWPS WII created a1 part of the Executive Offlce of the President In 1974, primarily to monitor Inflationary actloM In the private uctor but also to review federal regulatory program, for potential Inflationary lmpactl. Any regulation that generated benefits In excess of coat8 wa considered anti-Inflationary, wheras any regulation that did the oppo11te WII branded Inflationary (MIiier and Yanctlel 11:J8, p,I), As the 1170' anded, It was clear that moat American continued to 1upport the goals of aoclal regulation. There were, however, growing public concerns about the effectlvenof 1peclflc regulations and whether their coet1 Jultlfled their benefltl (U.S. Senate 1978JI I.I~, 111:tl MIiier IRd V.Rllle, 11111 if.RdF1.1,e, 1114), Al the decade clOlld, th .. were lncreaaed demand for action to reform the regulatory proca11 Ml.I2.2.3 Pc)ft 1981 In 1180, Ronald ANgan ran for PrNldent on a platform that Included regulatory reform and an ea1lng of the federal regulatory burden on lnduatry (Iii., .UfMsWl'BJJMIIIITIRl!lilll_, 1111). Al part of his program to achieve th-obJectlvH, Praldent Reagan Implemented Executive Ord 12211 ~A" 1110IHIJ!l][IIIDJMJ In hie first month In office. The Executive Order lnllftuted two major changN In the practice of conducting regulatory 1naly1l1. 27

PAGE 32

Final Draft (4128/19) Do Not Quote, Che, or Reproduce Flrlt, ft firmly eatabllshed coat-benefit analysis as the primary evaluative technique for aUH1lng the lmpactl of proposecl major regulations. Second, Title 3 of the Ordw charged the 0MB with executive oversight of the regulatory proceu. These two provlalona remain In force today. The Implementation of Executive Order 12291 ha mnt a commitment to the goal of economic efficiency and to t:ostbeneflt analysla a af8j primary means of evaluating federal regulatlona having major economic lmpactL a,3 Utlllty of Regulatory Analyw In Devising Environmental Raaulatory Polley It la the nNd to document the economic lmp,1cts and potentially high cost1 of federal regulatory d~lslona that continually motivatea agenclea to evaluate the effectlvenof th-decisions. The goal In conducting theae evaluative exercl-haa been to Improve regulatory decision-making through systematic I development of, preferably quantitative, Information about the positive and negative economic lmpacta of propoaed regulations. Explicit, organ~ed comparleon~!-o-J the benefits and coata of ch regulatory option can a11l1t deciaion makera In Improving the cost-effectlvenof regulatory programs. From an analytical point of view, the ability of any evaluative technique to Influence the Nlectlon of a particular regulatory afternatlve depends on the degree to which that technique can provide clea,tcut dlatlnctlon1 among anernatlvea. BecauH of large gaps In underlying scientific information, estlmatn of coats, risks and benefits are more often than not quite crude and 1ubJect to a high degree of uncertainty. Consequently, cost-benefit and other regulatory analy1l1 techniques are Vf111Y approximate and usually only capable of distinguishing clearly superior from lnf_.or alternatives. 28

PAGE 33

Flnal Draft (4/28/89) Do Not Quote, Cite, or Reproduce 2.3.1 Improving Aalallan,_,__ Dasptte this llmttatlon cost-benefit and cost-effectiveness analyses have definitely Influenced the development of regulations. In a recent aueument of regulatory Impact analyses (RIAs) for 15 major regulatloni, EPA (1987) concluded that cost-benefit analysis had Improved lndlvldual envlronmental regulations In several ways. These included: (1) guiding the development of a regulation, I.a., net benefltl Increase or decreaae If the proposed regulation Is made more or lea stringent; (2) leading to the specification of additional attarnatlves for analyal1 and consideration; I.e., little variation In net benefits among the lnltlal alternatives; (3) ellmlnatlng alternatives that are clearly not cost-effective, I.e., net benefits show that one subset of alternatives are clearly Inferior and do not warrant further consideration; (4) adjusting alternative to account for differences between Industries or Industry segments, I.e., the distribution of cost, for benafltl 11 quite uneven among altarnatlves; and (5) supporting decisions, I.e., there are net benefits for a regulatory decision that has been formulated under a different decision framework. EPA noted that In some cases It Is precluded by laglslatlon from allowing the rNultl of a cost-benefit analysis to Influence the rule making process. In some of th-Instances, the agency ha1 gone ahead and prepared colt-benefit analyse, In order to conform with the requirements of Executive Order 12291. n C.1WA1fR~R81i-1 Accounting Office (19841) In reviewing the utlltty of colt-benefit analy1l1 at EPA noted this difficulty and recommended the agency forward Its u~.!r. ..... !!1!~ PJ..ean Air Act, for example, primary national ambient air quality llln~NI -must be based sola!I .. ~~~aalth .e~~~hout con11deratlon of benefits, costs or economic Impact, ---~WJ.IBD.-29

PAGE 34

Final Draft (4/28/81) Do Not Quote, Ctte, or Reproduce analyNa to Cong,-. Expllctt analysis could still provide useful Information for cong,...lonal overalght responslbllltlN. EPA supported this recommendation but noted that care should be taken In Interpreting the findings In light of uncertainties and data gaps that are likely to exist In such analyses lllaiitlll2.3.2 Addltlonal Contributions In addition to Improving regulatlon1IR 111 111e111RaRI, EPA noted aeveral other contributions that expllclt coat-benefit analy1l1 has brought to the agency. As the agency ha1 gained experience In quantifying benefits, It has been able to transfer analytical expertise from one regulatory area to another. For example, part of what EPA lfl In evaluating the health benefits of removing ld from gaaollne has been applicable In estimating the benefits of reducing lead In drinking water. Appllcatlon of the colt-benefit approach has Improved the con1l1tency and comprehen1lvenof regulatory analyof proposed rule1. Evaluatlon of regulation, to control pollutants that have the same health outcome, e.g., cancer, encouraged more uniformity In analyzing health effectl data. For multlmedla pollutants, the application of coat-benefit analy1l1 ha1 Increased awarenthat regulatory action In --~ one medium has ramification, for tile IIR afllnae a~ ex ur~~ww.Ml?-~~fflilll. 'l'e-poa 'lliiJ~~ ~. ,, _.,,.-.,M,.,.,,,,,, 2.4 Economic Principles and Methods of Cost-Benefit and Cost-Effectlvene11 Analy1l1 As Indicated above, coat-benefit and cost-effectiveness analyal1 seek to quantify and compare the direct coats and benaffls of a propoaect regulation. If a cost-benefit analysis confirm that the !!It beneffl1, I.a, the direct benefit mlnu1 the direct coltl, of regulatory propoul are p011tlve, the regulatlon 11 uld to produce an economically efficient allocation of rNOurcea. Implementation of that regulation wlll resun In a net Increase In the economic welfare that 10Clety can attain from Its current stock of reaourcee. 30

PAGE 35

Flnal Draft (4/28/89) Do Not Quote, CHe, or Reproduce 2.4.1 Concepts And Definitions The term cost-benefit (CBA) and cost-effectlven819 analy1l1 (CEA) have come to ref to analytical technlqun In which formal economic concepts are applied In comparing the negative and posttlve consequences of alternative uof reaourc81. Whlle the logic of CBA and CEA 11 embedded In all rational decision analysl1, I.e., lletlng, clanlfylng, comparing and summarizing the pluand mlnUNI of a deci1ion, the operational definitions of the term, "cost,ea "beneffl,11 and effect1ven...-have somewhat specialized meanings that are grounded In prtnclples of microeconomics. It 11 Important to understand th-meanings In the mu1urement of costs, benefits and effectiveness and In applying the results of the analysis. In gen .. 1, the concept of cost-benefit and cost-effectlveneu rests on the bl1lc economic concept of opportunity coat: that Is, the true cost of any activity 11 the value of alternative endeavors that might have iaa been undertaken with the me resourcn. For example, the economic-In contraat to the accounting-coat of premarket testing of a chemical Is the value that resources uaad for toxicity testing would have had H used In production, Nin or other re-rch activities. The prlnclple technical distinction between CBA and CEA lies In the valuation procen for the desirable consequences of a decision. In CBA, all of the desirable consequenc81 or benefits are valued, like coats, In monetary units. Conceptually, thl1 procedure permits the analyst to aueconomic efficiency In absolute terms ter 1 1ln111 1ll1flMtltD1(by how much do benefits exceed coats?) w.1111 11 ttii.lilii competing atternatlve1. Because all coats and benefit are measured In monetary units, CBA can be used to compare slmllar or widely divergent types of decl1lon1. Thu1, In concept CBA might be used to compare the regulatory effectlvenof options to Impose protective labeling, a product ban, or neither. In CEA, program benefits typically are measured In natural or non-monetary unltl. For heatth-related benefits, CEA' frequently use years of llfe uved or days 31

PAGE 36

Flnal Draft (4/28/89) Do Not Quote, Cite, or Reproduce of morbidity or dlublllty avoided. In the health area, In particular, analysts frequently prefer CEA to CBA because of the dlfflculty or undealrablllty of placing a dollar value on He. When using CEA to evaluate health programs that have both mortality and morbidity-reducing consequences, analysts are often faced with outcomes. How are two program to be compared when one 11vea several llvea but has a limited Impact on morbidity, while the other saves a few lives and has a more extensive Impact on Hin-? To address this problem, analysts have developed a metric I called quallty-of-llfe adjusted years (QAL Vs). Colt-effectlven11 useful In making relative comparisons of the efficiency of different options and le more meaningful when two or more altematlvej UHi ,e11uF11ure compared. For example, Instead of considering the co1taffectlven111 of toxicity test A, standing alone, analysts examine the colteffectlvenof teet protocol A compared to protocol a or protocol C. Protocol A Is coat-effective If It yields the required test data at a lower colt than protocol 8 or C; or A Is cost-effective If It produces more useful data that B or C when the 11me level of resources 11 utilized In each test protocol. In both of theaa comparl1on1, protocol A would be regarded as the most economically efficient alternative of the thrN; economic efficiency Is 1110 a relative concept and refn to the anernatlve that provides the greatest return for a given level of resource expenditures. 2.4.2 Methods Thl1 HCtlon pre1ent1 a brief, four-step discussion of the "how to" for an application of CIA and CEA kNft a _. regulatory Impact analysis et;fi.t I toxic 1ubatancn controle. The four major steps In this application are summarized In Box 9-&1. 32

PAGE 37

Final Draft (4/28/.89) Do Not Quote, Cite, or Reproduce lllltll Define the regulatory program to be analyzed: Its focus, attematlves and llmlta. Minor dlfferencn In the definition of the program, for example, Ignoring the poulblllty lndlvlduals may be exposed to the substance In question through saveral media, can have major Impacts on estimates of coats and beneffls. For th-reasons, a precise definition of the program -i.id 11 crttlcal. 119111 Compute the coats of compliance for the regulatory program. Coats are computed from a aocial perspective, that Is the value of all of society's resources ulld In the program are counted N(j costs, regardlof who pays for them. In addition, the analyst must be careful In assigning values to r110urcn that reflect their real opportunity costs as opposed to values that are simply accounting entries. There are two parts to this step. The first Involves computing the total coats of resourcn needed for compliance In each year of the program's operation. The timing of Nch expenditure relative to the beginning of the program 11 noted. Some '"urc, for example, buildings and equipment are purchased Infrequently but uNd for extended periods of time. Others such as labor and materials are purchasad and used more or Ins contemporaneously. The second ee111panaRt ~ this step Is discounting to preHnt value. Discounting Is a procedure analysts use to relate costs that occur at different tlmea to a common basis. Future costs are considered leu burdensome than pr-nt colts because of the time preference for money. Moat lndlvlduals would prefer to postpone full payment of a bill to some future date. In this manner, J.111 M Invest a smaller amount of money which would grow at a compound rate of Interest (similar to a savings account) to yield an amount of money needed for the bill ment. The would then be able to aRta 1111U!iii~--11te .. : pay Y J .&JZl ... ~:fiL .... ... ..... .. ... ............... :~ ........ ffl amount of money equal to expected Interest earnings. The discount rate selected for regulatory Impact analysis should represent the opportunity coat for social Investment In heatth and safety programs. Generally, ratn that are In the range of 5 to 15 percent have been used. Hewe'i11P, Because 33

PAGE 38

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce there la great dNI of uncertainty and disagreement among economists, as to the appropriate rate, the analysis should be repeated using alternative discount rates. ltim Compute musur of beneffls or effectlveneu arising from the regulatory program. The hbh and environmental beneffls or outcomes are also computed from a social perspective, that Is ragardlof who recelvN them. In cosrjbeneffl analysis, benefits are expressed In monetary terms, whlle In costeffectlven-analysis, outcomes are expreuad in natural units such as lives uved, caof Hin-averted, and days of dlsabllfty avoided. There are three ...,.,. In computing health ben1ffl1. The .~ ,t Is to lltlmate In natural units the hNnh Improvements from risk reduction. Uves uvad, caof Hin prevented or days of dlsablllty avoided are examples of pcJUlble program outcomn. Estimation of th-quantitlee must rely heavily on epldemlologlcal findings, risk -manta of animal toxicology data, and expert opinion. The second 11111jjj] consists of combining the disparate (appl .... nd-oranges) estimates of heafth effects into a commensurate measure of benefits. In cost benefit analyslej each outcome estimate Is evaluated In monetary terms -p? .. u.r~ -~M--!,-U~~-~ In cost-effactlv1n111 analyslej mNaurH such as additional yra of hNlthy llfe, also known as quallty-adJustedillf9iyear (QAL Y) are used. Combining the different msures of heanh outcomes for cost-effectiveness analysis e-ntlally Involves weighing them with a scaling factor. If, for example, the most valued type of outcome from risk reduction Mi9M 111 le allslf.i:'.~j-::JR'f8.II.Tt1 one year of perfect haafth to life expectancy, then that outcome la "scaled' as one year of healthy llte. If the second most valued outcome 11 added life expectancy but with the presence of llngerlng Illness, then that outcome would be scaled some fraction of the first. Perhaps a value of 80 percent of year of hNlthy llfe might be assigned to the second outcome. 34

PAGE 39

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce Scaling factors are es .. ntially ._ value Judgments that reflect the preferenc of II affected persona. Although assessment of these preferences Is dlfflcult, resurchers have developed Interview techniques that use forced-choice questionnaires to ascertain IMIF-preferences for various health states. li1eRatwlet1 111 ll1r.11lap1II 11J1ral all1Mltl~a appraa1h11 far 'AllwalleR at hNIIII 8RII 1nPJIF1n1R1 IWIIIIRII In IR8Rlllfl/ ,.. ff:PIIIRIR, 1878), The final jj.atfil step IA 1etl1RallRI ll1nalt1lnvolves discounting. As with costa, discounting ,, necesaary to relate benefits that occur at dlffwent times to a common ba1l1. Because of time preference,, present benefits are preferred to future benefits, and the ume discounting procedure that Is used for com should be a Had to benefits. ~~--~~-m .. ~--~ pp ~,w.- .,--w. l ... '-ffl::~ i ~ :-1-:7::::'.11~~ Rd.!fffl . ....... ,., ~~r)r12111m ~:'.@~--W:k ;.:,-c -v:-.MiT~1aa .... .a.:.a .. -. .. 1. ... ,. s.,Y.>. .... ..... 1m...... B. ... ..... ... .... .:, ..................... ................ 11 ..................................... :$:...... ----~ ~..... ~:;::R; :;.:,.. fMWJ. J.J.~b?. ~fia--J~::$;t:'_,.. e1,aw. ==. --~----.-:~--,.---=~~,~ IIWIW Perform sensitivity analysis and examln~ the effects on the decision. Many of the data and procedures for estimating costs and benefits are not known with certainty. For example, It Is dlfflcult to cost-out all of the components of regulatory compliance or to select :ffll appropriate discount rate. Epldemlologlsts are uncertain about the relatlonshlp between exposures to naurotoxlc substances and occurrence and severity of di- Medical experts are also uncertain about trNtment procedures for lndlvfduals who do become Ill. Risk assessments are constantly being updated to reflect new research. 35 / /

PAGE 40

Flnal Draft (4/28/89) Do Not Quote, cne, or Reproduce For th-rN10n1, 1en1ftlvtty analysis, the proc111 of dellberately varying the uncertain pr1111eW 11 performed to examine their effect on the decl1lon rule. If the ftnal outcome 11 not greatly affected by different auumptlon1 about the uncertain quantftl11, than one can be relatively confident about the study concluelona. If on th1 other hand, there are widely different eatlmatH, than one .hould be Conlld .. bly more cautlou1 1~===~=1= ,,.n.w;:IIJ.l.lf.:;.,. .. .,..,"""' -~ ..,,..,: ~: 1 ~' }~t~ : 38

PAGE 41

Flnal Draft (4128/81) Do Not Quote, cne, or Reproduce 3. THE COSTS OF NEUROTOXICITY TESTING Animal toxicity tntlng and the resource, expended for thl purpoH are now con11dered -ntlal featurn In the development of new chemical and drug technologln. FFDCA and FIFRA require demonltratlon of drug and peatlcldn, I.e., the designed toxic properties, In attacking di-or target organl1m1. The relative Nfety of a drug a, meaeurad In term, of unintended toxic eflectl or a pntlclde 11 mea1urad In term, of morbidity or mortality to non-target org1nl1m, muat 1110 be demonatrated. TSCA placea emphl.,. on ntabllahlng 1 minimal Nt of Information about a chemical' toxic propertl befON I I Introduced Into commerce. Under TSCA, manufactunn can alao be requnted to provide addftlonal teat data If the uN pattern, of a chemical 1uggnt that ft may prHent an unreaaonable rl1k to human health or the environment. For over I decade, fed.,.I authorltlH reeponalble for regulating chemlcal1 have given primary attention to the potential carcinogenic, mutagenlc and t .. togenlc effect of pestlckln and toxic 1ubatance1. Although concern regarding neurotoxlc effects w.. frequently mentlonod, In moat ca-they were of eecondary Importance. With ltNdy advances In the science of neurotoxlcology and corresponding lmprovementa In the ability to understand and to teat reliably for the neurotoxlc effects of chemical expoaurn, the adverse effectl that 1 substance may have on the nervous 1yatem hive become of lncrNslng lnterut and Importance In regulatory decl1lon making. In order to gauge the economic 1lgnlflcanc of requlrementa for wldw appllcatlon of neurotoxlclty tntlng, this section dlacu-flctcn that determine the coata of utlllzlng animal tHt1 to characterize the neurotoxlc propertlN of chemical and drugs. Eatlmatn obtained by thl1 atudy of the coeta of conducting certain neurotoxlclty teats are then prnented. Flnally, the Incremental etfecta that the coat of neurotoxlclty tntlng will have on total re-rch and development colts for new chemical technologln 1111 dlacu1Md. 37

PAGE 42

Anal Draft (41211.11) Do Not Quote, Cite, or Reproduce 3.1 PfllnDlnam, of 1bt COfll of Ntyrptoxlcfty Intl htlmatN of the COltl of conducting animal toxicity tNtlng with neurologlcal ftllUltlona vary grNtly from laboratory to laboratory. For example, the hlghnt and lowlll NtlmatN obtained from the _..,,., conductld by thll ltUdy differ from two to tw91w-fold for the me tNt battery. Many flctora contribute to thm wide coat varlatlonl among labcntorlN. Th-tactora can be placed Into two categortee: IClfolHlc, or dlfflranca In protocol requlrementa, laborltory personnel, faclllllN, ate.; and flQlnclal, or dltferencn In laboratory com, ratee and fw. 3. 1.1 SclfntHlc PfllrnJlnanll n.. .,. tlve main typee of IClentltlc COMldntlona that datermlne the COltl of neuroloxlclty telling. Thw .,.: (a) protocol raqunmenta, (b) quality ...,.nee, (c) peraonnel, (d) laboratory capabllltlN, and (e) laboratory automation. Each of 111w II dlaculNd below. Prqlocol A,aunm,nta.-The raqulrefflentl of the tnt protocol .,. the 1lngl1 fflOII Important factor In Mlllllnln -iiilillllllilil the COltl of toxicity tNtlng. Animal tNtl may be conducted to Identify the ad,,... ttflCtl of acute upoe&na or to dernonataate the effectl of chronic exposures. Thtwo tllll reprwnt the oppoelle enda of the spectrum In tlnM of amount of time raqulred tor tctltlng. The farmer II uaually completed within one month; the latt may require up to two ,_,. of anlmal doalng and obWvatlon. BecaUH of the tNI time dlflertncn alone, direct labor com for a chronic veraua an acute toxicity tnt may differ by much a factor of 40. After duration of upoaure, route of upoaure 11 the next moat Important ..... In .,111111n_m111mmmrnma11 te1t coat dltfnncll. ........ of rellltlve .... of dON admlnlltratlon, oral apoaur9 via gavage II INlt coatty followed by oral fNdlng, damal, and lnhalatlon apoaurea. Dtm11I and Inhalation expo1ur11 require peolll preperatlonl and equipment to admlnllter dow. Inhalation also 31

PAGE 43

Flnal Draft (4/21/N) Do NOi Quote, Cite, or Reproduce ........ epeclll monitoring equipment to ......... the concentration of the tell ., .. ,.. In the air brllthed by the animals. Allhough the EPA hll promulgated toxicity tNt guldlllnN fliPA, 1IIIJBI1R 1111111, thw prolOColl .,. not rigid reclpee for conducting toxicity 1NtL Thn II COlllld.,.ble flmclblllly that permltl the chernlcal manufacturenl to CMd EPA requhlnenta (e.g., an lncrNNd numblr ot dOIII groupe or anlmlll per group) or to 11111 addlllonll t8lllng bald on prevloue experience and tell flndlnge. 9eWY Apagna.aua11y ...... ,... (QA) affecla the COiia of tox1c11y teltlng In proportion to the acanc, and praclllon of the m.....,.. reqund by the prolOcol.. To achlew ...-accancy, men lffort le needed In conlrollng for contamination or other flckn that may bin To achltw grNtlr praclllon, men .nort II needed In making dupllcate mNIUl'lffNNlla and analyw. Federal Good Laboratory Practice (OLP) guldellnel and regulltlona ._, RIIIINt hive, for the fflOII part, required llborltortn to .... bllltl ln-houN QA unit&. The numbar of pnonnel In theN unb varl by laboratory. Some llboratorlel do not hive full-time QA pereonntl and rely on outalde coneunanta or pert-time peraonnet whON COltl may be lower. LaboratortN with large QA unlta '*'"" functlonl WIii beyond the ballc tNt requ"""""-and their COltl u..ally are much hlghll'. Quality auurance pnonnel perform protocol evaluatlone, ,...,.1 laboratory I~ evaluation of technical procedurea, vertflcatlon of raw data, Int.em and final report audb, and verttlcatlon of the flnal report. Varlancee In the time reqund for theN procedane .,. affected by the degrtt of automation at the laboratory, the degrN of report lllndanHzatlon and computerization, the amount of data audited, which may range from ten to 100 percent. and the experience and tfflclency of the QA pnonnel. 31

PAGE 44

Final Draft (4121111) Do Not Quote, Cite, or Reproduce P-,ono,1.-The levels of profealonal and technical upertlN required for a lpeoltlc toxicity tell can algnlflclntly Influence the protocol coat, particularly In the lhorter-term atudl-. The levlla of education and experience required may be tpeCltled by the protocol, fednl regulatory requlrementa, or general conMnaua, any of which wlll mull In protoool COtlt variation. Small laboratorlN may have only Umltld .,_.onnel available for performing the tNtlng (I.e., unlor level IClenlletl may be performing proceclur11 which would normally bl done by technlclln1). The COit of thw dltfentnt levt11 of .,..onnel can vary conald .. bly. Labogtgry Capabllffln.-Cost varlabllfty may be due to the available mix of capabllltlll within a laboratory. Many laboratorlN wlll not perform ln-hoUN the full complement of required teat tunctlona, I.e., analytical chemlatry or electron mlcropey taaka, and muat UN a consultant or eubcontractor. LaboratorlN which ulllla coneultantl 91' eubcontractors to perform thfunction, lncreau coat by lddlng glMflll and admlnlatrltlve ,-. Laboratorln which have atenalve ln lncw great overhe: ii burdene. Labogtgry Autpfflltlon.-Laboratory lnatrumentatlon and other equipment may be automated. Thn are major cost dlflIIICN between manual data collectlon rnelhoda and the UH of highly eophlltlcated, o~lne computer ey1t1m1 that capture data electronically. Automation 1110 affects faclllty and animal monitoring coeta. ExamplN lnclucttlij automatic control, monitoring and recording of envlronmtntal condition within the laborat'Yd and computerized data atatlon1 tor I animal body weights, food conaumptlon, and cllnlcal obHrvltlon1. 40

PAGE 45

Final Draft (4121/81) Do Not Quote, Cite, or Reproduce 3.1.2 FIQIQClal Dflennlnants There are four typet of flnanclal facton that Influence varlablllty In laboratory com: (a) oVlrhNd ratn; (b) general and administrative ratn; (c) ,_; and (d) labor ratN. OmbNd Rat& Overhd cOlta are the indirect expen1uch rent, heating, llghtlng, equipment, computer services, telephone, ln1urance, reproduction, and Olh experlN9 auoclated with the overall operation of I laboratory. Overhd coats are usually computed percentage fl1II the ovlrhNd rate -of the total direct labor costa. OverhNd ndN vary algnlflcantly among laboratorl11 for numoua rueona. Geographical location can affect overhud rate through variation In utlllty c09tlri rentl 111llter land INNlfj conatructlon cost9rl property tu, .,.stat RIEJ _Ill_ corporate Income tu.. The number of years tMj commercial laboratory haa been In bualn-may Influence the overhud rate. Newer firm typically have a 1maller work force (very few of which are supported on overhNd), a large capital lnvatment In new equipment, and sizeable expen111 In order to generate new bu1lnN1. Older, well eatabll1hed firms u1ually support a significant portion of employ... on overhNd, off a better fringe beneffl package, and purcha1e more up to date Instrumentation. The overall capabllHln offered by a laboratory also affect the overhead rate. Th more varied they are, the more equipment and personnel are required. On the oth hand, labonltorlH -Jfth more llmlted capabllltlN muat utlllze con1ultant1 and 1ubcontractora to perform certain t-may be in apen1lv1. Aton Ind Admlnlatratlve Ratg. General and admlnlatratlve COltl represent the ularlN of admlnlltrltlve and 1upport personnel who do not engage In the ltudy, but whou functions are 11Hntlal to the operation of the laboratory. 41

PAGE 46

Flnal Draft (4128/89) Do Not Quota, en,, or Reproduce Exampl11 of general and admlnlatratlve functions Include management, personnel, accounting, contracts, marketing, and legal counsel. In general, commercial laboratorlH have general and administrative rates range from five to 25 percent. The more Ntabllshed laboratories tend to have a higher general and administrative ratn becauae of higher ratios of support to nonsupport personnel. flll. F ... refer to the profit expected from a study. Due to th& confldentlal nature of thla type of Information, ft Is dlfflcult to obtain estimates of freceived by commercial laboratories, but they NA w,v fFafive to 40 percent. The wide range In profit rates may reflect an Individual laboratory's marketing atrategy and the volume of studies being performed. If the tasting volume Is low, lower fees may be used to attract new business. To encourage volume testing, many laboratories will also offer discounted prices for muttlple testing packages. Th ... -may be slgnlflcantly lower than the sum of the pFIN16JI of the lndlvldual tests Furthermore, acute toxicity protocols are often bid at or below actual cost In order to encourage future business. Labor Ratp.The labor rates will vary substantially from one laboratory to anoth according to the mix (e.g., salary rates for more quallfled personnel vs. thOH for,_ productive or skilled personnel) of lndlvlduale required to conduct a peclflc tat. Variance also exists among laboratorl11 In average salary rate, for 1lmllar types of technical po1ftlons due to regional economic condition. 3.2 Cost Estlmat11 for Neurotoxlclty Testing A ravulad above, there 11 considerable varlabllfty In the coltl of utlllzlng animal tllta to characterize chemical toxicity. Because experience with neurotoxlcfty teetlng, In particular, 11 stlll relatively llmlted, there are even greater 42

PAGE 47

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce uncertalntln regarding available colt astlmatn for conducting thl1 type of tatting. Recently, In 1upport of the TSCA Test Guldellnes Program, EPA (11811)l1IMJ. published cost eetlmata for several toxicity testing protocols that Include various neurological evaluations. Th11e estlmat11 were constructed by a senior toxlcologllt who 11 experienced In managing contract laboratory operations for toxicity tNtlng. BecauN of the uncertainty regarding the repreNntatlvenan of 1 decided as part of this study to obtain Independent estimates of the costs of neurotoxlclty testing from a number of experienced laboratories. 3.2.1 Method for Obtaining Cost Estimates To obtain eltlmat of the costs of neurotoxlcfty testing, a survey was conducted among r-rchara In Industrial, government and contract laboratories. lncHvlduals who were 1urveyad were selected because of their experience in neurotoxlclty tNtlng and .Di! because of the type of laboratory In which they work. Because the potential pool of survey lndlvlduals was quite small, It was not poalble to obtain enough lndlvlduals to repr-nt alia1111M1l,ffffjj--Jlt --uch of the three laborat settln a. .. ..... .. ory g The chief purpoae of the survey wa1 to obtain a batter underatandlng of the range of com for utlllzlng animal tests to characterize neurotoxlclty. Toward this and, a quettlonnaire wa1 prepared to obtain cost eltlmates for acute, subchronic and chronic toxicity test protocols that 1,e a1111111Atell te Include various neurological evaluations. (The aclentlflc objectives of these teats are summarized In Box 8-E.) Fer -111,11, fuRllleMI ellea,,,..len, Mater INltta,r 1111,MJ 1RII RIUFl(lellllllllNI l'AIIU8118RI IFI 11111111 tefrailli! ... tlf.l;-acut~ IUbchronlc and Chronic toxicity teats nr:#UUfOl1Glial mlf.llB-Duration and route of exposure were also specified for each protocol. The protocols for which cost estimates 43

PAGE 48

Final Draft (4128/89) Do Not Quote, Cite, or Reproduce were aollclted are indicated In Table 8-2. To aullt rnpondents In estimating costs, each questionnaire was accompanied by an abridged protocol description for the relevant combination of toxlcHy test and neurotoxiclty evaluations. These abridged protocol were developed from aectlon1 of the Toxic Substances Control Act teat guideline for acute, subchronic and chronic exposure toxicity testing and tor neurotoxlclty tNtlng E&PA, 1011Jlrlll.l. ... Ill-Coples of th-guklellnes were alao Included In the questionnaire package for reference purpo-. Appendix A contains a questionnaire and the accompanying abridged protocol deacrlptlon for one of the protocol. In addition to total colts for each protocol, respondents we aeked to provide 11parata astlmatN of the Incremental costs for each of the neurological teata. The purpose here was to a11Hs how much each of the lndlvldual neurotoxlclty test screens would contribute to total teat costs and whether a neurotoxlclty test requirement would lead to a substantial Increase In total testing costs. This Information Is not available In the EPA (111i1~8IIIJ estlmatn. From all Indications, respondents had little difficulty In underatandlng the quNtlonnalre. In many ca1N, they provided total and Incremental coat eetlmat11 for the tests and neurological evaluations which they are currently conducting In their laboratories. Consequently, non-response was greatest for the 1811 frequently conducted protocols and evaluations such as the chronic toxicity study and the schldule-controlled operant behavior evaluation. 3.2.2 AHuft1 The rang11 In the reported costs for conducting animal toxicity tests combined with neurotoxlclty evaluations are preaented In Table 8.3. Thne are the highest and lowest cost estimates for the lr~dlcated toxicity tests and the highest and lowNt Incremental cost estimates for the different neurotoxlctty evaluations: functional observational battery (FOB), motor activity (MA)i. IINlllneuropathology 44

PAGE 49

Flnal Draft ( 4/28/89) Do Not Quote, Cite, or Reproduce The rank order of the estimates conforms to prior expectatlon1. Acute toxicity test cost estlmat are lower than th011 for repeated doae studlae. Cost estlrnatee for tests using the oral route of expoaure are lowerthan tho using the Inhalation route. --The relative size of th-ranges gives an Indication of relatlve experience and, COITllpondlngly, confidence respondents have In conducting and costing-out tollclty tNta and the neurological components. The ratios of the hlgheat to lowest Nllrnata fall In a narrower range (2.8 to 5.8) for acute, subchronlc and chronic exposure tests than for any of the neurotoxlclty tests: FO&aal'fl_f __ 11111 (11.3 to 22.8), nr,Aor activity (4.il'J to 10.3), and neuropathology (al em to 13.3). Using the me loglc, It appeara respondents have considerably more famlllartty with the motor activity test than In administering the functional oblervatlonal battery or In conducting neuropathology Investigations. Median coat estlmat11 for Nch of the base test protocols and IIIRellW neurological evaluatlone are presented In Table 8.4. Becau11 this kind of survey Is likely to yleld outllars at both the high and low ends of distribution, the median la the pret ... ble estimate of central tendency. The median Htlmatea Indicate that A111F81Hlelly 1aa11n1 la.If.ti. may add from aolt to aeo,JI percent to the costs of conventional toxicity testing. arJ1l111tl1Re, The added cost Impact 11 highest for the acute teat protocols. 45

PAGE 50



PAGE 51

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce Table 8-2 Pllllocols For Which Cost Elllnlldea W818 Solcled Toxicity Test Neurological Evaluations Protocol Functional Motor Neuro-ScheduleObservatlonlf Activity pathology Controlled Battery Operant Behavior Acute Inhalation X X X Acute Oral X X X Subchronlc Inhalation X X X Subchronlc Inhalation X X Subchronlc Oral X X X Chronic Oral X X X 48

PAGE 52

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce Table 8.3 Ellllmated Coll Range for Animal Toxicity T .... Combined with Neurotoxlclty Evaluations ($1,000) Toxlcfty Test (Base Cost) Neurotoxlclty Evaluations (Incremental Costs) Schedule, Protocol Base Funcllonal Controlled Study Observational Motor NeuroOperant Battery Activity pathology Behavior Acute $ 8.8 -47.2 $1.1 -21.3 $1.2 12.3 $ 4.7 -187.8 Inhalation Acute $ 8.9 -39.7 $1.1 -21.3 $1.2 -11.3 $ 4.7 -179.8 Oral Subchronlc $ 99. 1 391.0 $2.9 -32.9 $2.1 -11.8 $ 8.2 -328.9 Inhalation Subchronlc $ 69.5 -183.0 $2.7 32.9 $2.1 11.8 $ 8.2 -271.5 Oral Subchronlc $ 69.5 -183.0 N/A N/A $ 8.2 -271.5 $11.0 80.3 Oral Chronic $234.0 -783.9 $3.8 -85.8 $4.8 -38.2 $11.3 -802.0 47

PAGE 53

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce Table L4 lledlln Colt Elllmatel tor Animal Toxlclly TNla Combined Wllh Neunlloxlcly Evalultlane ($1,000) Protocol Acute Inhalation Acute Oral Subchronlc Inhalation Subchronlc Oral Subchronlc Oral Chronic Toxicity Teat (Ba Coll) Bal8 Study $ 28.8(7) $ 21.2(7) $190.8(7) $111.0(7) $109.8(6) ~0(8) Functlonal Oblervatlonal Motor Battery Activity $ 2.5(5) $ 4.5(8) $ 2.4(5) $ 4.4(8) $ 4.8(5) $ 4.7(8) $ 4.8(5) $ 4.7(8) $12.5(5) $11.8(8) Neuroto=. Evaluations (Inc,.. ...... Colla) Neuro pathology $42.0(5) $42.0(5) $42.0(5) $29.7(5) $41.7(4) $51.7(5) $14.1(5) Median Total IIICl'IHlllnt $ 49.1(5f $ 48.9(5) $ 79.1(5) $ 79.1(5) $ 87.0(4) $113.2(4) Number of oblervatlon1 lhown In parenthNla. .. BecauN of Incomplete raaponan, columns do not aum to total. il'ICIWINNII Percent of Ba 188 235 42 72 71 37 48

PAGE 54

Flnal Draft (4121/11) Do Not Quote, Cite, or Reproduce Finally, Table 1.1 comparn median coat lltlmatN obtained by thla atucly with the EPA (11111tlrll!I.IID NtlmatN for Identical protocol1 The compartaona Indicate the EPA Ntlrnatn are conaldnbly lower-from oMihalf to -c11IHiliill!lhlNI than the Nllmat obtained for thll ltUdy. Although the EPA lltlmatN were developed approximately I month, prior to thla atudy, the 1-Inflation rate of 4 to I percent during thla period cannot account for the dltf .. nCH of thla magnitude. 41

PAGE 55



PAGE 56

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce Table 1.5 Rllllo of Survey Ellimltes to EPA Ellimlles for ToJdcly T .... Combined WIii Functional Ballery, llotor Actlvily and Neuropathology Evaluations Protocol Acute Inhalation Acute Oral (diet) Subchronlc Inhalation Subchronlc Oral (diet) Coat Ratio (Median/EPA Beat) 3.81 3.43 1.95 2.12 50

PAGE 57

c; Final Draft (4/28/89) Do Not Quote, cne, or Reproduce 3.3 Neurotoxlclty Test Costa and Innovation ~~~1=--.. '-0~19~:-..,.s::~,J:f.'-t~~t::-M ffleffl-.f.f.!.::::M! ~-:-.a~~~~ri :i:M~ .-.. fX-:..~~J.m::~:ffl .. l rallff?Zw--.;,,:.: ... .;,,:.,.; .. ,, ... ,: ... ~w .,w~~*r.-.~--=-ir=~~--:ara:a ..... ... ~,: ...... liol ........... ~. ......... .... .. ..... l'-. ...... ; ffl~:-.... .. ffl, .... i-.:--~!:~!:fi:J.B:.,!IM..=;,: .... : .. ?.'~1 .... ... ... ........... o;,.. and Pesticide DeveU,pment There are many slmllarHles In the proceaa of developing new drug and pestlcldn. The key flctora governing the pattern of Innovation In theae lnduatrle1 are the high costs and long development tlmea experienced from the time of dlacovery of a new compound to it1 commerclallzatlon. Thouund1 of new compounds are acreened for each new pesticide and drug that 11 eventually marketed. Approximately 1 o years may elapse from discovery to first reglatratlon (NAS, 1987; PMA, 1988). The pharmaceutical Industry estimates that It currently costs well over $100 million to develop, test and bring to market a new drug product (Wiggins, 1987). The pesticide Industry estimates development coats for a new pesticide aNjJ. about 125 million and another $25 to $80 mllllon being required for build and equip production facllltlea. (Aapelln, 1989). 21 Agrlchemlcal and pharmaceutical companlea spend from 9 to 15 percent of ulae revenue on R&D (NAS, 1987; PMA, 1988). Most R&D In pesticide and pharmaceutical companies Is Internally financed and conducted In order to protect the proprietary status of new Innovations. The dlaadvantage of this practice Is that uncertainties Imposed by the regulatory proceaa, either as delays In the Introduction of new products or 11 unexpected llmltatlons or bans on the sale of theee products, may reduce the return on Industry's Investments In research. 51

PAGE 58

Final Draft (4/28/88) Do Not Quote, Cite, or Reproduce The high com and long time from discovery to commerclallzatlon forces the development proceN for new pesticides and drugs toward those applications that are likely to have very high retums. Only a relatively srnall number of markets are large enough to make It economically worthwhile for firms to develop these products. Consequently, pesticides ar-, developed and lnltlally registered for major usH, for example major crops such as com or soybeans. Subsequently, they are tested for UH on minor crops. However, a company cannot afford to develop a pesticide for uN on a minor crop. The actual discovery of a new drug entity-a new chemical wtth therapeutic potential 11 Just the first step In a lengthy process of research and development. The discovery phase of the process consists of chemical synthesis and animal testing to establish a compound's toxicology and pharmacology. The development phase encompascllnlcal testing to assess potential toxic affects In healthy humans and, subsequently, to establish In patients the therapeutic efficacy of a new drug candidate. tbe map ID Jbt rroreee faal111lin1 PP oxlmate llmaa &lid colll ,., :1 pl:laee 1111 1u111111arlnd 111 Figure a 1, rill Feie ef fiDA IA 1pp,er.1IR1 a1111Hlle111 fl'a111 dru1 1111R11faatu,e,e ta p,eaee.a threugh eaeh 11h11e 111, ........ IR Chapter everal other studies have estimated the research and evalopment costs In bringing a new d to market. 22 The cost estlm es presented In Figure by Hansen (1979). study Is of particular I est because of the q llty of his data and the appro ch taken In estimating the pportunity cost of rea obtained survey ta on reaearch and de lopment expenditures for a new drugs lntroduc the distribution of expenditures over 8For a recant review of these studies sea Hutt (1982). 52

PAGE 59

Final Draft (4128189) Do Not Quote, Cite, or Reproduce of the date of marketing approval. The present value 11 of the date market Introduction of the accumulated stream of research and development costs reprasant1 the opportunity costs of these Investments to the firm. Hansen estimated the average cost of bringing forth a new drug to be $54 mllllon (capitalized at 8 percent and In 1978 dollars), Including the cost of capital. In addttlon he found that costs Incurred in the discovery phase were comparable to costs Incurred In the development phase. .,..... :r1;a--nwt .. 1.1111~;w1 .. ~w1a,11181 ,,a,,' ----~~~ \ ~~L~.::.:: :: SH, ..... ...... ..~ ;:::.J.11'.'.'. ,A'1flffl,~ --:-:,w,V.:.~~~6tiit;M"~-~w.v.~--.. v .... _. -~---: .................................. ;~:0.JQJ..;:;:R~~~ ... .. -.,. .. _t .. {$.~'-1-.~~1 .. ~.,, w .-. ., :;~$,.~ .,_.,,.,::,v,. .-.....-......... :~f::,,,,,. ----w _____ J.fintw. iliifl(~-?:WJl--~-M1~(:--~-~~1aii .............. -~ ... :::~-......... 1v :::w.::::::.: ...................... -~.............. ."?.-.... F,, -~~B,..,M~-= .-: .~ .:-..:t:s.cc ..... == ....... ~'l':f.f.qf.:::. ~. : ... .. . u.~~,., .. ,,, ~,, .. .............. ,, .. ~-r~=: :=~=~a-:~ '="-~ .. ... ......... =:::::f.::: n 53

PAGE 60

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce Flgan 1-1 OIUG DmtoMNT nr THE UtmED Sr,m ----Phues: ChemkaJ Lab. ----Tmlf required l (mtnimlm) IND (1962) NOA (1931) PrecBmca1 ~----Cl1nial----....J I i lND NDA NDA HIJq Sahmiaiml Appronl l 1ND Phase I ND4 Pbut Marketing ~!'!'1 .... j ,-1 pl111111 pllut I .... (-, : I J I J I 3 (cat.) .I C 1 T J T-1os, .....__....__. ____ __________ .._. ___ Jyn (?} Hyn 2-3yn Attdtica 10,ooo(ij 1,ooo(~ 10 S 1 Cost ($1"6)-:.-----1---~ 1 J ., I Awrap elective patent life (from NDA approval date) 1966 D.a yn. 1919 9.5,n, Source: Wardall (1973). 54

PAGE 61

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce A ............. f\fll99IRe, 1881~ af AIW drw1e ra1i1ed llatweeR 18:f'O IRII 188& -11111e!IS~_......... ;u;:~till~MK.-:llfflll.l. ml!M:-itiff!!'~~~--.:.... the total research -.,.RIR-11M41-~-~:.,:-........ Jffl::~.~ ..... .... .~ -..~ nllll:mt!ll---~;~~~M-:11 and development coat for an approved new drug Is e1a1 Mllll1n In 1881 ll1IIIF1 =" 111J1j~:~~l11R = l. :,:. .. ... .... ~,, ............ .:-................ -;,, Uke the Hansen study, this new analysis evaluates the opportunity coats of lnveatment1 for drug research and development over the t;me period that elapses before a drug can be marketed. According to the Pharmaceutical Manufacturers Association (1988), for whom this study was commissioned, the Increasing costs of developing new drugs la due In part to an Increasing focus on therapies for chronic conditions. The development of drugs of this kind require more extensive testing. 3.3.2 Neurotoxlclty Tests and Innovation f,1Qlil@Wlffllllf4 The above discussion of the processes for developing drugs, pesticides and chemicals provides a framework within which the Innovation Impacts of conducting animal teats for neurotoxlclty may be assessed. The Impacts of tasting on Innovation depend on overall test costs, duration of the teats and the timing (scheduling) of the tests within the innovation period. One posslblllty would be for the animal toxicity tests with combined neurological evaluations to take place during the pre-clinical and pre-field testing phases for drug and pesticide development, respec;tlvely. In this scenario, the addHlonal costs of testing for neurotoxlclty would occur during the second or third years of a 1 o year developmental period. If neurotoxlclty test protocols are totally Incompatible wHh other concurrent animal toxicity testing, then the additional costs of obtaining neurotoxlcHy data would be the capHallzed value of the full test costs at the expected date of marketing approval. The expected date of marketing approval 11 7 to 8 years In the future. At the assumed 1 o percent rate of Interest, the capltallzed value of 190,000-tha median cost estimate for subchronlc oral toxicity test wHh functional 55

PAGE 62

Flnal Draft ( 4/28/89) Do Not Quote, cne, or Reproduce obHl'Vltlon, motor activity and neuropathology evaluatlone-ls from $370,000 to $430,000. The capitalized value of $420,000-the median coat estimate for chronic oral toxicity testing with the same neurological evaluatlone-ls from $820,000 to $900,000. Thamounts are essentlally very small (lea than one percent) when compared to current estimates of total capHallzed coats of developing a new drug or pesticide. A second posalblllty would be for neurotoxlclty test data to be requested at the very end of the drug or pesticide development proceaa. In thia Instance, timing of the teats Is of much greater importance than their costs. Testing that, for example, extends the Innovation period by one year at the end of the development period has an associated opportunity cost that Is equal to the Interest on the total cumulative R&D Investment. For drugs and pesticides, the costs of delaying marketing approval at this point In time clearly ove~hadowa any outlays required to conduct the tests. ~:=-~ :=:~:~m~:::~;~=--~ : .... .... ., ... ~i.,=~1~==:~:a::==-~~~ !J.:W.ff.:~r: ............. :~:~:~,~~-Mn~:-::~ _.. ~..... Ml:W.U .. f.J.ffl~~:.r:::::W:9M-: -1:: ---Mil-~1111181 11.aMJ11b ~al11i111. il'.iWlrMaMlrr Yo. '#Ump~~. ,)('. = .~ :W~Y~e::]B.lillll~lllti1l1ll.i.iiN.Mflli --.-tfl.1~naa:-1ra1i:1afl.m:~r11.1 ffWtilB-lilil~!#.llfiamf-li~--IJiliH._~~iiliWlii1ili.~Mti ....... .i"--~,-~ff.~~iif.f-~~ ~,--r~ ... ~-~,...__,.,., .... _,_.1 W=imi~=~r.amrura ~-.w.~1:!ft-w. ~,,..f.~J:=~n ......... : ..... 11 .*"'=...~.-.: ...... :~'..~=~;,fl .. .':B..::~"..}.ili ... ~. ,~=.ff'.'A.~~..~=.~.=:=.=.::~.,:.~: .. ~.~.:>:::::>:::-.; ~-; ?.. ...... :.. ,,:,,, : ;Jilt'alt.::~~;,:lif.l~l:lil\:a:~iii:*~~:l:l:f:'::: !!:ffl_._:o .. ... ~-,:; ~--~ -r.--n.:-)ltffl'-lt:~!: ...... ~w;.::::-.M!~J.:::::::K, -t.~mt.ra~~in~m11J-1
PAGE 63

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce :~1~-~--=Mt,.-...... -~ .... N ...... lfla ... ~-1--~~~iiit~--' w,:-.. :iitf.'~~-:~r~~--l~-~-:;mm f.::lffl'-'9 ..... ~.............. .... "'\., ... 'i! ....... ~,,, .,,., ....... ,.,-::::111 ,,, ........ u ..... ....... V 57

PAGE 64

Final Draft (4/28/89) "'.. ~ ........... .... .:...... Do Not Quote, Cite, or Reproduce -----BIIBIJ-11-~~~.. --.................................... ::-.n1 -=._ ... ,.. ...... :, ....... _. ...... ,a:M .. IIIIW: ........ .............. I 58

PAGE 65

Flnal Draft (4128/81) Do Not Quote, Cite, or Reproduce 4. ECONOMIC BENEFITS OF REGULATING NEUROTOXIC SUBSTANCES This aectlon dlacuuas the problem of evaluating In economic term, the beneflbt gf regulating naurotoxlc substancu. Toward this and, It la Important to dlltlngulah betwNn the adverse effecta of neurotoxlc subatancn and the benefit, of reducing or preventing these adverN effects. The adverN effect of neurotoxlc 1ub1tanc are exprauad as lmpacta on human health and the envtronmem and are mured In term, of mortality, morbidity, dlublllty ratn and anvlronmental damagM. Because th-1ubstancn may also effect mental ltatus, the efftct1 on human hlth muat be expanded to Include memory, cognitive and other Intellectual deficits that may be allOClated with exposures to neurotoxlc 1ub1tancn. Reducing or preventing the risks of exposure to neurotoxlc 1ubatancn mun, nlduclng the magnitude of th-adverse affects. The human and monetary value, that are placed on reductions In the risks of naurotoxlcity conltltute I maure of the beneflta of regulation. In the economics of health and uflty, number of approachaa have bean used to a~n monetary values to reduction In the rl1k1 of mortality, morbidity and dlu~illty. Th-approachn have been broadly categorized valuation through adjudication, Oury awards), polltlcal procenu, lndlvtdual preferencn, and rnource or opportunity coat,. Valuation through rnourcH or opportunity colts will be dl1cuuad here. The following HCtlon discusthe step, that are involved In estimating the benefit of reducing the rl1k1 of neurotoxlclty. Subsequent section, discuss recent ltudln that have ntlmatld the hlth cost, ....r treating the elderly for dementia and ..,..,. treating cognitive deficits due to exc-lve lud expo1ure In children. Th-ltudle, 11111~1 11111 11111 el 111111 11 lllle 1HN1,1RI ty9111 al tlNIIII 11re atvaluatlon according to lndlvldual preferencn or ''Wllllngneato-paf 11 frequently cited by tconomlata the moat appropriate me11ure of the value of reducing the rl1k1 of advarae hlth eflact1 (Freeman, 1979). 51

PAGE 66

Flnal Draft (4121/11) Do Not Quote, Cite, or Reproduce 11111111111 111 .....,n, 1111.-111 1nll lll1eNI,,. 11 v.tlll1h urae R1u,etII 1u11 1111, 1111111111111, 'RI el11IIINllluatrat1 the analytlclJ problems of utlllzlng ............ thl ....... IINllh ..... IIINIIIPII -~lllUIEJ.11 the economic blneffll of controlling the risks of :; : 1\:~ ~~-,;;::_ .. ; .. _,:"1,'f:'",( .... :-....... .. -:. .. ....... neurotoxlclty. Flnally, the hNlth care coat lltlmatn ---UIn th8H ltudlN provide a baala for ll1'41la11lnlliJJJjjj very 11111;-tld.t .,, .,.,.., ... .,.... < .-.-:, .,. lltlmata of the IINIIII 11111 RIUPMINll~J.-' ,/ I : 4.1 Knowtfda Reaulrementa to Estimate Benefit With the exception of INd, It II cumtntly not poulbll ,. IWIIIWJltii begin to ll1r:111111 11111111111 the economic benafltl of regulating 1peclflc neurotoxlc tubltanca. The chief reaaon for thl1 lnablllty 11 not a lack of Information on the com of treating neurotoxlc dllOl'dera, but rather It 11 a lack of undll'ltandlng of how exposures to specific neurotoxlc subatancn produce dlublllty, morbidity and mortality in humans. To estimate the benefltl of pollcl to reduce or prevent neurotoxlc rl1k1 requlrN knowledge and quantification of several functional relatlon1hlp1. These are: 1. Relatlonlhlpe betwffn economic actlvltln and the rat of uee and, hence, the ratn of dl1poul of neurotoxlc 1ub1tance1 Into the environment; 2. Relatlonlhlpa betwffn the environmental fate and transport mechanisms that IIAC! :ftfi~~=~--~>,~ut=aii-1::::lil~::: I -~-Q~1~ ......... .. ,.~~~a human upoaurn to th-1ub8tlncn; 3. Relatlonahl betwffn the actlvttln of lndlvldual1 rtmlWillldl"::: Pl ............................... and the ratn of human Intake, 1,1,, 1atlRl1 wafklng, r1l11, of theN aubatancn; 80

PAGE 67

Final Draft (4/28/19) Do Not Quote, Cite, or Reproduce 4. fJiologlcal mechanl1m1 by which th-1ubstancH cauN dl1u11 In human,; and 5. Relatlon1hlp1 between changea In hutth atatua and ffll utlllzatlon of hutth care. 81

PAGE 68



PAGE 69

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce F1gln L2 Knowledge Requnmenla to Elllmlte the Healh Benellls of Reducing Neuraloxlc Rllb Economic Ambient BodJ Activity Emlaalona Levell 0amaae1 Benefits Bu ens Production, Tons of lead, p./m1 of lead, c/dl of lead Thouund1 of Dollar value distribution pounds of = organon blood, lndlvldual1 of reductlonl and use of organo-oaphates, metabolites with elevated In mortality, neurotoxlc phosphates, etc. In air, of organoblood lead morbidity, substances. etc. emitted, water, food, ,:o:.tes levels, dlaablllty i.i disposed. aoll. u ne, etc. hoapltallzatlons for pesticide poisoning, etc. 82

PAGE 70

Fina I Draft ( 4/28/89) Do Not Quote, Cite, or Reproduce Of thne relatlonehlpe, which are Illustrated In Figure 8-2, only the first and lalt are basically-although not exclusively-In the realm of economics. The Intervening relatlonehlps represent the Interface between science and economics. In partlcular, th Intervening relatlonshlps are the substance of risk a11e11ment1 of exposures to neurotoxlc substances. The fact that expo1ur11 to neurotoxlc substances present more and varied forms of health effects than say exposures to carcinogens Is an Important dlltlnctlon that poses major analytical dlfflcultles In risk a11e11ment and beneffla analysis of neurotoxlclty. In contrast to carcinogenicity, which can be usually characterized as a single outcome wtth discrete measures of health status, I.e., disease present or not, neurotoxlclty Is often manifested 11 multiple effecteach of which produces a continuum of health states ranging from mlld to extremely Hvere. The variety of ::,, :-:. ,,~ ....... .,... ... ;.: ,.WMJ.li effects a11oclated .. ,. "" '-""' .. ..'I 'II ., !'. .. '. wHh occupatlonal exposur11 to various chemicals listed In Table a-e Illustrates this point. 83

PAGE 71

Fina I Draft ( 4/28/89) Do Not Quote, Cite, or Reproduce Table a-e Effects of Occupational Chemicals on the Nervous Systenf Effect Agent Peripheral Nervous System Comments Motor neuropaihy Lead Mixed 11naorlAcrylamlde motor neuropathy Arsenic Carbon dlsulflde Carbon monoxide DDT Wrist extensors (drop rare) Ataxia, hand and sole desquamatlon, palm sweating Distal parestheslas, painful llmba, aMI, foot hyperpathla, leg weakness MIid (CNS effects more Important) Only after severe Intoxication N-hexane, methel n-butyl ketone, Mercury (esp. alkyl) Only seen with Ingestion Distal paresthesla1, motor weaknesa, weight loss, fatigue, cramps Distal sensory Involvement Central Nervous System Effect Cranial neuropathy Bladder neuropathy Conetrlcted visual fields Impaired visual acuity Myoclonua Nystagmu1 0psoclonua Paraplegia Parkln1onl1m Seizure, Tremor Ataxic gait Impaired r.ychomotor function Carbon d sulfide, Lead, Styrene, Perchloroethylene Memory Impairment Neuraath1nla, lnitablllty, syatemlc symptoms Emotlon1I lnatablllty/psycho1l1 (acute) 'Adapted from Baker (1971) Agent Carbon disulfide, Trlchloroethylene Dlmethylaminopropionitrlle (DMAPN) Mercury n-Hexane, Mercury, Methanol Benzene hexachloride, Mercury Mercury Chlordecone Organotln compounds Carbon disulfide, Carbon monoxide, Manganese Lead, Organic mercurlal1, Organotin compounds, 0rgt.nchlorlne Insecticides Carbon dlsulflde, Chlordecona, DDT, Manganese, Mercury Acrylamlde, Chlordane, Chlordecone (Kepone), DDT, n-Hexane, Manganese, Methyl mercury Organophosphate insecticides, Mercury, Arsenic, Carbon disulfide, Lead, Manganese Acrylamlde, Arsenic, Lead, Manganese, rrtt Mercury, Methyl n-b~I ketone (MBK), Organotln compounds, Styrene Carbon dlsulflde, Manganese, Toluene (rare) 84

PAGE 72

Flnal Draft (4/28/89) Do Not Quote, Cite, or Reproduce 4.2 The Health Costs of Neurotoxlclty Aa noted above, the resource or opportunity costs of morbidity and mortality that can be attributed to neurotoxlclty provide a measure of the potential economic benefits of reducing neurotoxlc risks to human health. These opportunity costs, frequently called the social costs of illness, Include direct and Indirect costs of Illness and death. The direct costs of illness consist of the payments for hea~ care products and services utlllzed In providing needed patient care. The Indirect coats of Illness encompass the expected stream of earnings an lndlvldual loses aa a consequence of not working because of illness. Medical care costs and foregone eamlngs are estimated for each year from the onset of lllne11 to expected year of death. This time stream of costs is then discounted to present values. Estimating benefits In this manner Is known as the productivity or human capital approach. Most economists regard this approach as providing lower-bound estimates of the benefits of Improving health because there Is no attempt to measure and Include the personal dlsutlllty experienced by persons having these diseases or by their families and friends. This kind of dlsutlllty Is particularly relevant for dementia, retardation and other mental disorders to which neurotoxlcity may be a contributing factor. 4.2.1 The Health Coats of Mental Disorders and Dlseasas of the Nervous System Mental disorders and diseases of the nervous system contribute substantially to hNlth coats In the United States. In 1980 they ranked aa the third and ffMiH411flltj most expensive medical conditions In terms of personal health care expenditures (Table 8-7). The estimate of nearly $40 bllllon (1980 dollars) for these two categories of morbidity does not Include values for lost productivity, reltrlcted actlvtty and other social costs, for example, crlmln1I activity, law enforcement, and rehabllltatlon for drug and alcohol abuse, that frequently accompany mental llln111 or other forms of cognHlve and behavioral Impairment.

PAGE 73

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce Table 8-7 Pnonal Hfth Care Expendftures tor the Ten Most Expensive Medical Conditions In the Unlled StalN In 1980 (mllllons of dollars) Medical Condlton All Ages Under 85 DI- of the circulatory system $33,184 $13,078 DIof the digestive system 31,755 28,084 Mental dlsordera 20,301 14,812 ln~ury and rolsonlng 19,248 15,042 D o the nervous system and aenee organs 17,499 13,028 DI- of the resplrat:t system 17,305 13,184 DI- of the musculos elatal 1yatem and connective tissue 13,645 9,821 Neopl11ms 13,823 8,302 DI-of the gannourlnary _:iatem 13,182 10,721 E ocrlne, nutrltlonal, metabolic syatem and Immunity disorders 7,658 4,889 Source: National Center for Health Statistics {1983). 85 Years of age or over $20,D,5 5,871 5,889 4,208 4,471 4,141 3,824 5,322 2,441 2,988 ee

PAGE 74

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce 4.2.2 The Costs of Neurotoxlclty as an Element of Dementia Dementia is defined II the loss of intellectual function. It Is manifested as a complex of symptoms that can be caused by as many as 70 underlying conditions (See Table 8-8). The causes of disorders that produce the vast majority of dementia casaa are stlll not understood (OTA, 1987). Diagnosis of Alzheimer's 01-ae, for example, whose etiology is unknown, accounts for 80 to 70 percent of dementia cases. Other diagnoses include necrosis of brain ti11ue due to vascular obstruction, various Infectious diseases, tumors, alcohol, and neurotoxlclty from drugs, metals, solvents and other chemicals (Katzman, Lasker and Bernstein, 1988). Describing the costs of dementia or, for that matter, any disease, requires epldemlologlc data on the number of Individuals who acquire the disease during a specified period of time :(IIJBilil'JiililJD the characteristic UH of health care resources by those Individuals during the course of the dlsea and the unit prices of the resources consumed. Uncertainty In the estimates of the coats of dementia results from unreliable estimates of the Incidence of dementia, the distribution of that Incidence among the various causes, the time courae of the major (Alzheimer's type) forms of the disease, and the mixture of health care resources and unit prices utlllzed in treatment of the disease. Some of these uncertainties are Illuminated In the following paragraphs. Diagnostic Costa At present, there are no definitive diagnostic tests for Alzhelmer, Dlseaae and many of the other disorders causing dementia. Cllnlcally a patient presenting wtth de~entla 1ymptom1 11 given a workup consisting of phy1lcal, neurological, and psychological examinations that lncludN blood and other laboratory tests, electrocardlogram, computed tomography brain scan, and cheat X-ray. If Inconclusive, addltlonal procedures may Include electroencephalogram, lumbar puncture, and further laboratory tests. At research centers, brain scan,, brain 87

PAGE 75

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce blop1ln and other advanced diagnostic techniques may be employed. The cost estimate of diagnosis per case depends on the costs of the Individual procedures and the frequency with which they occur In an "average diagnosis. Factors that affect this estimate Include the number of times a patient must be seen for periodic reevaluations, whether diagnostic testing is done on an Inpatient or an outpatient baslai and. local medical costs. Physician, Services, Druaa and Short-Term, Acute Hospitallzatlon Costa. After diagnosis, medical management of dementia patients requires continual vtalt1 to physicians, prescription drug therapy for behavioral symptoms, mental health services and Intermittent hospital care. The costs of these services depend on the number and Intensity with which they are needed. Nursing Home and Lona-Term Mental Hospital Costs Approximately so to 60 percent of nursing home residents ---~Jliil diagnosed as "senile" or having other symptoms of dementia (Huang and Hu, 1984; Nielson and Robinson, 1984; Katzman, 1985; OTA, 1987). A smaller percentage of patients In long~1erm mental hospitals a,eflif,t~lD.ijfi slmllarly diagnosed. In 1983, national nursing home expenditures were estimated at $29.4 bllllon (Levlt, !1 !!, 1985). The proportion of these exp~ndltures directly caused by persons with dementlng llln111 is not known. Several studies (Including those reported here) of the costs of dementing illness assume that long-term care costs can be calculated by taking the proportion of nursing home patients with dementia and multlplylng by the overall costs of longlerm care. Thia approach a11umes that all long-term care costs for lndlvlduals with dementia are caused by their dementia alone. It Ignores the posalblllty that large numbers of these lndlvlduals ffli.t have other Important co-morbidities, for example, arthritis, that also require their being placed In long-term care facllltlea. 88

PAGE 76

Final Draft (4/28/89) Do Not Quote, CHe, or Reproduce Costs of Home Care The majority of long-term care for dementia Is delivered by famlll rn the homes of the dementia patients, aspecially those with only mlld or moderate Impairments (OTA, 1987). The costs of these services are very difficult to estimate. One approach to Imputing the value of this care has been to use wage rate for nurse' aides In hospitals and nursing facllHles as a measure of the opportunity cost of family members' time (Hay and Emit, 1987). To these Imputed costs must be added estimated direct costs of care provided by social service agencies for home delivered meals, aduH day care, homemaker services, transportation, etc. Net Expected Costs for an Individual The estimated costs of dementia for an Individual are the expected .!!!! direct and Indirect costs a11oclated with the disease. "Net' Indicates that these costs are ov and above normal health care costs and Income losses. la&RI lePM-~Jjjffl care coats per person are computed annually for the expected llfetlme of the patient after diagnosis. lfi.fiill costs are then discounted over that period back to the year of diagnosis. The estimates in Table 8-8 of net heaHh care coats for an Individual course of lllneu depend on: (1) ar.nual expendltur11 for normal health care; (2) annual expenditures after diagnosis of the disease: (3) degree of disability after diagnosis; (4) expected survival time after diagnosis. overall costs Although the coats of dementia to the nation can only be estimated In crude approximation, the11 coats are high and are bound to increase II the population ages. Estimates of the costa of dementia are preaented here II a ba1l1 for providing an estimate of the heatth cost, of neurotoxlctty. 81

PAGE 77

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce Table 8-8 Nel Annual Expected Coats In 1113 for an Individual with Alzhelmlr'a DINaN, Ealudlng the Coeta of Dlallb@ly and Pnlmlue Dm111 .. (IIIIMlange Elllmatas) Net Annual Ex~ed Direct Costa Dlagnoalo (One-time Only) Nursing Homea Long-term Mental Hospitals Social Service Agencies (Home Care) Short-term Acute Hospitals Physicians Services Drugs and Medlcal Supplies Travel R-rch and Training Total First Year Qncludlng Diagnostic Costs) Total Second and Later Years (Excluding Dfagnostlc Costs) Net Annual Expected Indirect Costs Famlly-Provldad Home Care Famlly Members nme Total Net Annual Expected Total Costs First Year Second and Later Years Source: Hay and Ernst {1987) S 874 5,328 322 1,774 434 418 244 187 18 9,578 8,704 8,884 258 8,939 18,517 17,843 ate.ch annual expected net cost of a service is estimated 11 the average gross cost 1119 the average costs for normally expected health care due to utlllzatlon for ailments other than Alzheimer's Dlaeaae. Average groaa costs were estimated II the unit price of the service times the estimated fraction of Alzheimer's patients using the service. 70

PAGE 78

Final Draft (4128/88) Do Not Quote, Cft, or Reproduc Two atudla (Huang and Hu, 1884; Nielson and Roblnaon, 1884) have made partial or complete ntlmatn of the costs of dementia. A third atudy (Hay and Emat, 1987) hat atlmated the coats of Alzheimer's 01-e, 1peclflcally. A dllgnoala of Alzheimer's accounta for 80 to 70 percent of dlaordera producing dementia (Table 8-8). The three 9'11111Rtla atudln estimated the heafth care coata for 111 persona diagnosed with dementia or Alzheimer's In I single yur. The Huang and Hu atudy Ntlmated the total coata of dementia at Just over $38 bllllon In 1883. Many of the lndlvldual components of this estimate w.. baaed on pilot ltudln, and projections of these components to the natlonal level are regarded as very I Imprecise (OTA, 1887). The and Robinson study estimated the total coats of dementia at from $24 to $)18 billion for ~-Hay and Emst estimated the total coltl of Alzheimer's ...... .W:i at $27.9 to t.31.2 bllllon for 111 persona find diagnosed In 1983. If It 11 assumed that Alzheimer's patients constitute, 85 percent of all dementia patlenta, these estimatH acale up to $42.9 to 141 billion for all dementia. The differences in the estlmat among the studies are due prtmartly to a11umptlons regarding the Incidence rate for dlagnoled dementia and the longevity of dementia patients after diagnoses. Katzman,!! 1l (1887}, ascertained that from two to thrAa percent of dementia patient, we dlagnoled a, having dlaorcters Involving drug toxicity (Table 8-9). If thla proportion can be regarded 11 a lower bound estimate of Iii Incidence of dementia that 11 attributable to neurotoxlc agents, then from two to three percent of the costs of dementia may be taken 11 a lower bound estimate of the social coats of neurotoxlclty. Applying two to three percent to each of the above ntlmatn for the overall cost, of dementia yield.I estimate, that range from $0.5 to 1,1.5 bllllon annuall for ~ra.-~====~~~~11tJ~ neurotoxlclty miffl. ::-N .... Y, ~.m .... ~~ffl ........ ~~,t..,.~-*'~ ............. a .......... W'i (Table a-10). 71

PAGE 79

Flnal Draft (4/28/81) Do Not Quote, Cite, or Reproduce a1.2.3 Jh NIY[Otoxlclty c9111 of Lead Expo1ure In contrllt to nrty all oth known or 1u1pected neurotoxlc 1ubetancH, the neurotoxlcty of INd In human, la well known for a large range of expoaure levels. Epldemlologlata have demonatrated a1aoclatlon1 between exc-lve INd exposure, partlcularty during childhood, and Gveral kinda of advne neurological and behavioral efltcta. In the paat, public hNlth agencies, through INd poisoning prevention program,, focuNd prlnclpally on Nvere lead expo1ure and the rnultant aymptom1 of overt INd polaonlng. More recently, medical aclentllt8 have shown that Important neurochemlcal changn art Induced by lead body burden, that are well below levels gennlly a1ac,clated with clinical symptom, of ld poisoning. Finally, th ... 11 con1lderable epldemlologlcal evidence that low level INd exposure can mun In altered neuropsychologlcal behaviors which may exhibit themselves aa attentional dllOl'dtr1, lumlng dlubllltlas or emotional dllOl'd.,. that Impair clanroom performance. For th8H reaaon1, an analysls of the health coats attributable to excnslve lud exposure during childhood must recognize at least three cateforlea of coats: 1. Direct medical care expenditures, including hoapltallzatlon, doctor's tees, drug1, and convaleacent care for preschool children who have been diagnosed a, being at risk wHh respect to lead absorption. 2. Special education and/or lnatltutlonallzatlon costs for school-age children who suffer permanent neuropaychologlcal effects from lead exposure. llf or a recent comprehensive review of the adverae health effects of lead See EPA (1981). 72

PAGE 80

Final Draft ( 4/28/89) Do Not Quote, Cite, or Reproduce 3. Coat burden to society In term, of reduced production and tax contributions from adult members of the labor force who have permanent neuropsychologlcal Impairment, stemming from excessive lead exposure during childhood. Calculation of health costs t.imlt~i(l!Blolii Involves multlplylng eetlmates of the number of preschool, itil school-age, aAli a~wM indlvlduala who develop specific lead-Induced health and intelligence deflcHs by cost factors that repreeent ea1i1ty'1 WIIIIR fl818 18 tetffi@om...~1=:'&ju.avoid Or correct thOl8 deficits I Ill~ ......... : .... ... A ... .... .. .. .o .. ,,..~~:.-..:-IQ,"=::--..... ,,0. (Provenzano, 1980). 73

PAGE 81

Flnal Draft (4/28/89) Do Not Quote, Cite, or Reproduce Table 8-9 Dlaonlers Producing Dementia; Dllgnoela In Nine Cllnlcal Dlagno1l1 Alzheimer + Parkinson + Vaecular TOTAL ALZHEIMER Vascular (MID) Parkinson Huntington PSP ALS Kuf1 Polt-anoxlc/CO Poat-traumatic Poet-encephallc Creutzfeldt-Jakob TOTAL "OTHER IRREVERSIBLE" Neuro1yphlll1 Fungal Infection, Tumor Alcohol Subdural Hydrocephalus Epilepsy TOTAL "TREATABLE" Drug toxicity Metabolic Hepatic 1 Hyponatremla 1 Calclum/PTH 4 B-12 2 Thyroid 1 7 Hypoglycemia 1 TOTAL "REVERSIBLE" Cause uncertain Total N Multi-Infarct dementia. N 499 10 8 85 10 15 3 1 1 5 8 3 3 2 2 22 22 4 2-, 3 21 18 14 784 Group 517 134 82 37 14 784 b Source: (Katzman, Lasker and Bernstein, 1988). % 85.9 17.1 10.5 4.7 1.8 100.0 74

PAGE 82

Final Draft (4/28/88) Source Do Not Quote, Cite, or Reproduce Table 8-10 Dementia Costs $38.0 $24.0 to $48.0 $42.9 to $48.0 Neurotoxlclty Coat, (2 to 3 percent of dementia) so.a to s1.1 S0.5 to $1.4 so.8 to $1.4 75

PAGE 83

Flnal Draft (4/28/89) Do Not Quote, Cite, or Reproduce Two recent analyses of regulatory proposals to reduce human exposures to lud utlllzed thl1 approach In quantifying In economic term, the ftlllffl benefit of reducing neurotoxlc rlaks of lead expoaure to children. In a coat-benefit analysla of option for removing lead additive, from gaaollne, Schwartz J1 IJ.. {1985) eatlmated the reduction In the number of children who would experience elevated blood lead levels (over 25 p.g/dl) 11 a consequence of removing lead from gaaollne. The study 111umed that 20 percent of all children over 25 p.g/dl would be affected nverly enough to warrant compenutory education for up to three years. The length of time In compensatory education waa baaed on atudle1 by de II Burde and Choate {1972, 1975) that lndlcat~ cognitive effect and lead Induced behavioral problems may persist for at lealt three yura. In the valuation step, the number of perso"=tvears In compensatory education waa multlplled by an estimate of the addltlonal costs for providing part-time apeclal education to a child for one year. These estimates are presented In Table s-11. The benefits of reducing lead In gasoline continue to decrease for a number of years as the use of leaded gaaollne 11 gradually phased out. Levin (1978) developed similar estimates of the savings In medical care and compensatory education colts that would resuli from reducing the maximum contaminant level for lead In drinking water from 50 p.g/1 to 20 p.g/1. The health benefits estimate for this one time reduction were $81.2 and $27.8 mllllon In 1985 dollars for compensatory education and medical care costs respectively. n order to make estimates of the health benefits of controlling neruotoxlc substances, ft la eaaentlal to have good data on the extent to which human populations are exposed 11 well as epldemlologlcal relatlonshlps that link exposures to adverse health effects. Estimates of the benefits of reducing human exposures to lead were greatly facilitated by the avallablltty of national estimates for the prevalence of lead exposure obtained through the National Health and Nutrition Examination Survey (NHANES-11). 78

PAGE 84

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce Table 8-11 Estimates of the Health Benefits of Reducing the Neurotoxlc Effects of Lead In Chlld1911 (mllllona of 1883 dollars) Year Compensatory Education Medical Care Total 1885 $187 $ 65 $252 1988 $447 $155 $802 Source: Schwartz et al (1985). 1987 1988 1989 1990 $408 $37 4 $338 $309 $141 $130 $117 $107 $549 $504 $455 $418 77 77

PAGE 85

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce APPENDIX A QUESTIONNAIRE USED TO OBTAIN COST ESTIMATES FOR TOXICITY TESTS COMBINED WITH NEUROTOXICITY EVALUATIONS Figure A-1 contains one component of a larger questionnaire that was admlnlaterld to obtain coat estimates for six toxicity teats combined with various neurobehavloral evaluatlons. The specific protocols for which coats were requested Included the following combinations of tests: (1) Acute oral toxicity combined with functional observational battery (FOB), motor activity (MA), and neuropathology evaluations (NE); (2) Acute lnhalatlon toxicity combined with FOB, MA, and NE; {3) Subchronlc oral toxicity combined with FOB, ,-~. ~., and NE; (4) Subchronlc Inhalation toxicity combined with FOB, MA, and NE; (5) Subchronlc oral toxicity combined with schedule-controlled operant behavior (SCOB) and NE; and (8) Chronic oral toxicity combined with FOB, MA and NE. To assist respondents In estimating costs, each questionnaire was accompanied by abridged protocol deacrtptlons for the relevant combination of toxicity test and neurotoxlclty evaluations. These abridged protocols were developed from sections of the Toxic Substances Control Act test guidelines for acute, subchronlc and chronic exposure toxicity testing and neurotoxlclty testing ~&PA 181&~(11:H?l~\'.\IHlt).". Coples of these guidelines were also Included In the questionnaire package for reference purposes. 78

PAGE 86

PIGURE A-1: COST ESTIMATES FOR SUBCHRQNIC TOXICITY TESTS WITH HEUROTOXICITY EVALUATIONS Instructions (1) Please provide on the attached pages, that have been slabelled "PROTOCOL ESTIMATE," estimates of the resource prices and requirements (e.g., wage rates, hourly requirements, unit costs and amounts) needed to conduct subchronic toxicity tests that include neurotoxicity evaluations. Composite unit costs and hourly rates, i.e., labor costs for all scientists, all technicians, etc., may be used. For the neurotoxicity test components, (functional observational battery (FOB), motor activity (MA), schedulecontrolled operant behavior (SCOB) and neuropathology) please provide separate estimates of the incremental resources required for each of these evaluations. Please provide separate cost estimates for tests involving inhalation and oral exposures. Copies of the test protocols are attached for your reference. (2) Please indicate here types and purchase amounts of any new equipment or instrumentation required in conducting the following neurotoxicity evaluations: a. Functional Observational Battery b. Motor Activity c. Neuropathology d. Schedule-controlled Operant Behavior (3) Would your "bottom-line" total cost estimate for testing a single chemical decrease if the number of chemicals tested annually by your laboratory were to increase to 3, 5, 7, etc., chemicals per year? By what percentage would the total cost for testing a chemical decline if the number of chemicals tested annually were to increase to these numbers?

PAGE 87

PROTOCOL ISTJMATI IP!KiP91JC JPtJ,tTIQII TOZICITY COMIIIIED VITB POI, MA, AID NIUIOPATBOLOGY .ICT LAIO&a .entit Senior Tozicol. Bd. Cert. Pathol. Q.A. Inapector Veterinarian Bi1tol01i1t Clin. Chemi1t Other (specify) ~chnician Histology Tech. Senior Technician Technician Clin. Lab. Tech. Animal Caretaker Other (specify) Jata Analy1i1/Reportina Bi01tati1tician Report Writer Word Proce11ing Data Encoder BTOTAL DlllCT LABOl.s (rate x hours) ($ [ /hr) FOB Tess HA Tests ed Neuro ath Pu

PAGE 88

PROTOCOL ISTIHAD EPIGBIPlfIC PffltJ,tTIOI TOXICITY COMIIIID VITB roa, KA, AHi) HIUROPATBOLOGY (Continued) aw.ss Rat1 Animal Car (feed etc.) Lab supplies Other (specify) TOTAL NATDW.Sa (COit Z unitl) LYTICAL CBIK. s I.OSCOPY: Election Light PDAD Overhead_% of Direct Labor 'AL COST BIPOU GU, G&A (_% of Total Coit) FEE(_% of Total Cost) >TOCOL ISTIMATI: FOB Tess HA Tests Neuroath

PAGE 89

RO!OCOL ISTDfA.TB ff"MIIOIIIC 9161: TOXI~Iff COHIDIBD VITI POI, Kl, AIID IIUI.OPATIIOLOGT CT I.AIOI.a ntiats Senior Tozicol. Bd. Cert. Pathol. Q.A. In1pector Veterinarian Bi1tolo1i1t .Clin. Chem.it Other (specify) !clmician Hi1tolo11 Tech. Senior Technician Technician Clin. Lab. Tech. Animal Caretaker Other (specify) 1ta Analy11,11eportin1 Bioatatistician leport Writer Word Processing Data Encoder TOTAL DIIBCT LABOa1 ,.-.. ~o l,~,,~.,, ($ /hr) I Add I Subchronic I FOB I HA To t Tests --I I

PAGE 90

:RIAI,S I Rat1 Animal Care ( feed etc.) Lab 1upplie1 Other (1pecif7) lf&TBllliLS I (c01t. z units) .. YTICAL CBIN. a lOSCOPYa Election Light ($ /hr) Overhead _z of DiTect Labor \L COST BEPOU GU: G,A (_% of Total Coat) 1'RAC2'0Rsnm: FEE(_% of Total Cost) rocoL ISTIMATI, PROTOCOL ISTI*D POB Tests I I MA Testa Neuro ath

PAGE 91

PROTOCOL ISTIM&TB SJJICIIOQC Qltl TOXICITY COKIIIID VITB SC0I AND NBOROPA'l'B0LOGY ~, Ld0&1 !ntists Senior Tozicol. Id. Cert Pa thol Q .A. Inapector Veterinarian Biatologist Clin. Chemist Other (specify) !Chniciana Bi1tolo1y Tech. Senior Technician Technician Clin. Lab. Tech. Animal Caretaker Other (specify) Lt& Analysis /Reporting Bioeta tis tician Report Writer Word Processing Data Encoder ?OTAL DD.BCT LABOI. s of Bou 1 ($ /hr) Additional Hours e uired SCOB Tests Neuroath J

PAGE 92

ROTOCOL ESTIMATE SUBCBI.OIIIC OUL TOXICITY COMBIRED WITB SCOB AND HEOROPATBOLOGY (Continued) Sa .s .mal Care eed ate.) supplies .er (specify) MATBllIALS: ,st x units) !AL CBIX.1 (S /hr} Num. of Units Subchronic Toxicit I I I I I I I I I I Additional U SCOB Tests uired >PY: !Ction Jht L..-...--~-----J ) !rhead _% of Direct Lah~~ JST BEPOU GU.: ~(_%of Total Cost) OST BEPOU PD1 E (_% of Total Cost) L ISTIMATI: C -' ,/

PAGE 93

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce BOX 8-A: ECONOMIC BALANCING PROVISIONS OF TSCA, PIFRA AND FFDCA TSCA, FIFRA and FFDCA are the primary laws under which regulation of neurotoxic substances has occurred. Each of these laws contains provisions (1) to encourage Increased testing for neurotoxicity; and (2) to control the production, distribution and use of substances that present unreasonable neurotoxicity risks. The following requirements for economic balancing relate to the control provisions In each of these laws. TSCA Section 8 of TSCA 111.lQllil\\l-=c4Jl, gives EPA broad authority to regulate manufacturing, processing, distrabution, use or disposal of chemical substances that present an unreasonable risk of injury to health or the environment. Section 6 states that in proposing any such regulation, EPA must consider and document: the effecls of such substance o, mixture on health and 1he magnitude of the exposure of human beings 1D such substance o, mixture; the effects of such aublltance or mixtul9 on the environment and the magnitude of the exposure of the environment to such substance or mixture; 1he t.fils of such subslance or mixture for various uw and the availability of subslltutas for such uses; and the ....anably acertainable ecottomic conaequences of the rule, after 00111idendion of the effect on the national ecot tomy, smaJI business, ttlehnologlcal Innovation, the environment, and public health. Congress (Interstate and Foreign Commerce Committee, 1978) Intentionally did not define unreasonable risk but indicated that determining whether a chemical posed such risks should involve ".balancing the probability 1hat harm will occur and the magnitude and -,.tty of 1hat harm aaainst the effect of propoaed regulatory action on the availability 1D IOCiely of the t>ene.4Hs of the substance or mbdl,19, taking into account the availability of aubslltutas for the subalance or mixture which do not require regulation, and other adverse effecls which such proposed action may have on aociety. Congress further elaborated on the extent to which economic analysis was need In the balancing process, to wit: -the balancing procesa deacribed above does not require a formal benefit-cost analyaia under which a monetary value la assigned to the risks aaocia1l9d with a substance and 1D the cost to 90Ciety of p,opowt regulalory action on the availabtltty of such beiNllla. Becau8e a monetary value often cannot be 8lligned to benefit or COit. such an analyaia would not be very uaeful.f Congress cited the National Academy of Sciences (1975) as support for the last statement. 79-. ( I /2

PAGE 94

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce RFRA/FEPCA In order to register a new pesticide under Section 3(c) of FIFRA, EPA must ascertain whether it will "cause unreasonable adverse effects on the environment" EFIFRA 11 a1ReAliad)llfaMl~l~-(tl). FIFRA defines unreasonable adverse effects on the environment very oroadly to Include: any unreasonable risk to man or the environment, taking into account the economic. social and environmental costs and beneffls of the use of any pesticide ESeelieA ao,,nt1t1U~l4.l~1tJ.IIIII) [emphasis added]. Under Section &(b), EPA may cancel, restrict or suspend the current registration of a pesticide If the Agency determines that the pesticide 11causes unreasonable adverse effects on the environmenr when used according to commonly recognized practice. In proposing such action EPA must take into account the Impact It will have on the ... -~! !,,9.r,.~.~~~-~I commodities, retail ... food prices and the agricultural economy @~~P.lf'.41&1llliUtiJl. FFDCA Under FFDCA, the economic balancing provisions are considerably less explicit. The various sections of the law reflect Congress Implicit Intent both to provide for the safety of food (Including substances added to food) and to maintain an economically affordable and abundant food supply. Whether regulatory analyses are undertaken depends on which section of the law Is being applied and the type of regulatory action being considered. Because of the way sections of FFDCA have been amended over the years, the regulation of chemicals in food is quite complex (Hatten, et !I, 1983). Food related substances that may be addressed under the Act may talT into one or more separate categories. These Include food, direct or indirect food additives, color additives, naturally occurring environmental contaminants, Inherent constituents of raw agricultural commodities, pesticide residues and animal drug residues. With the exception of food or color additives that are carcinogenic (Delaney), these sections of the law do not require absolute levels of safety. FDA may apply a variety of safety standards to substances depending on the regulatory categories In which they are placed. In addition, FDA may take a variety of different regulatory actions, for example, setting formal tolerances, setting action levels, banning or llmHlng the use of a substance depending on the regulatory category in which a substance is placed. Finally, procedural considerations are important. The Bureau of Foods does not consider the process of approving and publishing a regulation that permits the safe use of a new food or color additive as formal rule making subject to the cost-benefit analysis requirements of Executive Order 12291. Proposals to ban or limit the use of food additives that are already approved, however, are regarded as formal rule making subject to the Order's requirements. A proposal to establish a formal tolerance for environmental contaminants, a procedure that Is rarely undertaken, la also regarded as formal rule making and would require a cost beneffl analysis. 80 --------1v7

PAGE 95

Final Draft (4/28/89) Do Not Quote, CHe, or Reproduce BOX 8-B: REQUIREMENTS OF EXECUTIVE ORDER 12291 lncrea:~e::::y Rae:~::m11~~;(,~~~l!\~1 a~Y=-~gc~~ri~v~1h~~ 1~:r Order specifies that In promulgating, reviewing or developing regu1aBons, all agencies, to the extent permitted by law, adhere to the following requirements: Administrative decisions shall be based on adequate Information concerning the need for and consequences of proposed government action; Regulatory action shall not be undertaken unless the potential benefits to society for the regulation outweigh the potentral costs to society; Regulatory objectives shall be chosen to maximize the net benefits to society; Among alternative approaches to any given regulatory objectives, the alternative involving the least net cost to society shall be chosen; and Agencies shall set regulatory priorities with the aim c,f maximizing the aggregate net benefHs to society, taking Into account the condition of the particular Industries affected by regulations, the condition of the national economy, and other regulatory actions contemplated for the future. A Regulatory Impact Analysis (RIA) provides tne mians for Insuring that agencies meet these requirements. the Executive Order requires that agencies submit RIA's to the Director of 0MB at least 10 days prior to the publication in the Federal Reister of a notice of froposed rule making or final rule. For major rules, preparaton and submission o a preliminary RIA must occur at least 60 days prior to the publication of a notice of proposed rule making, and a final RIA must be submitted at least 30 days prior to publication of a final rule. A major rule means any regulation that la likely to have an annual effect on the economy of S 1 oo million or more; result In a mator Increase in costs or prices; or have significant adverse effects on competltfon, employment, investment, productivity, innovation or the competitiveness of domestic firms relative to foreign counterparts. c;.(

PAGE 96

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce BOX 8-C: THE INSTITUTIONALIZATION OF REGULATORY ANALYSIS 1971 TO 1981 In the 19701, the tremendous growth In regulaUon of the U.S. economy to promote certain social goals greatly elevated the pubUc's concerns regarding the effectiveness and economic consequences of regulation. To address these Issues, the Executive Branch, acting through the Office of Management and Budget (0MB), and departments and agencies with regulatory authority administratively developed and refined procedures for conducting regulatory analyses of proposed regulations. Today, regulatory analysis, which evaluates costs, benefits, and risks for several proposed alternatives for a specific rule or restriction, plays an Important role in regulatory decision-making. A9l'.Executlve Order Vear intle of Anal~sis T~ges of Anal~sls 0MB Memo 101sn1 1971 Quality of Life Review Costs, Benefits Executive Order 11821 1974 Inflation Impact Costs, Benefits, Statement Inflationary Impacts Executive Order 11949 1978 Economic Impact Costs, Benefits, Statement Economic Impacts Executive Order 12044 1978 Regulatory Analysis Costs, Economic Consequences Regulatory Flexibility Act 1980 Regulatory Impacts on Small Flexibility Analysis Businesses Executive Order 12291 1981 Regulatory Impact Costs, Benefits, Analysis Net Benefits

PAGE 97

Final Draft (4/28/89) Do Not Quote, Cite, or Reproduce BOX 8-D: FOUR STEPS IN CONDUCTING COST-BENEFIT OR COST-EFFECTIVENESS ANALYSIS 1. DEFINE THE REGULATORY PROGRAM TO BE ANALVZED Define precisely the program to be analyzed (who, what, where, when, why and how). Develop alternative options for achieving program objectives. 2. COMPUTE COSTS Compute gross program outlays. Discount costs to present value. 38. COMPUTE BENEFITS (In dollars) OR Add the dollar value for Addltlonal years of life Reductions In the number of cases of illness Reductions in number of days of disability I Ecological damages avoided. Discount benefits to present value 4. PERFORM SENSITIVITY ANALYSIS 3b. COMPUTE EFFECTS (In added years of healthy life) Add Additional years of life Added years of healthy llfe due to reduced morbidity Added years of healthy llfe due to reduced disability Discount effects to present value Vary uncertain parameters and recompute costs, benefits and effects estimates Examine the sensitivity of estimates to changes in uncertain parameters ~--

PAGE 98

Flnal Draft (4/28/89) Do Not Quote, Cite, or Reproduce BOX 8-E: THE OBJECTIVES OF TOXICITY TESTING The animal toxHlty tests described below have 11 their primary objective the characterization of a dose-response relationship between exposures to chemical substances and various physiological, pathological and behavioral devlatlo~~from the normal. The neurotoxiclty evaluations are d~.s~.9..m~. to focus qg the characterization of dose-response relationships belaeen_. chemical exposures and adverse effects on the central and/or peripheral nervous system. General Toxicity Testing Acute Toxicity Tests In the assessment and evaluation of the toxic characteristics of a substance, determination of acute toxcity is usually the initial step. Acute toxicity tests provide Information on the heaHh hazards that are likely to arise from short-term and generally larg._ exposures to the substance in question. When conducting acute toxicity testing, a single exposure and a 14-day observation period are used. The test substance Is administered In graduated doses to several groups of experimental animals, with one dose being used per test group. Subchronlc Toxicity Testa In the asseS1mant of the toxic characteristics of a chemical, subchronic toxicity tests are conducted after acute testing has been completed. A subchronlc test Is designed to ascertain the no-observed-effect level (NOEL) .....,lfMJU!II information on IMhealth hazards that are likely to arise frq_m continuous or repeated exposures to a substance for &Alntermedlate perlodl of time. When conductlnQ ....... !.w~ubchronlc toxicity test, t.he test substance Is applied dally for a period of m,im 90 days. The substance is applied In graduated doses to several groups of experimental animals, with one dose used per test group. Chronic Toxicity Tests Chronic toxicity tests are conducted to determine the affects of a substance !~~;,'y"Y,:t0 ~ .w=:u;:rch ~=~rr!h: ~c:i~d~::,i;,~:'p!';~~~~~~ .._, carcln~_enlclty, or which are cumulative should become maAlfeat11Mr:lffl. A chronic toxicity test should Identify a majority of chronic effects and dafl'rifflong termj dose-response relatlonshlr.:1. These tests require dally applications of the test substance for periods of up to two years. The substance Is applied In graduated doses to several groups of experimental animals, with one dose being used per test group. ~-Ci I

PAGE 99

Flnal Draft (4/28/89) Do Not Quote, Cite, or Reproduce Neurotoxicity Evaluations Functional Observational Battery These tests are designed to detect dose-dependent changes In gross functlonal deficits reaultlng from exposure to chemicals. Such deficits may Include the presence of convulsions, tremors, ataxia and other unusual responses with respect to activity level, coordination and behavior. This test battery is Intended to be used In conjunction with neuro-pathological evaluations and/or other general toxicity testing. The tests may be administered as part of an acute, subchronlc or chronic t~xicity study. Motor Activity The purpose of this test Is to detect dose-dependent changes, e.g., Inca .aases or decreases from baseline, in motor activity occurring over a range of acute 1ubchronic or chronic exposures to toxic substances. More speclflcally, in the context of neurotoxicity, motor activity refers to changes in the movement patterns of the experimental animal caused by chemical induced adverse effec.11 on the structure or function of the central and/or peripheral nervous system. This teat may be combined with other toxicity studies, as long as none of the requirements of either test are compromised by the combination. Neuropathology Neuropathologlcal examinations are performed on the nervo~s systems of sacrificed test animals to detect and characterize gro11 and fRl1Faaaape ffl.lMHKd, dos!elated morphological changes caused by exposures to toxic substances. These examinations may be done followlnQ acute, subchronlc or chronic toxicity studies and should be complemented with neurobehavloral and neurophysiological studies. Starting with animals in the highest dosage level, the examinations are conducted until a no effect level is determined. Schedule-Controlled Operant Behavior Schedule-controlled operant behavior tests are designed to evaluate neurotoxic effects on the rate and pattern of response in animals ,hat t,~e trained to perform under a schedule of reinforcement. Operant behavior is behavior which la modified by its consequences. A schedule of reinforc:ement specifies a relatlonshlp between behavioral responses and the delivery o1! relnforcera such as Hfood and water. These behavioral tests may be administered In acute or subchronlc toxicity studies, and behavioral evaluations should be made In conjunction with neuropathologicjf and other toxicity evaluations.


xml version 1.0 encoding UTF-8
REPORT xmlns http:www.fcla.edudlsmddaitss xmlns:xsi http:www.w3.org2001XMLSchema-instance xsi:schemaLocation http:www.fcla.edudlsmddaitssdaitssReport.xsd
INGEST IEID E9O7B9F7Z_2TZWAQ INGEST_TIME 2017-06-05T16:36:53Z PACKAGE AA00055775_00001
AGREEMENT_INFO ACCOUNT UF PROJECT UFDC
FILES