Consumer expenditure on FDA regulated products: 20 cents of every dollar

Posted on November 1, 2016 by FDA Voice

By: Sheri Walker, Ph.D., and Clark Nardinelli

Sheri Walker, Ph.D., is an FDA Senior Economist

One of the much-cited statistics about FDA is this: that FDA-regulated products account for about 20 cents of every dollar of annual spending by U.S. consumers. Add up 20 cents of every dollar and it amounts to more than $2.4 trillion in annual consumption that includes medical products, food and tobacco.

Our staff of 34 economists comes up with this estimate of FDA’s impact every year. We think it helps the public put in perspective the sheer scope of FDA’s responsibilities, especially when you recognize that FDA is only one of dozens of governmental agencies.

We largely rely on personal consumption expenditure data collected by the Bureau of Economic Analysis (BEA) every year to calculate total consumer spending in each of the major FDA product categories. These product categories include food (except alcohol and meat products regulated by USDA), drugs, medical devices, cosmetics, dietary supplements, and (since 2009) tobacco products.

Clark Nardinelli is FDA’s Chief Economist

Some BEA expenditure categories include more than one FDA product area. For example, biologics and dietary supplements are included in the expenditure for pharmaceutical and medical products (although, legally, dietary supplements are food). Cosmetic products are captured under the BEA expenditure category for personal care products. Pet food and animal drugs are estimated as a percentage of the pet-related products category. The estimate for medical device products is derived using data from the therapeutic equipment products category from the BEA and data from the Annual Survey of Manufacturers collected by the U.S. Census Bureau.

Food products represent the largest share of spending on FDA products, accounting for approximately 11 cents of every dollar of consumer spending. Without the addition of tobacco products, spending on FDA-regulated products would be slightly less than 20 cents per dollar.

We know that some people say FDA oversees 25 cents of every consumer dollar. Maybe it’s an urban legend – or maybe it harkens back to decades ago. The 20 cents (or 20 percent of spending on consumer goods and services) has held steady over the past 5 years. Americans used to spend a much higher proportion of their income on food – with over 25 cents of every dollar going to food during World War II. But since then the share of food and tobacco in total consumer spending has been falling steadily while the share of consumer spending devoted to medical products has been steadily climbing. Whether those trends will continue, and whether FDA’s 20 cents will hold steady for the next 5 or 50 years, is impossible to predict.

Sheri Walker, Ph.D., is an FDA Senior Economist, and Clark Nardinelli is FDA’s Chief Economist