Deeply flawed economic analysis exaggerates the cost of FDA's produce rule

One of the healthiest things a person can do is to eat lots of fruits and vegetables. Unless they’re contaminated with dangerous pathogens, that is. Contaminated produce has been responsible for an alarming number of deaths and illnesses in recent years, from Listeria-tainted cantaloupes that killed up to 43 people in 2011 to a Cyclospora outbreak linked to salad mix and cilantro that sickened 631 people in 25 states this past summer. 

For this reason, the Food Safety Modernization Act (FSMA) directed the Food and Drug Administration (FDA) to set standards to ensure the safety of the fruits and vegetables in our food supply.   The FDA’s proposed rule on produce safety would address some of the most likely sources of contamination on farms, including tools and equipment, water used in agricultural activities, and worker health and hygiene. At the Center for Progressive Reform we submitted comments to the FDA, urging the agency to issue the final produce rule as soon as possible, in its strongest, most protective form.

We focused most of our attention on the economic analysis that accompanied the FDA’s proposal. The FDA found that the rule is easily justified on economic grounds, estimating annual benefits of $1.04 billion—representing 1.75 million avoided illnesses in the United States—and annual domestic costs of $460 million.

But once we looked behind these numbers, it became clear that the rule’s benefits will be even more significant, and its costs considerably smaller, than the FDA suggests. The agency’s estimates are built on flawed assumptions, and those flaws were greatly exacerbated by the White House Office of Information and Regulatory Affairs (OIRA) during the 13 months that it spent marking up the proposal and delaying its release. By misrepresenting the rule’s impacts, these distortions help to fuel needless negativity towards the rule, from members of Congress, produce-industry associations, and farmers themselves. 

Below are some examples of how the analysis overestimates the rule’s costs. 

$113.5 Million for … Washing Your Hands Before You Handle Food?

Fully one-quarter of the rule’s total cost – the largest single category of cost – is attributed to the rule’s requirement that farm personnel wash their hands before handling food. If a farm worker is just beginning work for the day, or donning gloves, or returning to work after using the bathroom, or has just touched a farm animal, the FDA’s proposed rule would require her to wash her hands before handling food. The FDA estimates that the vast majority of farm workers do not now wash their hands before work or after being away from their work station, and that fully a quarter do not wash their hands after using the toilet. The agency believes that requiring the simple act of hand washing – a rule parents everywhere can understand – will help protect our produce from contamination.

So far; so good. However, after reaching this common-sense conclusion, the agency does something quite strange: it calculates the economic costs of hand washing. Even though most everyone would agree that people who handle food should – even without a federal rule on the subject – be washing their hands after visiting the bathroom or touching a farm animal, the FDA effectively reverses this common-sense presumption by treating hand washing as a departure from the existing norm and, as such, an imposition of costs on the farm worker’s employer.  Reversing the presumption in favor of hand washing makes even less sense when one recalls that most farms are already required to allow their workers “reasonable use” of hand-washing facilities.

How does hand washing end up “costing” $113.5 million? According to the FDA, it’s the cost of “lost productivity”: Every hand-wash supposedly takes two minutes out of a worker’s time—most of it taken up with walking to and from the hand-washing facility—depriving the farm of 47 cents’ worth of the worker’s labor. Multiplied by all the farm workers in the country, this individually trivial cost adds up to $113.5 million per year.

OIRA played a major role in this wildly exaggerated estimate: Originally, the FDA assumed each hand-wash would take one minute, but OIRA – without explanation – increased the time to two minutes, which doubled the total cost from $56.8 million to $113.5 million. Far from an overwhelming financial drain, hand washing should be treated as what it is: part of the regular course of everyday farm activities. One farm, after joining a voluntary food safety program, started towing a few hand-washing stations behind a trailer, moving them around to different fields so they would be easily accessible to workers. The new requirements were an adjustment at first, but soon became part of the daily routine. The exotic suggestion of the FDA’s economic analysis is not that people who handle food should wash their hands regularly, but that – depending on how the numbers come out – perhaps it would be best if they didn’t. 

The Cost of Testing Agricultural Water

The proposed rule would require farmers to regularly test certain kinds of water sources for signs of fecal contamination, if the water is used for irrigation or if it directly contacts produce. The FDA assumes that laboratory analysis of water samples would cost each farm thousands of dollars per year.

But given the extended compliance dates for these water requirements—up to six years beyond the rule’s effective date for very small farms—it’s almost inevitable that the rule will spur the development of low-cost testing kits that can be used with little training “on farm,” and will increase competitiveness among suppliers of testing products and services. These developments, already in the making, will make testing significantly more affordable for small farms than the agency suggests.  

The Cost to Exempt Farms 

A farm that is exempt from the rule’s growing and harvesting standards would still have to let consumers know its name and business address. A farm that does not put labels on its food (labels that might already contain this information) will need to find another way to let consumers know its name and address. The FDA believes that very small farms that sell directly to consumers will likely put up a sign near the point of purchase. The FDA estimates the cost of this simple requirement to be $1,134 per year, per farm. 

Before going into the details, let us pause for a minute to consider what appears to be the FDA’s operating assumption, which is that these farms do not already display their name and address at the point of purchase, and that only the FDA’s rule will induce them to do so. It seems reasonable to assume the opposite, which is that farms have an incentive to lure consumers and build their loyalty by posting their name and address. If that’s right, the FDA’s requirement may not cost anything.

Originally, the FDA estimated that a farm that sells directly to consumers would spend five minutes every two weeks to write its name and address on a piece of poster board, at an annual cost of $101 per farm. The agency thought it reasonable to assume that the farm operator would buy and prepare one poster board every two weeks because the poster “can get tattered and worn-out.” It seems equally reasonable to assume that, upon seeing this tattering and wearing out, the farm operator would choose a more durable method for displaying the farm’s name and address.

But OIRA veered in the opposite direction. It took the FDA’s exaggerated cost to a whole new level by insisting that it would take a farmer an hour every two weeks to prepare the sign stating the farm’s name and address – bringing the cost up to $1,134 per farm. Unless a farmer chooses to write her name and address in Burgues Script – and needs to relearn this calligraphic font every time she uses it – it is hard to see how this trivial task could take an entire hour.

Reading the FDA’s analysis, one wonders whether the agency itself recognized the ridiculousness of it all. The agency pointedly observes: “We do not estimate a cost for the use of a marker to write on the poster since it is expected that this cost is minimal since the farmer will likely use something he has on hand.” Hilarious – if it were a segment on The Colbert Report rather than part of a serious attempt to assess the costs of food safety in this country.

On Exemptions

The proposed rule already provides a number of exemptions and special provisions intended to ease burdens on small and low-risk farms. Some have argued that the proposed exemptions don’t go far enough, urging the FDA to expand them further. It is completely understandable for small farms to be anxious as this new, unfamiliar regulatory framework is put into place, and they try to figure out where they fall among the various exemptions or how they have to modify their practices while operating on slim profit margins. 

But there is evidence that many farms may be overreacting out of mistrust and uncertainty, misjudging just how broad these exemptions really are. As it is, 79 percent of all U.S. farms would be exempt from the rule, and those small farms that are still covered would have significantly extended compliance dates. In a survey of farmers conducted this past spring by an NYU graduate student, some of the respondents who made the most negative comments about the rule and suggested it would put them out of business actually turned out to be exempt. 

For all these reasons, we believe that continuing the FDA’s outreach efforts and clarifying points of confusion would be more effective, and more protective of public health, than expanding these exemptions any further.