Contrary to what FDA tells the US congress when it is defending (or lobbying to expand) its bureaucratic turf the agency did not actively reject thalidomide, rather the agency simply failed to approve it on its normal schedule.
If FDA had followed its normal procedures it would have approved thalidomide for sale in the US. The exact details of the reasons for that delay are certainly not the one's quoted by FDA or the their reviewer.
After the fact (and after having been given the Distinguished Federal Civil Service Award by JFK the reviewer (Francis Kelsey MD) began to claim that she had been concerned about reproductive safety, however she did not document these concerns prior to the onset of deformed births in Europe.
FDA was given widely expanded regulatory power as a direct result of this accidental coup. One direct result is that almost certainly more US citizens die annually from delayed (as compared with the rest of the industrialized world) introduction of new drugs than are benefited by protection of potentially dangerous drugs. Some analyses of the long-term effects of US drug policy can be read in the following URLs.
Consider the following scenarios:
Latex is widely recognized as a material which causes allergic reactions in a significant fraction of users. Latex, however is still the material of choice in many context in device design for the simple reason that it has decades of track record. As with drugs, FDA guidelines require highly expensive testing for the use of any new material in any given application.
Additionally, FDA's requirements for new methods virtually never gets less stringent. This directly results in a system that existing designs will be favored (even if they are clearly inferior) in an economic environment whose rules are mostly determined by FDA.
Today in the US there are 3 condoms (to my knowledge) on the market which are made of a material other than latex. By FDA rules none of these are permitted to make any label claim regarding pregnancy or STD transmission until completing a highly expensive battery of testing. It probably costs no more to manufacture a urethane condom than one made of latex, yet these retail at double or more the price of the latex variety. Further, non-latex condoms are not affected by ozone or oil-based lubricants (which cause immediate failure of latex condoms).
One clear group of economic winners here are the manufacturers who have invested in the manufacture of latex condoms. Releasing new condom designs to the market is inexpensive as long as they are of latex construction.
HIV/AIDS therapies are a far more striking (and costly) example. In addition to the discussions in the URLs cited above consider:
The US is (for the present and foreseeable future) the central wheel of new drug and medical device development. Therefor it is principally US concerns which are engaging in research in drug therapies for HIV. The FDA rules substantially prevent US citizens from using more effective drugs with lower levels of toxic effects.
Additionally the developers expect to be paid US - scaled prices for the products they develop. Thus FDA's policies are both substantially escalating the costs of new therapies, and slowing their delivery to patients, and this effect is global.
None of the above is intended to suggest that there are easy answers both our laws and our manner of doing medical research are highly complex and are not quick to change. Also, many of FDA's scientists and researchers are absolutely top people.
The legacy of thalidomide on the US regulation of medical technology however, is not an entirely healthy one.