Instead of worrying about how the market might organize, concentrate on how awful the current situation is. If they're only seeing it as "inefficient" they're not looking close enough.
The issue is that the government's regulations are backed by violence and coercion, which only distorts the market and allows for the corruption of concentrated power. The issue is centralized power, being forced to fund an agency which gives out violent mandates.
This seems like a good thing if you're view of the state is one of righteous authority, knowledge, and benevolence. You have to show them how it causes problems, rather than creates solutions.
The FDA, just like the TSA, or the Fed or whatever... it's all safety security theater as cover for protectionist rackets...
(and after they cause problems they blame it on the free market and say they need more money and more power to fix it.) Show them that, otherwise you're competing your weird foreign sounding "private regulation" stuff with their concept of this decent-albeit-inefficient system which we already have in place.