The Objectives of the FDA's Office of Generic Drugs
AbstractI use variation in approval time for generic drugs to shed light on the objectives of the federal agency in charge of granting entry permission for these drugs (FDA). Applications belonging to firms later found to have engaged in fraud or corruption were approved nine months faster on average, controlling for other characteristics, indicating that illegal behavior was effective in reducing approval times. The FDA approved applications for large revenue markets faster; this is the only evidence that the agency is taking consumer surplus into account, but it is also consistent with a response to producer surplus and application quality. Order of entry into a drug market is insignificant in predicting approval times due to the offsetting effects of social surplus and FDA learning. The FDA appears to avoid complaints from constituent firms by preserving the entry order of applications. FDA resources clearly affect approval times; this appears in the year effects after the generic scandal (much slower) and in the agency's use of slack provided by applications submitted before patent expiration. After the scandal the FDA appears to care more about the risk inherent in a product and discounts a firm's pre-scandal technical experience. Overall, the results provide most support for an agency responding to bureaucratic preferences, complaints from constituent firms, and risk to consumers, rather than trying to maximize classic measures of social surplus (absent risk considerations).
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6143.
Date of creation: Aug 1997
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Olson, Mary K, 1995. "Regulatory Agency Discretion among Competing Industries: Inside the FDA," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(2), pages 379-405, October.
- Weingast, Barry R & Moran, Mark J, 1983. "Bureaucratic Discretion or Congressional Control? Regulatory Policymaking by the Federal Trade Commission," Journal of Political Economy, University of Chicago Press, vol. 91(5), pages 765-800, October.
- David Dranove & David Meltzer, 1994. "Do Important Drugs Reach the Market Sooner?," RAND Journal of Economics, The RAND Corporation, vol. 25(3), pages 402-423, Autumn.
- Baron, David P. & Besanko, David, 1984. "Regulation and information in a continuing relationship," Information Economics and Policy, Elsevier, vol. 1(3), pages 267-302.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.