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Is the Food And Drug Administration Safe And Effective?


  • Tomas J. Philipson
  • Eric Sun


In the United States, the Food and Drug Administration (FDA) provides public oversight of the safety and efficacy of drugs; medical devices; biologics like vaccines and blood products; cosmetics; radiation-emitting electronic products; veterinary products; and all foods, except meat and poultry (which are regulated by the Department of Agriculture). According to the FDA, the products it regulates account for more than one-fifth of U.S. consumer spending. In the area of medical products, the FDA is responsible for determining whether marketed products are both safe and effective before and after they have been marketed. In this paper, we will explore whether the policies of the agency itself are safe and effective. We stress two issues, one static and one dynamic. The static issue concerns the potential duplication inefficiency when product safety is protected not only by the FDA but also by the private sector through product liability law. Put another way, what is the rationale for using product liability and the FDA to regulate drug safety? While intuitively it may seem that two systems must be better than one in ensuring drug safety, each system comes with costs. We then turn to the dynamic issue, the speed-safety trade off, and consider the extent to which higher safety is achieved at a cost of later market entry of effective and even life-saving products. We assess the Prescription Drug User Fee Acts (PDUFAs), which increased the speed of the agency's regulatory process starting in 1992, although according to some, at the cost of reducing drug safety. We conclude by suggesting a research agenda for future work on the Food and Drug Administration.

Suggested Citation

  • Tomas J. Philipson & Eric Sun, 2008. "Is the Food And Drug Administration Safe And Effective?," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 85-102, Winter.
  • Handle: RePEc:aea:jecper:v:22:y:2008:i:1:p:85-102 Note: DOI: 10.1257/jep.22.1.85

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    References listed on IDEAS

    1. Edward L. Glaeser & Andrei Shleifer, 2003. "The Rise of the Regulatory State," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 401-425, June.
    2. Steven Shavell, 2005. "Liability for Accidents," NBER Working Papers 11781, National Bureau of Economic Research, Inc.
    3. Tomas J. Philipson & Anupam B. Jena, 2005. "Surplus Appropriation from R&D and Health Care Technology Assessment Procedures," Public Economics 0511021, EconWPA.
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    Cited by:

    1. Tomas J. Philipson & Eric Sun & Dana Goldman, 2010. "The Effects of Product Liability Exemption in the Presence of the FDA," NBER Chapters,in: Regulation vs. Litigation: Perspectives from Economics and Law, pages 137-163 National Bureau of Economic Research, Inc.
    2. Immordino, Giovanni & Pagano, Marco & Polo, Michele, 2011. "Incentives to innovate and social harm: Laissez-faire, authorization or penalties?," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 864-876, August.
    3. repec:kap:ijhcfe:v:17:y:2017:i:2:d:10.1007_s10754-016-9208-2 is not listed on IDEAS
    4. Mary Olson, 2013. "Eliminating the U.S. drug lag: Implications for drug safety," Journal of Risk and Uncertainty, Springer, vol. 47(1), pages 1-30, August.
    5. Tomas J. Philipson & George Zanjani, 2013. "Economic Analysis of Risk and Uncertainty induced by Health Shocks: A Review and Extension," NBER Working Papers 19005, National Bureau of Economic Research, Inc.
    6. Clifford Winston, 2008. "The Efficacy of Information Policy: A Review of Archon Fung, Mary Graham, and David Weil's Full Disclosure: The Perils and Promise of Transparency," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 704-717, September.
    7. Giovanni Immordino & Michele Polo, 2014. "Public Policies in Investment-Intensive Industries," World Scientific Book Chapters,in: THE ANALYSIS OF COMPETITION POLICY AND SECTORAL REGULATION, chapter 13, pages 365-388 World Scientific Publishing Co. Pte. Ltd..
    8. repec:kap:revind:v:52:y:2018:i:1:d:10.1007_s11151-017-9579-7 is not listed on IDEAS

    More about this item

    JEL classification:

    • I0 - Health, Education, and Welfare - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health


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