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Regulatory review time and pharmaceutical research and development

Author

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  • Anna Chorniy
  • James Bailey
  • Abdulkadir Civan
  • Michael Maloney

Abstract

In the United States, all newly developed drugs undergo a lengthy review process conducted by the US Food and Drug Administration (FDA). These regulatory delays have direct immediate costs for drug manufacturers and patients waiting for treatment. Under certain market conditions, regulatory delays may also affect future research and development (R&D) strategies of pharmaceutical companies. To estimate the magnitude of this effect, we match data on drugs in the development pipeline in 2006 to data that we collect on FDA review times for all drugs approved between 1999 and 2005. Employing a rich and novel set of controls that affect drug R&D decisions and, potentially, regulatory review lags, we find that on average, three additional months of delay result in one fewer drug in development in that drug category. Our results suggest that the length of the regulatory delay matters for pharmaceutical firms' R&D decisions and that the firms are likely unable to pass on these costs onto consumers.

Suggested Citation

  • Anna Chorniy & James Bailey & Abdulkadir Civan & Michael Maloney, 2021. "Regulatory review time and pharmaceutical research and development," Health Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 113-128, January.
  • Handle: RePEc:wly:hlthec:v:30:y:2021:i:1:p:113-128
    DOI: 10.1002/hec.4180
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    References listed on IDEAS

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    1. Chris Sampson’s journal round-up for 4th January 2021
      by Chris Sampson in The Academic Health Economists' Blog on 2021-01-04 12:00:05

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