Product Quality Regulation and New Drug Introductions: Some New Evidence from the 1970s

Drug amendments enacted in 1962 require companies to provide the Food and Drug Administration (FDA) with ''substantial evidence'' of a new drug's effectiveness before it can be marketed in the US. Previous studies of these amendments have focused on a single, apparently perm...

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Bibliographic Details
Published in:The review of economics and statistics 1981-11, Vol.63 (4), p.615-619
Main Author: Wiggins, Steven N.
Format: Article
Language:English
Subjects:
Advertising restrictions
Coefficients
Commercial regulation
Cost estimates
Drug regulation
Drugs
Economic regulation
Industrial regulation
Medical treatment
Observational research
Product introduction
Product testing
Quality
Regulation
Regulations
Research & development expenditures
Spending
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Summary:Drug amendments enacted in 1962 require companies to provide the Food and Drug Administration (FDA) with ''substantial evidence'' of a new drug's effectiveness before it can be marketed in the US. Previous studies of these amendments have focused on a single, apparently permanent decline in the aggregate rate of new drug introduction in the 1962 era. These studies have often concluded that the amendments substantially reduced the rate of new drug introductions. A study presents the first estimates of these regulatory effects that do not have controversy at their root. The estimates rely exclusively on new drug introduction data from the 1970s. For the first time, estimates are also obtained on the effects of regulation on research spending, which significantly increases overall regulatory effects. The study provides the first current overall assessment of the effects of regulation on new drug introductions. Results suggest that regulation has had a major direct impact on introductions and a significant indirect effect through a reduction in research spending. It is estimated that regulation has reduced introduction rates by about 60%.
ISSN:0034-6535
1530-9142
DOI:10.2307/1935858