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Regulating ethical experimentation: Impacts of the breakthrough therapy designation on drug R&D

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  • Hermosilla, Manuel

Abstract

This article investigates patterns of pharmaceutical development activity around the 2012 creation of the FDA’s Breakthrough Therapy Designation (BTD). The BTD introduced regulatory flexibility and support to avoid ethical challenges created by experimental therapies of exceptional performance in early stage clinical trials. We argue that the program’s design indirectly created substantial incentives for the industry to pursue the designation. Consistent with this hypothesis, our evidence links the creation of the program with a substantial increase in the number of new drug indications entering the clinical trial process. This surge in introductions has resulted in a discernible increase in approvals, which has manifested with a lag and may strengthen in the future. Countering theoretical predictions, BTD incentives have not led to increased risk taking in project selection.

Suggested Citation

  • Hermosilla, Manuel, 2024. "Regulating ethical experimentation: Impacts of the breakthrough therapy designation on drug R&D," Journal of Health Economics, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:jhecon:v:94:y:2024:i:c:s0167629623001327
    DOI: 10.1016/j.jhealeco.2023.102855
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    More about this item

    Keywords

    Pharmaceuticals; R&D; Technological change; Ethics; FDA; Regulation;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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