IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/6143.html
   My bibliography  Save this paper

The Objectives of the FDA's Office of Generic Drugs

Author

Listed:
  • Fiona Scott Morton

Abstract

I 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).

Suggested Citation

  • Fiona Scott Morton, 1997. "The Objectives of the FDA's Office of Generic Drugs," NBER Working Papers 6143, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6143
    Note: IO
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w6143.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Baron, David P. & Besanko, David, 1984. "Regulation and information in a continuing relationship," Information Economics and Policy, Elsevier, vol. 1(3), pages 267-302.
    2. Olson, Mary K, 1995. "Regulatory Agency Discretion among Competing Industries: Inside the FDA," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(2), pages 379-405, October.
    3. 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.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hellström, Jörgen & Rudholm, Niklas, 2003. "Uncertainty in the Generic Versus Brand Name Prescription Decision," Umeå Economic Studies 602, Umeå University, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mary K. Olson, 2000. "Regulatory Reform and Bureaucratic Responsiveness to Firms: the Impact of User Fees in the FDA," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 363-395, June.
    2. Mary K. Olson, 1997. "Firm Characteristics and the Speed of FDA Approval," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 377-401, June.
    3. Lea Kosnik, 2010. "Balancing Environmental Protection and Energy Production in the Federal Hydropower Licensing Process," Land Economics, University of Wisconsin Press, vol. 86(3).
    4. Ando, Amy, 1998. "Delay on the Path to the Endangered Species List: Do Costs and Benefits Matter," RFF Working Paper Series dp-97-43-rev, Resources for the Future.
    5. Olson, Mary K, 1999. "Agency Rulemaking, Political Influences, Regulation, and Industry Compliance," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(3), pages 573-601, October.
    6. Min-Seok Pang, 2017. "Politics and Information Technology Investments in the U.S. Federal Government in 2003–2016," Information Systems Research, INFORMS, vol. 28(1), pages 33-45, March.
    7. Boakye, Derrick & Sarpong, David & Mordi, Chima, 2022. "Regulatory review of new product innovation: Conceptual clarity and future research directions," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    8. Olson, Mary K., 2004. "Are novel drugs more risky for patients than less novel drugs?," Journal of Health Economics, Elsevier, vol. 23(6), pages 1135-1158, November.
    9. Thompson, Anne M., 2022. "Political connections and the SEC confidential treatment process," Journal of Accounting and Economics, Elsevier, vol. 74(1).
    10. Arve, Malin & Zwart, Gijsbert, 2023. "Optimal procurement and investment in new technologies under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 147(C).
    11. Abdul‐Rahman Khokhar & Hesam Shahriari, 2022. "Is the SEC captured? Evidence from political connectedness and SEC enforcement actions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2725-2756, June.
    12. Stuart Kasdin & Luona Lin, 2015. "Strategic behavior by federal agencies in the allocation of public resources," Public Choice, Springer, vol. 164(3), pages 309-329, September.
    13. Litterscheid, Sina & Szalay, Dezsö, 2014. "Sequential, multidimensional screening," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100621, Verein für Socialpolitik / German Economic Association.
    14. David Martimort & Aggey Semenov & Lars Stole, 2017. "A Theory of Contracts with Limited Enforcement," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(2), pages 816-852.
    15. Lehr, William & Sicker, Douglas, 2017. "Communications Act 2021," 28th European Regional ITS Conference, Passau 2017 169478, International Telecommunications Society (ITS).
    16. Péter Eső & Balázs Szentes, 2007. "The price of advice," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 863-880, December.
    17. Michael Makowsky & Thomas Stratmann, 2014. "Politics, unemployment, and the enforcement of immigration law," Public Choice, Springer, vol. 160(1), pages 131-153, July.
    18. Kräkel, Matthias, 2006. "Firm Size, Economic Situation and Influence Activities," IZA Discussion Papers 2391, Institute of Labor Economics (IZA).
    19. B. Zorina Khan, 1999. "Legal Monopoly: Patents and Antitrust Litigation in U.S. Manufacturing, 1970-1998," NBER Working Papers 7068, National Bureau of Economic Research, Inc.
    20. Thomas Schacherer, 2015. "Deterministic versus stochastic contracts in a dynamic principal-agent model," BDPEMS Working Papers 2015013, Berlin School of Economics.

    More about this item

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6143. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.