Published:
Cambridge, Mass: National Bureau of Economic Research, 2018
Published in:NBER working paper series ; no. w24957
Extent:
1 Online-Ressource; illustrations (black and white)
Language:
English
DOI:
10.3386/w24957
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
System requirements: Adobe [Acrobat] Reader required for PDF files
Mode of access: World Wide Web
Description:
We provide causal evidence that regulatory shocks associated with drug safety label changes lead to aggregate demand declines of 16.9 percent within two years of a relabeling event. After accounting for all plausible substitution patterns by physicians along with competitor actions, aggregate demand declines by 4.7 percent; this decline represents consumers that prematurely leave the market. Results are robust to variation across types of relabeling, market sizes, and levels of competition. Our findings complement recent work that shows negative upstream innovation impacts from these downstream regulatory shocks. Importantly, drugs receiving expedited FDA review are more likely to incur serious safety label changes. Thus, it appears we may be trading off quicker access to new drugs today for less innovation tomorrow. Implications for welfare and policy are discussed