Unpacking the effects of adverse regulatory events: Evidence from pharmaceutical relabeling

Matthew Higgins, Xin Yan and Chirantan Chatterjee

Research Policy, 2021, vol. 50, issue 1

Abstract: We provide causal evidence that regulation induced product shocks significantly impact aggregate demand and firm performance in pharmaceutical markets. Event study results suggest an average loss between $569 million and $882 million. Affected products lose, on average, $186 million over their remaining effective patent life. This leaves a loss of between $383 million and $696 million attributable to declines in future innovation. Our findings complement research that shows drugs receiving expedited review are more likely to suffer from regulation induced product shocks. Thus, it appears we may be trading off quicker access to drugs today for less innovation tomorrow. Results remain robust to variation across types of relabeling, market sizes, and levels of competition.

Keywords: Regulatory shocks; Drug safety label changes; Pharmaceutical innovation; Aggregate demand (search for similar items in EconPapers)
JEL-codes: I18 L51 L65 M21 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Unpacking the effects of adverse regulatory events: Evidence from pharmaceutical relabeling (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:50:y:2021:i:1:s0048733320302018

DOI: 10.1016/j.respol.2020.104126

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