TY - JOUR
T1 - Cost benefit analysis and the FDA
T2 - measuring the costs and benefits of drug approval under the PDUFA I-II, 1998–2005: By
AU - DeCanio, Samuel
N1 - Publisher Copyright:
© The Author(s) 2024.
PY - 2024/12
Y1 - 2024/12
N2 - This paper examines the Food and Drug Administration’s regulation of drug safety. In one of the most sophisticated cost-benefit analyses to date, (Cost-benefit analysis of the FDA: The case of the prescription drug user fee acts, The Journal of Public Economics, 92, 1306–1325.) argue that between 1998 and 2005 the FDA’s drug submission process under the Prescription Drug User Fee Act (PDUFA) increased social surplus by $14–31 billion. However, this conclusion is based upon inappropriate data that underestimate the welfare costs of drugs that were withdrawn from the market due to their harmful side effects. Once appropriate epidemiological data are used to calculate the welfare costs of a single drug, Vioxx, which was withdrawn from the market after it was found to cause heart attacks, PDUFA I-II are found to have caused a net reduction in social welfare of between $1-201 billion. This indicates that statistically infrequent regulatory mistakes may have large social welfare implications that can counteract the benefits of years of accurate regulatory decisions. Thanks to Sarah Bernhardt, Romit Bhattacharya, Stephen DeCanio, Marco Giani, Colin Jennings, John Meadowcroft, and Tariq Thachil for helpful comments and suggestions. Special thanks to the helpful comments offered by two anonymous referees.
AB - This paper examines the Food and Drug Administration’s regulation of drug safety. In one of the most sophisticated cost-benefit analyses to date, (Cost-benefit analysis of the FDA: The case of the prescription drug user fee acts, The Journal of Public Economics, 92, 1306–1325.) argue that between 1998 and 2005 the FDA’s drug submission process under the Prescription Drug User Fee Act (PDUFA) increased social surplus by $14–31 billion. However, this conclusion is based upon inappropriate data that underestimate the welfare costs of drugs that were withdrawn from the market due to their harmful side effects. Once appropriate epidemiological data are used to calculate the welfare costs of a single drug, Vioxx, which was withdrawn from the market after it was found to cause heart attacks, PDUFA I-II are found to have caused a net reduction in social welfare of between $1-201 billion. This indicates that statistically infrequent regulatory mistakes may have large social welfare implications that can counteract the benefits of years of accurate regulatory decisions. Thanks to Sarah Bernhardt, Romit Bhattacharya, Stephen DeCanio, Marco Giani, Colin Jennings, John Meadowcroft, and Tariq Thachil for helpful comments and suggestions. Special thanks to the helpful comments offered by two anonymous referees.
KW - Cost benefit analysis
KW - D61
KW - D73
KW - FAERS
KW - FDA
KW - H11
KW - I18
KW - PDUFA
KW - Vioxx
UR - http://www.scopus.com/inward/record.url?scp=85190766121&partnerID=8YFLogxK
U2 - 10.1007/s11149-024-09477-2
DO - 10.1007/s11149-024-09477-2
M3 - Article
AN - SCOPUS:85190766121
SN - 0922-680X
VL - 66
SP - 174
EP - 180
JO - JOURNAL OF REGULATORY ECONOMICS
JF - JOURNAL OF REGULATORY ECONOMICS
IS - 2-3
ER -
