Regulatory Reform and Bureaucratic Responsiveness to Firms: The Impact of User Fees in the FDA

Abstract:     
This paper examines the impact of user fees on the speed of new drug review and on the responsiveness of FDA reviewers to pharmaceutical firms. User fees are expected to alter FDA behavior and responsiveness to pharmaceutical firms because they give regulators a financial incentive to process more new drug applications and because they convey information to regulators that may reduce type I error. The analysis examines the variation in FDA review times for new drugs approved between 1990-1995 as a function of differences that exist among firms
and drugs. Specifically, it compares estimates of regulator
responsiveness to several firm and drug characteristics before and after the introduction of user fees. The results show that user fees produced a significant change in FDA behavior. Regulators have become less responsive to the differences among firms after the introduction user fees which suggests that the reform has led to more equity in the new drug review process. In addition, the FDA has expedited the review of new drugs, especially the most therapeutically novel drugs which
suggests that politicians have been relatively successful in designing a reform to realign regulatory incentives in the FDA.

JEL Classification: D73, I18, L51, K2

Accepted Paper Series