Innovation Incentives Under Transferable Fast-Track Regulatory Review

Abstract

In 2007, Congress created a fast-track review voucher at the US Food and Drug Administration (FDA) as a reward for approval of a drug for a neglected disease. The developer of a neglected-disease drug receives a transferable voucher for faster review of any other drug. Similar fast-track vouchers are being offered by other agencies including the US Patent and Trademark Office (USPTO). This paper provides the first model of the innovation incentives for both humanitarian and other products as a result of transferable, fast-track regulatory review. We demonstrate how the existence of that review can impact innovation incentives potentially creating competition between otherwise unrelated pursuits. We consider the tradability of fast-track vouchers and map these to innovation race outcomes. Our analysis highlights areas for further exploration in policy settings as well as predictions for empirical analysis of the impact of fast-track policies.

Keywords: innovation, priority review vouchers, resale, regulation, patents

JEL Classification: O34, O31, L24