Innovation Incentives Under Transferable Fast-Track Regulatory Review

42 Pages Posted: 6 Nov 2012 Last revised: 13 Jun 2013

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

David B. Ridley

Duke University - Fuqua School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: June 13, 2013

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

Suggested Citation

Gans, Joshua S. and Ridley, David B., Innovation Incentives Under Transferable Fast-Track Regulatory Review (June 13, 2013). Rotman School of Management Working Paper No. 2171392. Available at SSRN: https://ssrn.com/abstract=2171392 or http://dx.doi.org/10.2139/ssrn.2171392

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David B. Ridley

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

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