Generic Drug Transparency: Testing a Regulatory Policy Proposal

30 Pages Posted: 1 Dec 2023

See all articles by Sebastián Villa

Sebastián Villa

Anderson School of Management, University of New Mexico

Gloria Urrea

University of Colorado at Boulder - Leeds School of Business

George Ball

Operations and Decision Technologies Dept, Kelley School of Business, Indiana University

John Gray

The Ohio State University - Fisher College of Business

Date Written: November 20, 2023

Abstract

Consumers who take generic drugs have little ability to determine where their drugs are
manufactured or the quality of their drugs. The pharmaceutical regulator in the United States (U.S.), the Food and Drug Administration (FDA), possesses both manufacturing location and quality data, but does not release this data to the public. A Congressional-commissioned National Academy of Sciences Engineering and Medicine (NASEM) report recommended that the FDA increase drug transparency by requiring manufacturers put manufacturing location and quality ratings on drug labels. The report made these recommendations to facilitate consumer preferences that may reward high quality manufacturers and U.S. drug manufacturing. The FDA has not acted on these recommendations, in part, we propose, because doing so contradicts FDA messaging, which states that all generic drugs approved via the same original drug are fully interchangeable, regardless of manufacturing location. This study is a test of the drug transparency recommendations made in the NASEM report. We implement two randomized choice-based conjoint analysis experimental studies with 1,500 U.S. participants to test these recommendations. Results indicate a strong preference for U.S.-made generic drugs when quality is not transparent, implying that consumers may not be fully convinced that all generic drugs are as interchangeable as the FDA claims. Including quality ratings in addition to manufacturing location removes much of the pro-U.S. bias, although not completely. Post hoc analysis explores a potential mechanism explaining these results and a simulated market share analysis provides economic implications of our experimental findings.

Keywords: Generic Drugs, Pharmaceutical Industry, Quality, FDA, Experiment

Suggested Citation

Villa, Sebastián and Urrea, Gloria and Ball, George and Gray, John, Generic Drug Transparency: Testing a Regulatory Policy Proposal (November 20, 2023). Available at SSRN: https://ssrn.com/abstract=4639108 or http://dx.doi.org/10.2139/ssrn.4639108

Sebastián Villa

Anderson School of Management, University of New Mexico ( email )

Albuquerque, NM 87131
United States

Gloria Urrea

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

George Ball (Contact Author)

Operations and Decision Technologies Dept, Kelley School of Business, Indiana University ( email )

1309 E 10th St
Bloomington, IN 47405
United States

John Gray

The Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-247-8021 (Phone)

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