Journal of Risk and Uncertainty

, Volume 47, Issue 1, pp 1–30 | Cite as

Eliminating the U.S. drug lag: Implications for drug safety



An increase in new drugs first launched in the U.S. and shorter lags between first global drug launch and U.S. approval indicate that the U.S. drug lag has declined. This paper examines the impact of these changes on drug safety using adverse drug reaction data for FDA-approved drugs in 1990 to 2004. Results show two different effects. First, drugs having longer U.S. launch lags (more foreign market experience) have fewer post approval drug risks compared to drugs with shorter launch lags. This result implies that foreign market experience prior to U.S. entry provides information to help alleviate drug-related risks for U.S. patients. Second, drugs that are first launched in the U.S. have fewer serious drug reactions compared to those that were first launched abroad. This result is surprising, and may suggest that first U.S. drug launch signals information about unobserved application quality, which translates into lower post approval drug risks.


Drug safety Drug approval Drug lag 

JEL Classifications

I18 L51 



I thank Margaret Kyle and Ernst Berndt for generously sharing their data with me, Roy Castle at the FDA for providing additional data, and Emily Karwat for assisting in the collection of firm data. I gratefully acknowledge helpful comments from seminar participants from Tulane, the Legal and Regulatory Issues in Pharmaceutical Research conference at Harvard, Sara Markowitz, the editor, and an anonymous referee. This project also benefited from valuable research support from the Murphy Institute of Political Economy at Tulane.


  1. Abraham, & J., Davis C. (2005). A comparative analysis of drug safety withdrawals in the UK and U.S. (1971–1992): Implications for current regulatory thinking and policy. Social Science and Medicine, 61, 881–892.CrossRefGoogle Scholar
  2. Carson, J., Strom B., Maislin G. (1994). Pharmacoepidemiology, 2nd ed. (B. Strom, Ed.) New York: Wiley.Google Scholar
  3. Center for Drug Evaluation and Research, Food and Drug Administration (1996). The clinical impact of adverse event reporting. A MedWatch continuing education article.Google Scholar
  4. Danzon, P., & Epstein A. (2009). Effects of regulation on drug launch and pricing in interdependent markets. NBER working Paper # 14041.Google Scholar
  5. David, G, Markowitz S., Richards-Shubik S. (2010). The effects of pharmaceutical marketing and promotion on adverse drug events and regulation. American Economic Journal: Economic Policy, 2(4), 1–25.CrossRefGoogle Scholar
  6. DiMasi, J., Hansen R., Grabowski H. (2003). The price of innovation: new estimates of drug development costs. Journal of Health Economics 22(2), 151–185.CrossRefGoogle Scholar
  7. Grabowski, H., & Wang Y. (2006). The quantity and quality of worldwide new drug introductions, 1982–2003. Health Affairs 25(2), 452–460.CrossRefGoogle Scholar
  8. Grabowski, H., & Wang Y. (2008). Do faster Food and Drug Administration drug reviews adversely affect patient safety? An analysis of the 1992 prescription drug user fee act. Journal of Law and Economics 51(2), 377–406.CrossRefGoogle Scholar
  9. Grabowski, H., Vernon J., Thomas L. (1978). Estimating the effects of regulation on innovation: an international comparative analysis of the pharmaceutical industry. Journal of Law & Economics 21(1), 133–163.CrossRefGoogle Scholar
  10. Institute of Medicine Committee on the Assessment of the U.S. Drug Safety System. 2007. The future of drug safety: Promoting and protecting the health of the public. Washington, DC: National Academy Press.Google Scholar
  11. Kaitin, K., & Brown J. (1995) A drug lag update. Drug Information Journal 29(2), 361–73.Google Scholar
  12. Kaitin, K., & Manocchia M. (1997). The new drug approvals of 1993, 1994, and 1995: Trends in drug development. American Journal of Therapeutics 4(1), 46–54.CrossRefGoogle Scholar
  13. Kaitin, K., & Healy E. (2000). The new drug approvals of 1996, 1997, and 1998: drug development trends in the user fee era. Drug Information Journa l34, 1–14.Google Scholar
  14. Kaitin, K., & Cairns C. (2003). The new drug approvals of 1999, 2000, and 2001: drug development trends after the passage of the prescription drug user fee act of 1992. Drug Information Journal 37, 357–371.Google Scholar
  15. Kaitin, K., Mattison N., Northington F., Lasagna L. (1989). The drug lag: an update of new drug introductions in the United States and in the United Kingdom, 1977 through 1987. Clinical Pharmacology & Therapeutics 46(2), 121–38.CrossRefGoogle Scholar
  16. Kaitin, K., Manocchia M., Seibring M., Lasagna L. (1994). The new drug approvals of 1990, 1991, and 1992: Trends in drug development. The Journal of Clinical Pharmacology 34, 120–127.CrossRefGoogle Scholar
  17. Kyle, M. K. (2006). The role of firm characteristics in pharmaceutical product launches. RAND Journal of Economics 37(3), 602–618.CrossRefGoogle Scholar
  18. Kyle, M. K. (2007). Pharmaceutical price controls and entry strategies. Review of Economics and Statistics 89(1), 88–99.CrossRefGoogle Scholar
  19. Lanjouw, J. O. (2005). Patents, price controls and access to new drugs: how policy affects global market entry. NBER working paper #11321.Google Scholar
  20. Olson, M. K. (1997). Firm characteristics and the speed of new drug approval. Journal of Economics and Management Strategy 6(2), 377–401.CrossRefGoogle Scholar
  21. Olson, M. K. (2004a). Managing delegation with user fees: Reducing delay in new drug review. Journal of Health Politics, Policy, and Law 29(3), 397–430.CrossRefGoogle Scholar
  22. Olson, M. K. (2004b). Are novel drugs more risky for patients than less novel drugs? Journal of Health Economics 23(6), 1135–1158.CrossRefGoogle Scholar
  23. Olson, M. K. (2008). The risk we bear: The effects of review speed and industry user fees on drug safety. Journal of Health Economics 27(2), 175–200.CrossRefGoogle Scholar
  24. Olson, M. K. (2009) PDUFA and initial U.S. drug launches. Michigan Telecommunications and Technology Law Review 15(2), 393–414.Google Scholar
  25. Peltzman, S. (1973). An evaluation of consumer protection legislation: 1962 drug amendments. Journal of Political Economy 81, 1049–1091.CrossRefGoogle Scholar
  26. Philipson, T., & Sun E. (2008). Is the Food and Drug Administration safe and effective? Journal of Economic Perspectives 22, 85–102.CrossRefGoogle Scholar
  27. Philipson, T., Berndt E., Gottschalk A., Strobeck M. (2008). Cost-benefit analysis of the FDA: the case of the prescription drug user fee acts. Journal of Public Economics 92(5–6), 1306–1325.CrossRefGoogle Scholar
  28. Wardell, W. M. (1978) The drug lag revisited: Comparison by therapeutic area of patterns of drugs marketed in the United States and Great Britain from 1972 through 1976. Clinical Pharmacology & Therapeutics 24, 499–524.Google Scholar
  29. Wooldridge, J. (2002). Econometric analysis of cross section and panel data. Cambridge: MIT Press.Google Scholar
  30. Yamada, T., Kusama M., Hirai Y., Arnold F., Sugiyama Y., Ono S. (2010). Analysis of pharmaceutical safety-related regulatory actions in Japan: Do tradeoffs exist between safer drugs and launch delay? The Annals of Pharmacotherapy 44: 1976–1985.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Department of EconomicsTulane UniversityNew OrleansUSA

Personalised recommendations