Health Research and Policy

Research in Progress Seminar (RIP)

Date: January 15, 2014
Time: 4:00 - 5:00 pm
Location: CHP/PCOR Conference Room
117 Encina Commons
Speaker: Ariel Dora Stern
PhD Candidate in Public Policy, Harvard University
Title: Innovation Under Regulatory Uncertainty: Evidence from Medical Technology

Abstract:

This paper explores how the regulatory approval process affects innovation incentives in medical technologies. While prior studies of medical innovation under regulation have found an early mover regulatory advantage for drugs, I find the opposite to be true for medical devices. Using detailed data on over three decades of high-risk medical device approval times in the United States, I show pioneer entrants spend approximately 34 percent (7.2 months) longer in the approval process than the first follow-on innovator. Back-of-the-envelope calculations suggest that a delay of this length could translate to a loss of approximately 8 percent of expected lifetime product revenues. I consider how different types of regulatory uncertainty affect approval times and find that a product's technological novelty is largely unrelated to time spent under review. In contrast, procedural uncertainty appears to play a large role: when objective guidelines for evaluation are published, approval times quicken for subsequent entrants. Finally, I consider how the regulatory process affects firms' market entry strategies and find that financially constrained firms are less likely to enter new device markets as pioneers.

Please note: All research in progress seminars are off-the-record. Any information about methodology/press release and/or results are embargoed until publication.
 
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