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15 Regulation 47 (1992)
Drug Approval Overregaultion

handle is hein.journals/rcatorbg15 and id is 249 raw text is: Drug Approval Overregulation Michael R. Ward The Food and Drug Administration regulates drug approvals to increase public health by keeping unsafe and ineffective drugs off the market while allowing pharmaceutical firms to market safe and effective drugs. Thus, the public can think of an approved drug as one that has been demonstrated to meet a standard for safety and efficacy. There is, however, evidence to sug- gest that U.S. drug approval standards have become more stringent than is socially optimal. Industry studies show not only a dramatic increase in the stringency of the FDA's drug regu- lation but also a net effect that harms consumers. Those results are consistent with a more general theory of regulation that implies that drug approval stringency will exceed what is socially optimal because the FDA is more adversely affected by approving harmful drugs than by denying approval of beneficial drugs. Successive reforms of the drug approval process have contin- ually attempted to relax the stringency by more fully addressing the bias in the FDA's incentives. Reforms proposed in November of 1991 that reduce the stringency of the drug approval process should be adopted. The Drug Development Process The very nature of the lengthy drug development process makes the pharmaceutical industry sus- ceptible to harm from unnecessarily stringent reg- ulations. Basic pharmaceutical research identifies Michael R. Ward is a staff economist at the Federal Trade Commission. His views are not necessarily those of the FTC. promising chemical or biological properties of newly synthesized or previously known sub- stances. Researchers usually publish their find- ings in academic journals and make presentations at conferences. Scientists at the major drug firms learn about the findings from those sources as well as through direct contact with the research- ers. Drug firms perform their own research on the substances that show the most promise for eventual market introduction. When a pharmaceutical firm identifies a new therapeutic use for a substance, it usually applies for a use patent and begins animal tests to deter- mine safe dosage levels of the drug. To begin human clinical trials in the United States, the firm files an investigational new drug application with the Food and Drug Administration. The firm may begin testing unless the FDA intervenes within thirty days. The tests follow guidelines established by the FDA and are divided into three phases. In the first phase firms test for safety on twenty to eighty healthy volunteers. In the more extensive second-phase tests, using 100 to 300 patients, firms test for efficacy under different dosages. The third phase entails a series of wider-scale trials (usually on 1,000 to 3,000 patients), in which firms test for proof of efficacy and acceptable side- effects. If the drug still appears to be promising, the firm submits the results of the trials to the FDA in the form of a new drug application. Appli- cations are typically 100,000 pages long. Finally, the FDA will approve the drug as a treatment for a specific indication. If it becomes known that the drug is effective in treating a different condition, CATO REVIEW OF BUSINESS & GOVERNMENT 47

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