Why do many economists argue that the FDA take too long to approve new drugs?

As stated "FDA approval lags reduce the effective patent life, but brand-name recognition typically increases the effective monopolyperiod for a drug product." Government approval is necessary, it is argued that because drug firms may otherwise perform insufficient testing in an attempt to gain a first mover advantage or to avoid high costs. Because of this the FDA must approve new drugs.

The Food and Drug Administration

The FDA is the Food and Drug Administration. They are put to the task of accepting or rejecting drugs. When they test, they can have two types of errors. The first error is when the FDA rejecs a new drug that is safe and effective. A type two error is one where approves a drug that is unsafe or ineffective. To prevent this the FDA take sometimes around 200 days or more to make their decision.
To avoid mistakes, the FDA ensures that newly approved drugs have passed vigorous testing, which includes animal testing, clinical trials of healthy individuals, and clinical trials of individuals suffering from the disease the drug is meant to treat. The FDA also verifies safety, quality, efficacy, along with drug interactions, and how various drugs may work depending on age, race, and sex. Critics argue that this process is long, tedious, and costly, and dramatically lengthens the time it takes effective drugs to hit the market
Go to : http://www.ncpa.org/iss/reg/2002/pd051402c.html for an example of why Cancer doctors take too long.

FDA’s Drug Review and Approval Times

FDA is often asked about the pace of drug approvals and how FDA review time for applications affects it. Since the Prescription Drug User Fee Act (PDUFA) was passed in 1992, FDA has met and often exceeded the vast majority of review-time goals established under the Act. New drug approval times also have been dramatically reduced (from a median of 22 months in 1992 to a median of less than 12 months in 1999), although a slight increase was seen for the year 2000.

The graph shows the median time to approval for NMEs between 1986 and 2000.
external image fda-1.gif

http://www.fda.gov/cder/reports/reviewtimes/default.htm Sources: The Graph shows how new drug approval times have in fact, decreased, but slightly raised over the last year shown in this graph. Though some may think the approval time is slow, it has made imporvetments over time.

Prescription Drug User Fee Act

The Prescription Drug User Fee Act of 1992 (PDUFA) authorizes the US Food and Drug Administration (FDA) to levy user fees on manufacturers who submit applications to the agency. The mean approval phase (NDA submission to approval) for the user fee drugs was considerably shorter than that for the non-user fee drugs (14.5 versus 31.0 months, respectively), the mean clinical phase (investigational new drug application filing to NDA submission) was somewhat longer (88.0 versus 81.1 months, respectively). As a result, the total time from the start of clinical testing to drug approval (total phase) was only marginally shorter for the user fee drugs (102.0 versus 112.1 months, respectively).

Politician/Goverment Incentives

Politicians have incentive to create policies and programs to help out the community and themselves. The more their ideas are welcomed, the better their chances iof winning are. Many governement officials will be included in four majors choices.
1. Being insured or uninsured. This is the most important health care choice people make. The govermnment wil pust people to buy insurance becuase without it, the community pays. As stated by John Goodman, "The Texas State Comproller's Office conducted a study five or six years ago and concluded that in Texas we spend about $1,000 per year on health care for every uninsured person in the state. " The population must pay taxes that go towards helping pay for Medicaid. Those who are insured, pay more in their premium than they need to cover the cost of the uninsured.
2. The second choice people must make is between private and public insurance. The government also plays a role in this. If your employer provides health insurance for you to purchase, the premiums you pay are not counted in your taxable income.
3. "Do we want people who have private coverage to get it though an employer or do we want them to get int on thier own? There is not much government subsidy here, becuase goverment give lots of incentive for public health care through an employer because this is what goverment prefers.
4. Deciding between how much we want to rely on this parties to pay medical bills and how much we want to rely on our own savings. Sine some amont is paid by insurance and less is paid by the insured, a person will spend more until they pay up to amount that they may be paying if it was all out of pocket. This can relate to moral hazard.

Santerre, Neun, Health Economics. Edition 4, Copyright 2007.
NATIONAL CENTER FOR POLICY ANALYSIS,http://www.ncpa.org/iss/reg/2002/pd051402c.html


1. A doctor in Canada has come up with a new type of medicine that will help desrease the nausia that can occur from taking diabetes medicine. The FDA rejects the drug and later finds out that it is effective. What type of error is this?
A. Type I C. Type III B. Type 2 D. Type IV
-A type I error is when the FDA rejects a new drug that is safe and effective.

2. Explain the trend and why the graph above looks like it does?
-In the 80's Drug approval times were high, they decreased some, but there was a dramatic decrease in time in 1992 due to the Prescription Drug User Fee Act, which sped up the process. The time decreased until 2000 when it began to increase a little.

3. What is a major benefit of public insurance?
-with public insurance, the premuiums you pay are not considered taxable income.

4. Which of the following in NOT one of the four major choices we make regarding government policies?
A. Deciding betweeen public or private insurance.
B. Deciding if it is truly necessary to insured.
C. Deciding to help the uninsrured.
D. Deciding how much we want to rely on insurance to pay medical bills and how much we want to pay out of pocket.
-Answer: C because this is not one of the major decisions, it involves the market risk and more of governement choices and what percent will help the poor out.