Comparing approval procedures for new drugs

Abstract

K E Y W O R D Saccess to new drugs, drug approval, international reference pricing 1 | INTRODUCTION This paper analyses how drug approval procedures influence the incentives of pharmaceutical firms to commercialise new drugs in different countries under international reference pricing. The general focus is on the exogenous timing of drug approvals, the endogenous choice of countries for the launches of new drugs and the regulated pricing of drugs. We also analyse in a simple framework the preferences of countries for approval procedures.Before commercialising a new drug on a market, a pharmaceutical firm must satisfy some regulatory constraints. One important compulsory step is to obtain a drug approval (or marketing authorisation). This drug approval depends on the proof that the new drug complies with safety, quality and efficacy standards. In the US, the Food and Drug Administration is in charge of approving new drugs. In the EU, four alternative procedures coexist for drug approval: the centralised procedure, the decentralised procedure, the national procedure and the mutual recognition procedure (Eudralex, 2013). Since 1995, a centralised procedure allows firms to submit a single application to the European Medicines Agency (EMA) to obtain a centralised drug approval valid in all EU countries, Iceland, Liechtenstein and Norway. 1 The decentralised procedure may be used to obtain a drug approval in several Member States when the applicant does not yet have a drug approval in any country. The national procedure is used to obtain a drug approval in one country at a time or in the initial phase of the mutual recognition procedure. The mutual recognition procedure is used to request a drug approval in EU countries for products that have already received approvals in other EU countries.The distinctive feature between these procedures that motivates our analysis is whether the drug is approved simultaneously in all countries or not. In the case of the EU, only the centralised procedure guarantees a simultaneous drug approval in all EU countries. In the alternative three noncentralised procedures, new drugs do not necessarily obtain an approval simultaneously in all countries. Once a drug approval is obtained, a drug producer can start commercialising its new 1 The centralised procedure is compulsory for all medicines derived from biotechnology and other high-tech processes, as well as for human medicines for the treatment of HIV/AIDS, cancer, diabetes, neurodegenerative diseases, autoimmune and other immune dysfunctions, and viral diseases, and for veterinary medicines for use for growth or yield enhancers. The centralised procedure is also open to products that bring a significant therapeutic, scientific or technical innovation, or is in any other respect in the interest of patient or animal health. As a result, the majority of genuinely novel medicines are authorised through the EMA.

Timely, Cheap, or Risk-Free? The Effect of Regulation on the Price and Availability of New Drugs

“…Houy and Jelovac [ 38 , 100 ] showed that their application may delay listing in some countries, while Bardey et al [ 33 ] pointed out that they may reduce expenditure in R&D. Finally, Voehler et al [ 101 ] showed that the price itself does not seem to change dramatically as a result of this regulation. The issue of investment in innovation is certainly very important as pricing may change the timing of the launch of new technologies and the return on investment in innovative drugs [ 100 , 102 , 103 , 104 , 105 , 106 , 107 ].…”

Pharmaceutical regulation under market integration through parallel trade

“…. 17 In the North, welfare increases in the reimbursement limit. A (potential) decrease in the reimbursement limit increases the consumer copayment for a given drug price 18 and decreases the quantity demanded.…”

“…The e¤ect of parallel trade on regulation is linked to the policy issue of access to pharmaceuparallel trade may result in greater launch delays. Also, approval procedures for new drugs and approval times may contribute to non-launches (Houy & Jelovac, 2019). ticals.…”

“…Price caps may be based on prices of the same drug in other countries or prices of therapeutic alternatives.2 Beside regulation via price caps and reimbursement examined in this paper, other regulation can also foster competition by parallel imports; see, for example,Birg (2023) for an analysis of the effect of regulation on the wholesale level on competition by parallel imports.3Danzon et al (2005),Danzon and Epstein (2012) andKyle (2011) suggest that stricter regulation and/or parallel trade may result in greater launch delays. Also, approval procedures for new drugs and approval times may contribute to non-launches(Houy and Jelovac 2019). …”

Price Caps versus Reimbursement Limits: Pharmaceutical Regulation under Market Integration through Parallel Trade

“…By changing regulatory decisions in destination and/or source country of parallel imports, parallel trade may result in regulatory convergence or regulatory divergence. In the former contribute to non-launches (Houy & Jelovac, 2018). case, parallel trade may also erode price di¤erences between countries, in particular, if price di¤erences are regulation driven.…”