Enhanced Information Disclosure and Drug Development: Evidence from Mandatory Reporting of Clinical Trials

Abstract

Using Section 801 of the Food and Drug Administration Amendments Act of 2007 (FDAAA) that requires drug developers to disclose clinical trial plans and detailed study results publicly, we provide novel evidence for the effect of information disclosure on drug development. We find suspensions increase significantly in industry-sponsored clinical trials after the FDAAA. This effect has a causal interpretation based on a difference-indifferences analysis that exploits the disclosure requirement imposed by the International Committee of Medical Journal Editors (ICMJE) before the FDAAA. Further evidence supports peer learning as a mechanism for the increased suspensions after the FDAAA. Finally, we analyze the social welfare implications of enhanced information disclosure; while the FDAAA helps improve drug quality, it leads to more suspensions of potential new drugs that could have reduced mortality and morbidity.