Pushing for speed or scope? Pharmaceutical lobbying and Food and Drug Administration drug review

Abstract

Research Summary: We argue firms implementing political activities face a fundamental trade-off between the content and the speed of public officials' decisions. Firms can use their political capital to speed up public officials' decisions at the expense of less customized content, or to push for more tailored content at the expense of speed. How do firms respond to this trade-off? We argue firms' nonmarket strategies are determined by their market environment: they will push for content or speed depending upon the level of competitive pressures they face in the market. In the presence of high market pressures, firms are more likely to push for speed; whereas firms facing low market pressures are more likely to push for customized content. Managerial Summary: We show evidence of a trade-off between content and speed in the political arena looking at Food and Drug Administration (FDA) drug approvals: lobbying for broader drugs leads to longer revisions, whereas lobbying to speed up the review process leads to narrower drugs. We explore how firms respond to this trade-off in a sample of 540 new drug applications to the FDA from 1998 to 2015. We show firms' lobbying strategies depend upon the level of intellectual property (IP) protection behind their drugs: firms with high levels of IP protection are more likely to lobby for drug scope, whereas firms with low levels of IP protection are more likely to lobby for revision speed. K E Y W O R D S corporate political activities, innovation, lobbying, new product development, pharmaceutical industry

Knowledge, routines, and cognitive effects in nonmarket selection environments: An examination of the regulatory review of innovations

“…An NDA comprises vast amounts of data and contains on average more than 100,000 pages (Macher & Boerner, 2006). As mentioned earlier, the vast majority of new drugs eventually receive FDA approval, 2 although the agency may request the firm to submit additional information (GAO, 2012; Barber IV & Diestre, 2019).…”

“…Despite evidence discussed earlier that the vast majority of NDAs receive FDA approval (GAO, 2012; Barber IV & Diestre, 2019), the FOIA request also solicited data on NDAs that the agency did not approve. The FDA, however, responded that the agency “does not release data on all NDAs submitted, as requested, (…) but only on those submitted and approved” (emphasis in original).…”

“…An NDA comprises vast amounts of data and contains on average more than 100,000 pages (Macher & Boerner, 2006). As mentioned earlier, the vast majority of new drugs eventually receive FDA approval, 2 although the agency may request the firm to submit additional information (GAO, 2012; Barber IV & Diestre, 2019). Once a firm submits an NDA, an FDA review team comprising a variety of experts, such as medical doctors, chemists, statisticians, and pharmacologists, evaluates the corresponding evidence to ascertain whether the drug is safe and efficacious for the proposed therapeutic use (FDA, 2018).…”

“…In line with the study's focus on the regulatory review of innovations, as well as with prior empirical examinations of the FDA approval of new drugs (Carpenter, 2002;Carpenter, 2004), the analysis comprises data about stricto sensu new drugs, that is, new molecular entities. 4 Despite evidence discussed earlier that the vast majority of NDAs receive FDA approval (GAO, 2012; Barber IV & Diestre, 2019), the FOIA request also solicited data on NDAs that the agency did not approve. The FDA, however, responded that the agency "does not release data on all NDAs submitted, as requested, (…) but only on those submitted and approved" (emphasis in original).…”

“…First, nonmarket selection is critical in this context, as the introduction of new drugs in the U.S. market is subject to regulatory approval by the Food and Drug Administration (FDA; Hilts, 2003). Second, in contrast with the high failure rates typical of drug discovery and development, the FDA approves the vast majority of new drug applications (GAO, 2012, p. 7; Barber IV & Diestre, 2019, p. 1197), such that the key variation is not whether or not a new drug is approved but rather the time between application and approval (Carpenter, 2002; Carpenter, 2004). This variation in FDA review times is consequential to firms, as each day's delay in obtaining FDA approval has been estimated to inflict on the respective firm an average loss of one million U.S. dollars (Abraham, 2002).…”