Information Disclosure and Drug Development: Evidence from Mandatory Reporting of Clinical Trials
70 Pages Posted: 3 Oct 2019 Last revised: 30 Jun 2021
Date Written: May 4, 2021
Using the Food and Drug Administration Amendments Act of 2007 (FDAAA) that requires drug developers to disclose detailed clinical study results publicly, we examine the effect of information disclosure on drug development. We find significantly more suspensions of new drug projects after the FDAAA with a causal interpretation based on difference-in-differences analyses. Further evidence supports peer learning as a mechanism for the increased suspensions after the FDAAA. We also analyze 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.
Keywords: New Drugs, Mandatory Information Disclosure, Information Diffusion, Divestment, Welfare Analysis
JEL Classification: I18, G30, D80, O32
Suggested Citation: Suggested Citation