Does regulatory approval speed impact product quality? Evidence from the US pharmaceutical industry (WITHDRAWN)

Abstract

The trade-off between speed to market and product quality is a well-studied phenomenon in the new product development literature. However, there is little evidence of how supply chain stakeholders beyond the focal firm can impact the speed-quality trade-off. Moreover, the impact of speed to market on performance parameters outside the firm – such as consumer safety and surplus, or social welfare – is unclear. We address both these gaps in the literature by studying speed to market from a regulatory perspective and analyzing the impact of speed to market on safety-related construct. Rooted in the context of the US pharmaceutical drug industry, our study evaluates the impact of four expedited drug approval programs by the USFDA on the quality of the newly launched pharmaceutical drugs in the US. These programs are designed to provide speedier access to those novel drugs which address a large unmet clinical need for the patients. We operationalize product quality as the number of adverse events and show that drugs approved under expedited programs could result in as high as 131% more number of adverse events and 167% more number of serious adverse events. Our study makes important theoretical and practical contributions. Theoretically, this is the first study in the NPD literature that, to the best of our knowledge, examines the impact of regulatory speed on the product quality. Practically, our study highlights critical unintended consequences of expediting the drug approval process for the regulators.