Should we really worry about “launch delays” of new drugs in OECD countries?

Abstract

In the last few years, the role of pharmaceutical price controls has been frequently questioned by economists on the grounds that they lower investments in research and development (R&D), due to reduced profitability [1]. A recent article by Danzon, Wang and Wang (hereafter, DWW [2]), although related to this general topic, somehow shifts the perspective, focusing on the effects of price regulation on strategic decisions to launch new chemical entities (NCEs) and finding that low prices in a therapeutic class are significantly related to launch delays of NCEs. DWW claim that these de lays might be mainly a consequence of companies' decisions to avoid price spillovers due to parallel trade and external referencing. After DWW, further "launch delay" literature appeared. Lanjow [3] and Kyle [4] reached similar conclusions to DWW, although using different data and techniques. The issue of launch delays becomes even more important in relation to the economic literature. For example, in different analyses Lichtenberg [5, 6] found that, compared to old products, NCEs are better at "keeping people out of the hospital" and improving life expectancy. A generalization of Lichtenberg's re sults would imply that lower prices may negatively affect overall social welfare by creating barriers to the entry of new drugs [7]. We think the question is