Transaction Cost Analysis of the New Drug Application Process: A Case Study of a Multinational Pharmaceutical Company in Japan

Abstract

The aim of this study was to measure the transaction costs of a new drug application (NDA) process in Japan in a case study of a multinational pharmaceutical company. The NDA process was viewed as involving transactions among 3 organizations: the headquarters, the Japanese subsidiary, and the Pharmaceuticals and Medical Devices Agency. Transaction costs were calculated by multiplying the time for each transaction by an hourly wage. Work time for the NDA process totaled 14,710.6 hours and was estimated to cost US$558,000 in human resource-related expenditure in the company. The total time for intracompany transactions was 7662.5 hours (52.1% of all transactions), which was similar to that of transactions with the Pharmaceuticals and Medical Devices Agency (7048.1 hours, 47.9%). Also found was a press-and-slack procedure in time course observation. In conclusion, the current NDA system in Japan imposes a considerable time and cost burden behind that of the visible official process on a multinational company.