Incentives for clinical trials

Abstract

Who gains from more information on the quality of pharmaceutical drugs?Are there incentives for voluntary post-approval clinical trials among pharmaceutical companies? Contrary to popular belief, this paper shows that it is not in the consumer interest that clinical evidence establishing the relative e¤ectiveness within a class of drugs are produced. Pharmaceutical companies, on the other hand, do bene…t: the elimination of uncertainty regarding quality increases expected product di¤erentiation, thereby raising prices for both high-quality and low-quality drugs, to the disadvantage of consumers.Still there is no unique equilibrium where the market provides clinical trials.If the costs of carrying out clinical trials are small, in relative terms, there will be a coordination problem between …rms, as …rms will want a rival …rm to carry the cost. If the costs are large they will be prohibitive. Legislation that obligates entering …rms to carry out post-approval trials is bene…cial for …rms if it solves the coordination problem, but is otherwise harmful. Legislation is never in the interest of consumers.

How do Cooperation and Scientific Research Influence Drug Development? The Case of Cancer Disease

“…Commercialization Grönqvist & Lundin (2009) This research found that post-approval head-to-head clinical trials increase expected product differentiation which is benefit for companies but not consumers.…”

“…Quantitative studies have established some of the factors which influence the economic performance of new drugs and the cost of clinical trials, including the following: the basicness of the research; the size of the investment; the specificity of the scientific targets; the sustainability of the research direction after the cessation of funding; the probability of research and commercial success; the difficulties of actually introducing the therapy on to the market (Kenney & Patton, 2018); the safety and clinical efficacy testing; compliance with regulations; and the adequate protection of intellectual property (Curreli et al, 2008). Grönqvist & Lundin (2009) confirmed through vertical differentiation predictions that pharmaceutical companies obtain benefits from carrying out voluntary post-approval clinical trials by raising prices for both high-quality and low-quality drugs. Magazzini et al (2016) found that there is a positive relationship between market size and firm entry in clinical trials.…”