NBER

Xin Yan

Emory University
Department of Economics
1602 Fishburne Drive
Atlanta, GA 30307

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Emory University

NBER Working Papers and Publications

August 2018Market Effects of Adverse Regulatory Events: Evidence from Drug Relabeling
with Matthew J. Higgins, Chirantan Chatterjee: w24957
The FDA maintains post-approval safety surveillance programs to monitor the safety of drugs. As adverse events are reported, the FDA may choose to intervene and change the safety labeling associated with a drug. We provide causal evidence of the impact that these regulatory interventions have on aggregate demand for pharmaceuticals. We find that aggregate demand declines by 16.9 percent within two years of a relabeling event. After accounting for substitution patterns by physicians along with competitor actions, aggregate demand declines by 5.1 percent. Critically, this decline represents consumers that leave the market. The overall effect appears to be driven by ‘high-intensity’ markets or those with significant relabeling activity. Results control for the level of advertising and are rob...

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