Health Affairs, 25, no. 5 (2006): 1309-1317 doi: 10.1377/hlthaff.25.5.1309 © 2006 by Project HOPE	New Online   Pay Cuts For Medicare Docs   Access To Care Woes   Public Coverage More Efficient   Empowering Consumers

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Evolution & Future

How Changes In Drug-Safety Regulations Affect The Way Drug And Biotech Companies Invest In Innovation

Changes in the economics of product development resulting from heightened safety regulations could have a sizable negative impact on drug and biotechnology companies’ decisions about investing in innovation. We developed a model to compare the potential economic effects of pre- and postmarketing strategies to identify safety problems with new drugs. Although expanding Phase III clinical testing and postmarketing safety surveillance are not perfect substitutes, our findings suggest that even a large increase in funding for the latter will have a relatively small adverse impact on investment decisions by drug companies and venture capital firms, compared with the former.

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