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Appendix The major decline in the number of new US drug introductions occurred at roughly the same time as the introduction of the 1962 amendments to the Food, Drug, and Cosmetic Act. A substantial body of policy analysis was undertaken to consider the effect of these regulatory changes on the number of new drug approvals. The early literature, however, has some major weaknesses. One of the initial studies by Peltzman (~15), for example, indicated that ad of the differences in introduction rates between the 1960s and 1950s could be attributed to the effects of regulation. One major weakness of his mode] is that it assumes that new drugs are supplied at a constant rate, thus changes in supply side factors that would cause the introduction rate to fall are not incorporated. Using a supply side mode] (a production function approach), Baily subsequently argues that introductions are not only a function of regulation, but also of industry research expenditures and research opportunities (6~. He concludes that regulatory requirements have significant `decreased new drug introductions. The measures used to examine the effect of regulation and research opportunities, however, are not very refinery. Wiggins(150), in a careful analysis of the subject, subsequently argues that to determine the specific influence of regulatory factors versus non-regulatory factors on the development process one should desegregate the new drug approval data according to therapeutic class. indicate that, not only were there changes over time in the numbers of INDs filed, but also in the pharmacological types of NCEs entering human testing. If one compares the mid 1960s with the early 1980s, for example, the number of anti- infective and psychopharmacological drugs decreased markedly, while cardiovascular drugs initially decreased somewhat and then increased again, and antineoplastic and gastro-intestinal drugs increased steadily2. The primary source of the overall decline can be found in psychopharmacological drugs, especially tranquillizers, and in anti- infectives. The question then arises whether these categories were more stringently regulated than other categories? According to Wiggins3, it appears that these These data ~ A subsequent study By Grabowski et al. (60) used a more sophisticated model and found roughly similar results. As a measure of regulation they consider the average amount of NDA review time. Regarding research opportunities, they use changes in the productivity of pharmaceutical R&D in UK during the 60s as a control measure for chances in non reculatorv factors in the US. 1' 2 However' one should keep in mind that the largest four categories in the early 1960s -- anti-infectives' analgesics' cardiovasculars and psychopharmacologic -- still remain the largest therapeutic categories in the early 80s. 3 While, as mentioned above, assessing efficacy and safety may be more complex with psychopharmacological products, this is certainly not the case with anti-infectives. Furthermore, the NDA review times within the regulatory agency for these two 53

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categories were not regulated more stringently, thus that non-regulatory factors must have also played a major role. Peter Temin specifies the argument as follows(133~. He underlines the fact that by far the largest decline can be found in the area of tranquillizer drugs. In addition to non-regulatory factors (such as the strong patents held in this area), he asserts that "the thalidomide tragedy was the proximate cause in the decline, acting quickly through its effects on the direction of drug industry research and more slowly through the governmental regulatory process". Tn short this literature does not specify the exact effect of changing regulatory requirements on the decline, it does demonstrate that regulatory requirements are an important factor in determining how, and whether, a drug is developed. ~ 7 At the same time, a number of studies(S6,140,142,143) have approached this issue from a different angle. They have compared the number of drug introductions in the US with other European countries, most notably the UK. Their results indicated that on average more NCEs were introduced to, for example, the UK market than to the US market. Furthermore, of the drugs introduced to both US and Euronean markets, most drugs were first introduced in Eurone. ~~ ~_~ __ Am_ 1~_ _ 1__tl ~~ r ~1 __ - 1 _ ~ 1 ~ 1 ~ This phenomenon has been aescr1nea as tne drug lag. MOSt O! these analyses, however, focus on the 1960s and early 1970s, while since the early 1970s these differences can be seen to converge. While the differences in market withdrawals were never anywhere near so marked as those of new drug introductions, the withdrawal rates also converged over time. For example, Between 1YO4 ano 1Yb3, ~ drugs were olscontlnuec cue to sated reasons in the UK and 5 in the US, while after 1974 the discontinuations in both countries are exactly similar(7,65~. ~ ~ , ~ nor ~ ~ ~ ~~ rot ~ ~. . _ . ~ Although international regulatory differences thus seem to diminish, a recent analysis by Berlin and Johnson demonstrates that the Scandinavian countries and the US are among the more stringent regulatory approval systems, both in terms of the length of the review times as well as in marketing dates(14~. categories were rather similar with regard to drugs in other therapeutic classes. In addition, the percentage of psychopharmacological drugs and anti-infectives first marketed abroad (under a different regulatory system) were also roughly similar to the percentage first marketed abroad in other therapeutic classes. According to these measures, it appears that neither psychopharmacological products or anti- infectives were regulated more stringently. The additional decline in these two categories, above other categories, therefore should be related to a number of non- regulatory factors, such as, for example, a potential decrease in research opportunities, or a potential increase in perceived risk to develop drugs in a specific area (for instance, a relationship between the decrease in tranquillizers and the thalidomide tragedy). 54