Indian Institute of Management Ahmedabad
Room 15F, Wing 15, Heritage Campus
Institutional Affiliation: Indian Institute of Management Ahmedabad
NBER Working Papers and Publications
|October 2018||Moving Beyond the Valley of Death: Regulation and Venture Capital Investments in Early-Stage Biopharmaceutical Firms|
with Yujin Kim, Matthew J. Higgins: w25202
Venture capitalists (VCs) traditionally invest in risky, early-stage innovations. Recent research suggests, however, that VCs may be herding into less risky, later-stage projects. Such a shift can create funding gaps for early-stage firms. Can regulation reverse this trend by providing information that may reduce the risk of early-stage investments? Using the regulatory setting of the European Union and the passage of the Orphan Drug Act (EU-ODA), we examine this question in the biopharmaceutical industry. We provide causal evidence that VCs are more likely to invest in early-stage biopharmaceutical firms operating in sub-fields disproportionately affected by EU-ODA. We also find that the level of syndication declined for early-stage investments and exit performance improved. Importantly, ...
|August 2018||Market Effects of Adverse Regulatory Events: Evidence from Drug Relabeling|
with Matthew J. Higgins, Xin Yan: 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...
|September 2014||Starving (or Fattening) the Golden Goose?: Generic Entry and the Incentives for Early-Stage Pharmaceutical Innovation|
with Lee Branstetter, Matthew J. Higgins: w20532
Over the last decade, generic penetration in the U.S. pharmaceutical market has increased substantially, providing significant gains in consumer surplus. What impact has this rise in generic penetration had on the rate and direction of early stage pharmaceutical innovation? We explore this question using novel data sources and an empirical framework that models the flow of early-stage pharmaceutical innovations as a function of generic penetration, scientific opportunity, firm innovative capability, and additional controls. While the aggregate level of early-stage drug development activity has increased, our estimates suggest a sizable, robust, negative relationship between generic penetration and early-stage pharmaceutical research activity within therapeutic markets. A 10% increase in ge...
|June 2011||Regulation and Welfare: Evidence from Paragraph IV Generic Entry in the Pharmaceutical Industry|
with Lee G. Branstetter, Matthew Higgins: w17188
With increasing frequency, generic drug manufacturers in the United States are able to challenge the monopoly status of patent-protected drugs even before their patents expire. The legal foundation for these challenges is found in Paragraph IV of the Hatch-Waxman Act. If successful, these Paragraph IV challenges generally lead to large market share losses for incumbents and sharp declines in average market prices. This paper estimates, for the first time, the welfare effects of accelerated generic entry via these challenges. Using aggregate brand level sales data between 1997 and 2008 for hypertension drugs in the U.S. we estimate demand using a nested logit model in order to back out cumulated consumer surplus, which we find to be approximately $270 billion. We then undertake a count...
Published: RAND Journal of Economics, Volume 47, Issue 4 Pages 857–890, 2016