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
Can regulation reduce risks associated with investing in early-stage firms? Using the passage of the European Orphan Drug Act (EU-ODA), we examine this question in the biopharmaceutical industry. We provide causal evidence that venture capitalists (VCs) are more likely to invest in early-stage firms operating in sub-fields disproportionately affected by EU-ODA. The switch to early-stage investments appears strongest among VCs that previously faced greater levels of information asymmetry. We also find that the level of syndication declined for early-stage investments and exit performance improved. We conclude discussing the implications of our findings for public policy, entrepreneurship and innovation.
|August 2018||Market Effects of Adverse Regulatory Events: Evidence from Drug Relabeling|
with Matthew J. Higgins, Xin Yan: w24957
We provide causal evidence that regulatory shocks associated with drug safety label changes lead to aggregate demand declines of 16.9 percent within two years of a relabeling event. After accounting for all plausible substitution patterns by physicians along with competitor actions, aggregate demand declines by 4.7 percent; this decline represents consumers that prematurely leave the market. Results are robust to variation across types of relabeling, market sizes, and levels of competition. Our findings complement recent work that shows negative upstream innovation impacts from these downstream regulatory shocks. Importantly, drugs receiving expedited FDA review are more likely to incur serious safety label changes. Thus, it appears we may be trading off quicker access to new drugs today f...
|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