Essays in the Economics of Health Care and the Regulation of Medical Technology
Contributors: Chandra, Amitabh; Cutler, David
Published: 2014
Language: eng
Description: The first chapter of this dissertation explores how the regulatory approval process affects innovation incentives in medical technologies. While prior studies of medical innovation under regulation have found an early mover regulatory advantage for drugs, I find the opposite to be true for medical devices. Using detailed data on over three decades of high-risk medical device approval times in the United States, I show pioneer entrants spend approximately 34 percent (7.2 months) longer in the approval process than the first follow-on innovator. Back-of-the-envelope calculations suggest that the opportunity cost of capital of a delay of this length is upwards of 7 percent of the total cost of bringing a new device to market. I consider how different types of regulatory uncertainty affect approval times and find that a product's technological novelty is largely unrelated to time spent under review. In contrast, uncertainty about application content and format appears to play a large role: when objective guidelines for evaluation are published, approval times quicken for subsequent entrants. Finally, I consider how the regulatory process affects firms’ market entry strategies and find that financially constrained firms are less likely to enter new device markets as pioneers.
Notes: Keywords: Economics, Healthcare, Medical Technology, Regulation.

Thesis Ph.D. Harvard University 2014