Law & Economics student, Elissa Philip Gentry, has been admitted to candidacy for the Ph.D. Her dissertation is titled “Safety and Effectiveness: The FDA’s Approach to Risk in Prescription Medication.” Ms. Philip Gentry’s committee chair is Professor W. Kip Viscusi. Professors James Blumstein, Daniel Gervais, and Dr. Melinda Buntin comprise the rest of Ms. Philip Gentry’s dissertation committee.
The Food and Drug Administration (“FDA”) is tasked with approving drugs that are both safe and effective. This uniform standard, however, can prohibit access to drugs that an individual might be willing to take. Given the inherent tradeoff between rigorously vetting drugs and delaying alternative treatments for patients, the FDA has sometimes exempted drugs from strict regulation. In these situations, the FDA often allows physicians broad discretion in how to prescribe a drug, introducing the risk that the drug might not be safe or effective as prescribed. Alternatively, the FDA sometimes allows a drug’s safety and effectiveness to remain ambiguous by allowing the drug to go through accelerated approval processes rather than the traditional approval process, for the sake of increasing access to the drug. In these areas where drug risks can be heterogeneous, physicians’ ability to assess, and the market’s ability to price, risk is particularly important. This dissertation examines whether the current regulatory regime incentivizes, or even allows, consumers to choose their optimal treatment based on their risk preferences. Chapter one proposes an experiment to elicit consumers’ relative valuations of safety and effectiveness risks and to study the effect of ambiguity on each risk perception. Chapter two examines market sensitivity to risk by studying the price differential for riskier “narrow therapeutic index” drugs. Chapter three will explore the factors determining physicians’ decisions to relinquish an ineffective drug, focusing on how legal constraints and third-party payers influence such relinquishment.