Wealth effects of food and drug administration "fast track" designation

Timothy G. Alefantis, Mukund S. Kulkarni, Premal P. Vora

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

The U.S. FDA, which regulates the market approval of pharmaceutical products in the U.S., created the fast track designation to reduce the length of review time for products which are targeted at treating ailments for which there are no current therapies. Once the product enters the market it enjoys a monopolistic status until a competitor therapy emerges. We study the stock price reaction to announcements of such designations by publicly-listed firms and find that stock prices increase by a statistically and economically significant amount. Additionally, we demonstrate that a portfolio containing firms with fast track designated products outperforms a widely-diversified portfolio of stocks over a long period of time. Our results provide support for the idea that a strategy of pursuing the development of drugs that target a life threatening condition is sound.

Original languageEnglish (US)
Pages (from-to)41-53
Number of pages13
JournalJournal of Pharmaceutical Finance, Economics and Policy
Volume13
Issue number3
DOIs
StatePublished - Dec 1 2004

All Science Journal Classification (ASJC) codes

  • Pharmacology
  • Pharmaceutical Science
  • Health Policy

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