Institutional change, innovation and regulation failure: evidence from the Spanish drug market

Abstract

Scant evidence has been reported on the influence of institutional change in drug market regulation. This article draws on the evidence of Spanish drug regulation (1980-2005) with the aim of examining whether institutional (lack of) change affected (i) regulatory innovation and (ii) the propensity of regulatory failure (rent seeking). We find that the prevailing institutional design of Spanish drug regulation has been prone to regulatory failure as incentives were geared towards rent-seeking behaviour and inefficient drug use by older patients and doctors. Innovation was typically imported except for a government devolution which occasionally has prevented regulatory failure