We test several explanations for the commonly observed pattern that larger firms receive shorter FDA approval times for the drugs they submit. Candidate explanations include capture and rent-seeking and “external-signals” accounts. Analyses of 766 new molecular entities submitted to the FDA from 1979 to 2000 suggest that large-firm advantage in pharmaceutical regulation is primarily due to two factors: (1) enhanced regulator familiarity with large firms by virtue of their submission histories (an effect augmented when firms merge), and (2) regulatory favor for “early entrants” to a disease market, which is induced from disease-specific consumer pressure for approvals. Our analyses show that as much as 70% of observed large-firm advantage in expected FDA approval times can be attributed to these factors, 30-55% to familiarity alone. We find no consistent support for rent-seeking or “political clout” explanations.Governmen
