Volume 8, Issue 1

Congress enacted and renewed the Prescription Drug User Fee Acts (PDUFA) in 1992, and renewed it in 1997 and 2002, mandating FDA performance goals in reviewing and acting on drug applications within specified time periods. In turn, the FDA was permitted to levy user fees on drug sponsors submitting applications to the FDA. While PDUFA mandated action or review times, its ultimate impacts on actual final drug approval times are unknown. We model and quantify the impact of PDUFA-I and II on drug approval times, since these approval dates are the ones most directly related to new medicines becoming available to benefit patients.In assessing the impacts of PDUFA on drug approval times, it is noteworthy that approval times were trending downwards at 1.7% percent per year prior to implementation of PDUFA. Assuming continuation of that time trend, approval times post-PDUFA would have fallen even in the absence of PDUFA. Our principal finding is that PDUFA accelerated this downward trend so that instead of a counterfactual 6% reduction in approval times from 24.2 to 20.4 months in absence of these acts between 1991 and 2002, there was an observed decline of about 42%, from 24.2 to 14.2 months, following implementation of PDUFA. Thus, of the total observed decline in approval times between 1991 and 2002, approximately two-thirds can be attributed to PDUFA. However, much of this impact occurred in the initial years between 1992 and 1997 (PDUFA-I) rather than during the subsequent 1997-2002 time frame (PDUFA-II). We discuss implications of these findings and how future research might quantify the social value of the observed acceleration in the FDA drug approvals.

Many companies have defined-contribution benefit plans requiring employees to pay the full cost (before taxes) of more generous health insurance choices. Research has shown that employee decisions are quite responsive to these arrangements. What is less clear is how the total compensation package changes when health insurance premiums rise. This paper examines employee compensation decisions during a three-year period when health insurance premiums were rising rapidly. The data come from a single large firm with a flexible benefits plan wherein employees explicitly choose how to allocate compensation between cash wages and other benefits. Under such an arrangement, higher health insurance premiums must induce changes in the composition of total compensation–either in lower after-tax wages or in decreased contributions to other benefits. The results suggest that about two-thirds of the premium increase is financed out of cash wages and the remaining one-thirds is financed by a reduction in benefits.

The growth of medical malpractice liability costs has the potential to affect the delivery of health care in the U.S. along two dimensions. If growth in malpractice payments results in higher malpractice insurance premiums for physicians, these premiums may affect the size and composition of the physician workforce. The growth of potential losses from malpractice liability might also encourage physicians to practice “defensive medicine.” We use rich new data to examine the relationship between the growth of malpractice costs and the delivery of health care along both of these dimensions. We pose three questions. First, are increases in payments responsible for increases in medical malpractice premiums? Second, do increases in malpractice liability drive physicians to close their practices or not move to areas with high payments? Third, do increases in malpractice liability change the way medicine is practiced by increasing the use of certain procedures? First, we find that increases in malpractice payments made on behalf of physicians do not seem to be the driving force behind increases in premiums. Second, increases in malpractice costs (both premiums overall and the subcomponent factors) do not seem to affect the overall size of the physician workforce, although they may deter marginal entry, increase marginal exit, and reduce the rural physician workforce. Third, there is little evidence of increased use of many treatments in response to malpractice liability at the state level, although there may be some increase in screening procedures such as mammography.

There is tremendous interest in understanding the effects of welfare reform enacted by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Our interest lies in one possible consequence of welfare reform: the loss of health insurance.This paper advances the literature by utilizing the 1992-1996 panels of the Survey of Income and Program Participation, matching type of insurance coverage to the presence of waivers from AFDC or TANF implementation in each state in specific months. We utilize a difference in differences method. Specifically, we estimate the difference before and after welfare reform in the insurance coverage of women and children who were likely to be eligible for welfare compared to those who were likely to be ineligible for welfare.We find that AFDC waivers prior to 1996 and the implementation of TANF after 1996 raised the probability that welfare-eligible women lack health insurance coverage. Specifically, TANF implementation is associated with a 7.8 percent increase in the probability that a welfare-eligible woman was uninsured. Welfare reform had less of an impact on the health insurance coverage of children. We find no evidence that AFDC waivers increased the probability that welfare-eligible children were uninsured. However, TANF implementation was associated with a 2.8 percent increase in the probability that a welfare-eligible child lacked health insurance.