Weighing the Options: From ANDA Submissions to Launch Decisions

FDA approval is necessary for a generic drug to be marketed but is not sufficient – FDA approval only provides an option to market, and firms decide whether or not to exercise this option.  Even more basic than the decision to market, firms must first decide to seek that option by submitting a generic drug application to FDA for review.  These two subsequent decisions affect the number of generic drugs on the market, and in turn patient access and welfare.  We use a probabilistic decision model to estimate which characteristics of the firm, the market for the drug, and technical aspects of the drug affect both decisions.  As standard in the literature, we use the set of approved ANDAs and authorized generics for the launch decision.  For the submission decision model, we use a cohort of submissions linked to a set of reference listed drug (RLD) facing the possibility of generic competition with 180-day exclusivity.  Our sample includes all RLDs that first get challenged between 2010 and 2014.  By including ANDA submission data, we illuminate the “demand for approvals” to answer questions related to how many generic submissions are received for a given product, when are they received, and how many formally withdraw or just abandon prior to being approved.