NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Haiden A. Huskamp

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Working Papers

October 2011The Effect of FDA Advisories on Branded Pharmaceutical Firms' Valuations and Promotion Efforts
with Rena M. Conti, Ernst R. Berndt: w17528
The US Food and Drug Administration (FDA) expends considerable efforts in regulating medications approved for use. Yet the impact of medication labeling changes on brand pharmaceutical products, and whether and what firms do to respond to increased information regarding the safety and efficacy of a drug, have not be characterized. We propose a behavioral framework for examining the effects of FDA advisories on branded pharmaceutical firms and their products. We empirically assess the impact of recent FDA advisories on the stock market valuations of a sample of branded pharmaceutical manufacturing firms using event study methods. We examine whether and how branded pharmaceutical manufacturers respond to an advisory by assessing changes in promotion compared to non-affected firms. We fin...

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