NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Is the FDA Too Conservative or Too Aggressive?: A Bayesian Decision Analysis of Clinical Trial Design

Vahid Montazerhodjat, Andrew W. Lo

NBER Working Paper No. 21499
Issued in August 2015
NBER Program(s):The Health Care Program, The Health Economics Program

Implicit in the drug-approval process is a trade-off between Type I and Type II error. We explore the application of Bayesian decision analysis (BDA) to minimize the expected cost of drug approval, where relative costs are calibrated using U.S. Burden of Disease Study 2010 data. The results for conventional fixed-sample randomized clinical-trial designs suggest that for terminal illnesses with no existing therapies such as pancreatic cancer, the standard threshold of 2.5% is substantially more conservative than the BDA-optimal threshold of 27.9%. However, for relatively less deadly conditions such as prostate cancer, 2.5% is more risk-tolerant or aggressive than the BDA-optimal threshold of 1.2%. We compute BDA-optimal sizes for 25 of the most lethal diseases and show how a BDA-informed approval process can incorporate all stakeholders’ views in a systematic, transparent, internally consistent, and repeatable manner.

download in pdf format
   (381 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21499

Users who downloaded this paper also downloaded* these:
Jones w21391 The Economics of Exclusion Restrictions in IV Models
Allcott and Gentzkow w23089 Social Media and Fake News in the 2016 Election
Chen and Goldman w21501 Health Care Spending: Historical Trends and New Directions
Lo w21267 The Gordon Gekko Effect: The Role of Culture in the Financial Industry
Berndt, Gottschalk, and Strobeck w11425 Opportunities for Improving the Drug Development Process: Results from a Survey of Industry and the FDA
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us