Generic Drugs, Manufacturing Location, and Serious Drug Recalls



Over 150 million U.S. consumers who take daily prescription drugs presume that generic drugs are equally as safe as the original drugs that they are patterned after. Unfortunately, this critical assumption has gone unexamined using rigorous econometric research techniques. We address this important research and public safety gap in this study. Using Coarsened Exact Matching methods and drug labeling data, we match generic drugs against their pharmaceutically-equivalent original drugs and compare their relative safety, operationalized as serious recalls. We match 2,892 drugs from 224 firms across 10 years, and find no significant difference between generic and original drugs in the overall sample. But, we find that this result is contingent upon whether the drugs are manufactured in an IMF-designated non-advanced economy, such as India and China, or an advanced economy, such as the U.S., Canada and Europe. Currently, approximately 50% of the generic drugs marketed in the U.S. are made in non-advanced economies, mostly in India. Our model predicts that generic drugs made in non-advanced economies experience a 143 percent increase in serious recalls when compared to original drugs made in non-advanced economies, and a 42 percent increase in serious recalls when compared to original drugs made in advanced economies. We attribute this heightened recall rate to the combination of the cost-based incentives faced by all generic drug manufacturers with the less mature regulatory oversight of pharmaceutical manufacturing in non-advanced economies. We conclude with two specific policy improvement recommendations to the Food and Drug Administration.

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Meeting ID: 951 6404 2677