NSF Org:	SES Division of Social and Economic Sciences
Recipient:	UNIVERSITY OF CALIFORNIA, SAN DIEGO
Initial Amendment Date:	February 16, 2023
Latest Amendment Date:	February 16, 2023
Award Number:	2242324
Award Instrument:	Standard Grant
Program Manager:	Nancy Lutz nlutz@nsf.gov  (703)292-7280 SES  Division of Social and Economic Sciences SBE  Directorate for Social, Behavioral and Economic Sciences
Start Date:	March 1, 2023
End Date:	February 29, 2024 (Estimated)
Total Intended Award Amount:	$23,700.00
Total Awarded Amount to Date:	$23,700.00
Funds Obligated to Date:	FY 2023 = $23,700.00
History of Investigator:	Jeffrey Clemens (Principal Investigator) j1clemens@ucsd.edu Parker Rogers (Co-Principal Investigator)
Recipient Sponsored Research Office:	University of California-San Diego 9500 GILMAN DR LA JOLLA CA  US  92093-0021 (858)534-4896
Sponsor Congressional District:	50
Primary Place of Performance:	The Regents of the Univ. of Calif., U.C. San Diego Office of Contract and Grant Administration LA JOLLA CA  US  92093-0934
Primary Place of Performance Congressional District:	50
Unique Entity Identifier (UEI):	UYTTZT6G9DT1
Parent UEI:
NSF Program(s):	Economics
Primary Program Source:	01002324DB NSF RESEARCH & RELATED ACTIVIT
Program Reference Code(s):	9179
Program Element Code(s):	132000
Award Agency Code:	4900
Fund Agency Code:	4900
Assistance Listing Number(s):	47.075

ABSTRACT

The U.S. Food and Drug Administration (FDA) regulates a wide array of health care products to ensure their safety and efficacy before they can be sold to consumers. While these regulations are intended to protect consumers, they also inevitably make it more expensive and time-intensive for companies to bring new medical technology to the market. These hurdles could leave consumers with fewer products to choose from or even delay their access to potentially life-saving medical technology. Without the threat of new entrants, existing firms are able to charge higher prices, knowing that consumers have few alternatives. Focusing on medical devices, the author(s) asks whether relaxing FDA regulation could increase the quality and accessibility of health care and combat rising costs. This project combines new data on millions of medical products with statistical analysis to understand how deregulation affects competition, prices, quantity, and quality in the market for medical devices. Specifically, the author(s) will study an FDA deregulation event in 2015 that deregulated some medical devices but not others. The results of this study will be valuable for policymakers who seek to make informed decisions about how to balance the benefits of product regulation against the costs it imposes on firms and consumers.

Products regulated by the U.S. Food and Drug Administration (FDA) account for 20 cents out of every dollar Americans spend (Food and Drug Administration, 2021). On the one hand, these regulations ? which often take the form of pre-market approval processes ? aim to ensure the safety and efficacy of consumer products. On the other hand, pre-market approvals can impose substantial costs on manufacturers, which prevent firm entry and can even reduce product safety (Rogers, 2022). This project considers how FDA regulation interacts with market forces and the resulting effect on the cost and quality of products in an important sector: medical devices. The author(s) bring together detailed data on market entry, device transactions, and insurance claims with econometric methods to answer this question. They exploit a 2015 FDA deregulation event that removed pre-market testing for 250 medical device types as a ?natural experiment? and use difference-in-difference and event study techniques to compare the effects on deregulated versus unaffected device types. They first use FDA registration data to assess the effects on market structure, like the number and types of firms that sell these devices. Next, they use fine-grained data on millions of medical device purchases made by healthcare providers to study the effects on prices and quantities of devices purchased. Finally, they use insurer claims and consider whether the prices, quantity, and quality of procedures that use these devices change. The project?s findings will provide policymakers with a better understanding of how regulation interacts with market forces and causes ripple effects throughout the supply chain in an important industry.

This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.

PROJECT OUTCOMES REPORT

Disclaimer

This Project Outcomes Report for the General Public is displayed verbatim as submitted by the Principal Investigator (PI) for this award. Any opinions, findings, and conclusions or recommendations expressed in this Report are those of the PI and do not necessarily reflect the views of the National Science Foundation; NSF has not approved or endorsed its content.

The U.S. Food and Drug Administration (FDA) plays a central role in regulating health care products to ensure their safety and efficacy before they reach consumers. However, these regulations can also create barriers for companies seeking to bring new medical technology to the market, potentially leading to fewer product choices and delayed access to life-saving innovations. In the absence of new entrants, existing firms may charge higher prices, knowing that consumers have limited alternatives. Focusing on medical devices, the author(s) sought to investigate whether relaxing FDA regulation could address rising health care costs and improve the quality and accessibility of health care.

The project has successfully expanded the current understanding of how healthcare input regulation affects healthcare costs. The author(s) acquired comprehensive data and conducted a detailed analysis, revealing that following the FDA deregulation event in 2015, hospitals experienced significant decreases in the prices they paid for deregulated medical devices. As a result, the prices patients pay through insurance claims for procedures involving these devices also decreased, demonstrating a substantial pass-through of cost savings to consumers.

The project's approach to understanding the effects of deregulation on the medical device market is noteworthy. By integrating data on market entry, device transactions, and insurance claims with econometric methods, the author(s) provided a comprehensive view of how regulatory changes impact various aspects of the industry. 

The project's findings have important implications for policymakers seeking to balance the benefits of product regulation against the costs it imposes on firms and consumers. The results suggest that relaxing FDA regulation can increase competition and lower prices. This information can help guide future policy decisions aimed at reducing healthcare costs while maintaining patient safety.

Further research will explore whether these events improved the accessibility and quality of medical care that uses affected devices and further investigate whether there is heterogeneity in the types of providers that negotiate lower prices, offering a more nuanced understanding of how different market participants respond to regulatory changes. These additional insights will contribute to a more comprehensive understanding of the complex interactions between regulation and market forces in health care.

Last Modified: 05/29/2024
Modified by: Parker Rogers

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