Regulatory Agency Discretion Among Competing Industries : Inside the Fda

This paper develops a theoretical framework to analyze the variability in Food and Drug Administration (FDA) approval decisions among competing industries including those that produce new brand-name drugs, generic drugs, and medical devices. The theory provides a framework to empirically test for the determinants of FDA approval decisions. These determinants include the agency's budget, congressional preferences and several proxies for industry interests and consumer interests. Results from the analysis suggest that the agency's response to these determinants varies among the three different industry approval activities. The pattern of variation implies that bureaucratic discretion is the highest for products with the greatest regulatory stringency. This variation in agency responsiveness further suggests that no single theory of regulation can explain the agency's approval decisions among the three industries. Instead, different theories of regulation, such as public interest, capture or congressional control, are need to explain different industry approval activities