David Ridley: Supply and Demand Analysis of Priority Review Vouchers

In 2007, Congress created the priority review voucher program to encourage development of drugs for neglected diseases. Since 2007, Congress has expanded the program to include additional diseases eligible for vouchers, but authors David Ridley and Stephane A. Régnier warn against expanding the program. The program is subject to the laws of supply and demand, so expanding the supply would decrease the price, thus decreasing the incentive for companies to develop new drugs for diseases already on the list. To illustrate how prices fall with expansion of the voucher supply, the authors collected 5-year sales data for drugs approved between 2007 and 2009. They then applied a model of how those sales could expand through use of a priority review voucher. Sales would expand through the competitive effect (taking market share from competitors), the time-value effect (the value of money today compared to tomorrow), and the exclusivity effect (more time on the market before the entry of generics and other competitors). In order for the vouchers to remain worthwhile investments, the authors call for more careful consideration of the diseases that qualify for inclusion in the voucher program, based on burden of disease, current drugs in use, and other incentive mechanisms.


Read more in “The Commercial Market for Priority Review Vouchers” Health Affairs

Ridley, D.B. & Regnier S.A. (2016). The Commercial Market for Priority Review Vouchers. Health Affairs, 35 (5), 776-783. Doi: 10.1377/hlthaff.2015.1314