Authors George Ball and colleagues from the Indiana University Kelley School of Business, Carlson School of Management and University of Notre Dame combined data from the US Food and Drug Administration’s (FDA) Orange Book with product recall data across a 12-year period.

Their results showed that product competition is positively associated with manufacturing-related recalls, providing evidence of a possible downside to competition in the pharmaceutical industry. Although competition is fostered by numerous federal regulations, Ball et al. found that this ‘may encourage companies to relax quality standards during the manufacturing process, which may result in lower quality products’.

Lead author, George Ball, explained that ‘extreme price competition in the generic pharmaceutical market has some unexpected risks that regulators and lawmakers may not have foreseen when pushing for cheaper drugs’. He added that ‘there’s a downside to cheaper drugs: You can't guarantee that they're going to be of the exact same quality’.

Generics makers are not allowed to change the design of a product, but they do have discretion regarding manufacturing decisions. This, according to co-author Rachna Shah, ‘may explain why firms producing a higher proportion of generic [drug] products may have higher rates of recalls’.

The authors concluded that their findings suggest the need for changes in processes used by FDA. These include requiring more detailed and precise documentation about how generics are produced and how stringently the manufacturing plants that produce generics are inspected.

Conflict of interest
The authors of the research paper [1] did not provide any conflict of interest statement.

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Reference
1. Ball GP, Shah R, Wowakc KD. Product competition, managerial discretion, and manufacturing recalls in the US pharmaceutical industry. Journal Op Manag. 2018;58-59:59-72.

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