The Economics of Investment in Clinical Trials

Abstract Scandals of selective reporting of clinical trial results by pharmaceutical …rms have underlined the need for more transparency in clinical trials. We provide a theoretical framework which reproduces incentives for selective reporting and yields three key implications concerning regulation. First, a compulsory clinical trial registry complemented through a voluntary clinical trial results database can implement full transparency (the existence of all trials as well as their results is known). Second, full transparency comes at a price. It has a deterrence e¤ect on the incentives to conduct clinical trials, as it reduces the …rms' gains from trials. Third, in principle, a voluntary clinical trial results database without a compulsory registry is a superior regulatory tool; but we provide some quali…ed support for additional compulsory registries when medical decision-makers cannot anticipate correctly the drug companies' decisions whether to conduct trials