The Impact of US Medical Product Regulatory Complexity on Innovation: Preliminary Evidence of Interdependence, Early Acceleration, and Subsequent Inversion

TL;DR

This study investigates how regulatory complexity affects innovation in US medical products, revealing an initial acceleration followed by an inversion around 2015, indicating a nuanced impact of regulation on innovation over time.

Contribution

It introduces novel proxy metrics for regulation and innovation, and demonstrates the dynamic interdependence and inverted U-curve relationship between regulation and innovation in the US.

Findings

Regulation initially accelerates innovation.

Around 2015, the relationship inverted, indicating reduced innovation impact.

Stakeholders should reconsider regulatory complexity to foster innovation.

Abstract

Is the complexity of medical product (medicines and medical devices) regulation impacting innovation in the US? If so, how? Here, this question is investigated as follows: Various novel proxy metrics of regulation (FDA-issued guidelines) and innovation (corresponding FDA-registrations) from 1976-2020 are used to determine interdependence, a concept relying on strong correlation and reciprocal causality (estimated via variable lag transfer entropy and wavelet coherence). Based on this interdependence, a mapping of regulation onto innovation is conducted and finds that regulation seems to accelerate then supports innovation until on or around 2015; at which time, an inverted U-curve emerged. If empirically evidentiary, an important innovation-regulation nexus in the US has been reached; and, as such, stakeholders should (re)consider the complexity of the regulatory landscape to enhance US medical product innovation. Study limitations, extensions, and further thoughts complete this investigation.