By Amanda Starc and Thomas G. Wollmann

Entry represents a fundamental threat to cartels engaged in price fixing. We study the extent and effect of this behavior in the largest price fixing case in US history, which involves generic drugmakers. To do so, we link information on the cartel’s internal operations to regulatory filings and market data. We find that collusion induces significant entry, which in turn reduces prices. However, regulatory approvals delay most entrants by 2-4 years. We then estimate a structural model to assess counterfactual policies. We find that reducing regulatory delays by just 1-2 years equates to consumer compensating variation of $597 million-$1.52 billion.

Chicago: Becker Friedman Institute, University of Chicago, 2022. 54p.

By Paul J. Larkin

The raw, agricultural form of cannabis is not capable of being approved for use by the Food and Drug Administration (FDA)—regardless of whether Congress or the U.S. Attorney General reschedules it downward from Schedule I. Rescheduling cannabis would not allow the drug to be distributed under federal law unless the FDA finds that it is a safe, effective, and uniform drug. The FDA could not do so under existing law, and the Attorney General cannot waive the Food, Drug, and Cosmetic Act’s requirements. Congress could do so by statute—but any such law would put at risk the health of users and nonusers in order to satisfy the desires of a minority for a transient high.

Washington, DC: The Heritage Foundation, 2023. 57p.