The Economics of Priority Review Vouchers

Priority review vouchers (PRVs) were introduced in 2007 by the US Congress as an incentive mechanism to spur pharmaceutical firms’ R&D efforts for neglected diseases (NDs). A voucher, which a firm can obtain upon approval of a new treatment for NDs, entitles the holder to prioritize the FDA review for any drug. The proposal generated much controversy regarding its ability to effectively stimulate R&D for NDs. Here, after reviewing the main issues of the debate, i use a stylized economic model to discuss the strength of PRVs as an economic incentive to invest in research. My findings suggest that R&D investments might be higher when the developer could prioritize a valuable compound.