Quality regulation and generic drug development: evidence from the implementation of the generic quality consistency evaluation in China

By leveraging drug-approval data on Chinese listed pharmaceutical firms, this paper investigates the effects of the Generic Quality Consistency Evaluation (GQCE) on drug development output. The results show that treated firms experienced a 30.70% increase in drug approval documents. The dynamic estimates become significantly positive approximately five years after the implementation of GQCE. The plausible mechanisms are quality improvement and market access under quality regulation, and firms with greater resource capacity respond more strongly to the policy. In addition, although the increase in drug development output was mainly driven by generic drugs, the estimated effect is larger for exploratory drugs than for exploitative drugs. These incentives stem from the expected returns embedded in quality regulation.