The Globalization of Pharmaceutical Regulation

Drugs have long been among the most extensively regulated of all consumer products. Not only do all governments closely supervise virtually every aspect of their development, testing, production and marketing, but many also regulate their pricing and distribution. The pharmaceutical industry is highly globalized, with over half the sales of the fifty largest drug companies made outside their home country (Tarabusi and Vivkery 1993). However, until recently, drug regulation was virtually synonymous with national sovereignty. Firms were required to conduct separate tests, submit separate applications, and meet distinctive criteria to enter each national market.
Because drugs are so extensively regulated and have such significant health and safety impacts, drug policy coordination has proven extremely difficult. Nonetheless over the last decade, national regulatory agencies have begun to cooperate more closely with one another. The European Union has established a centralized drug approval system, the United States Food and Drug Administration has become more willing to cooperate with its foreign counterparts, and the United States, the EU and Japan have made substantial progress in harmonizing drug approval requirements under the auspices of a new international body, the International Conference on Harmonization of Technical Requirements for the Registration of Pharmaceutical Products (ICH). This article describes and assesses the implications of the increase in international coordination of national drug approval policies. It argues that the undermining of national regulatory sovereignty has improved both the effectiveness and efficiency of government regulation.