UCLA Research Program in Pharmaceutical Economics and Policy

Drug testing in the United States is currently biased toward the minimization of "Type I" error, that is, toward minimizing the chance of approving drugs that are unsafe or ineffective. This regulatory focus of the Food and Drug Administration (FDA) ignores the potential for committing the alternative "Type II" error, that is, the error of not approving drugs that are, in fact, safe and effective. Such Type II errors can result in the loss of significant benefits to society when the sale of drugs that are safe and effective is prohibited. The present drug approval system puts enormous stress on Type I errors and largely ignores Type II errors, thereby raising the cost of drug testing and delaying the availability of safe and effective drugs. A more balanced set of FDA drug approval standards, accounting for the consequences of both Type I and Type II errors, could result in better outcomes, as compared to the present system.