Since 2007, the US Food and Drug Administration (FDA) has mandated that pharmaceutical companies publicly disclose the results of their clinical trials regardless of the outcomes. A study by four researchers, including NEOMA’s Kyungran Lee, has found that this transparency has had a positive impact on firms’ innovation strategies… but that patients don’t always emerge the winners. 

The pharmaceutical industry tops the global innovation charts, outstripping even the IT or semiconductor sectors. Pharma devotes as much as a quarter of its revenue to R&D, notably through the high-cost clinical trials that are essential for new drug approvals. Historically, firms kept the detailed results of these tests secret, since revealing the data would have gifted their competitors information earned through costly research.

96% of clinical trials end in failure

But the FDA disrupted the industry norm in 2007 when it introduced a rule requiring full clinical trial transparency even for studies with negative outcomes — which is the case for 96% of experimental treatments, since failures vastly outnumber successes.  This reform has given industry players access to detailed information about their competitors’ clinical trials. In other words, it has been a veritable revolution.

The recent study by Lee and her partners explored the impact of this seismic shift: has the number of clinical trials risen or fallen? Have companies invested more smartly? Has transparency produced better drugs? What impact has it had on patients? 

First major consequence of transparency: an uptick in terminated trials

When the changes were first introduced, any scenario seemed possible. A laboratory that discovered that a competitor had completed a successful trial might decide to halt its own testing if it thought the window had closed. Alternatively, it might decide to double down and capitalise on the lessons learned. In similar fashion, a competitor’s setback might prompt a company to quit if it exposed major obstacles… or to persevere if it knew how to find solutions to overcome them.

One of the key takeaways of the research, which was based on data from over 1,000 pharmaceutical companies and 6,500 clinical trials from 2002 to 2012, was that there was a spike in the  proportion of aborted projects. This was especially the case for phase 2 clinical trials, which test the efficacy of a therapeutic molecule and its tolerance in humans: the dropout rate rose fourfold between 2007 and 2012. 

Less competition, more learning

The second takeaway is that post-2007 laboratories continued to initiate more clinical trials every year but at a slower pace. This dual mechanism (more interrupted trials in tandem with a slowdown in new studies) is more acute in companies with tighter financial resources, where smart investment is a number-one priority. 

The authors of the research argue that these developments show that the FDA's decision has profoundly transformed the innovation strategies of the pharmaceutical sector. 

In the past, when one company halted a trial, it encouraged others to launch more. Decisions, in other words, were governed by competitive principles. Nowadays, learning from other firms is the main driver. Informed by the lessons learned by their peers, laboratories prioritise relevance over quantity. And the financial markets have responded positively to this shift: between 2007 and 2012, firms whose trials targeted conditions with numerous industrial projects saw their market value grow.

New, safer drugs for patients...

Seen in this light, clinical trial disclosure seems to offer nothing but advantages. It is even reasonable to assume that transparency cuts the costs of developing future drugs, leading to a similar downward trend in pricing. 

The authors, however, were also keen to evaluate the impact of the reform on patient health. And here their conclusions are more nuanced, delivering good news and bad.

The good news is that drugs developed between 2007 and 2017 have led to a 50% drop in so-called "serious" side effects: hospitalisation, life-threatening conditions, abnormalities, disability and even death. Access to detailed information about clinical trials ultimately improves drug efficiency and safety.

… but reduced therapeutic effectiveness for critical conditions

Conversely, the slower growth in new clinical trials has a negative impact on the healthy life expectancy of patients. The authors based this conclusion on WHO statistics outlining the 20 deadliest and most disabling diseases globally, including heart conditions, strokes, respiratory diseases, cancer, diabetes and tuberculosis. 

The research team divided the labs that develop drugs for these diseases into two groups. First, companies that have significantly reduced the growth rate of their new trials (down 46% on average); secondly, firms that have maintained a relatively stable rate (up 5% on average). 

When we compare the years 2000 and 2016, the conclusion is unmistakable: patients lose out when their health relies on companies that have scaled back their trials. If these labs had matched the R&D activities of their peers, the affected patients would have recovered 7.6 million cumulative years of "healthy" life — i.e. free from disability or premature death.

It follows that new drugs developed under transparent clinical trials are safer for patients, but the decreased drug quantity has led to potential loss of public health especially for serious conditions… side effects, it is safe to assume, that the FDA did not anticipate.

Find out more

Po-Hsuan Hsu, Kyungran Lee, S. Katie Moon & Seungjoon Oh, Information disclosure and peer innovation: Evidence from mandatory reporting of clinical trials, Journal of Financial and Quantitative Analysis, January 2025 doi.org/10.1017/S002210902400084X