1. Pharmaceutical Co. Shareholders Perceive that Benefits of Clinical Trials Reporting Exceed Costs
Dr. Mina Pizzini, Ph.D. Department of Accounting, McCoy College of Business
Texas State University
Dr. Maggie Hao, Ph.D., CPA
Department of Accounting, School of Business
University of Houston Clear Lake
Dr. Dana Forgione, Ph.D., CPA, CMA, CFE Department of Accounting, College of Business
University of Texas at San Antonio
Do requirements that pharmaceutical firms disclose information on clinical trials registrations and results impose overly burdensome costs on firms?
Background: Over the past twenty years, both governmental and private institutions have enacted laws and standards requiring pharmaceutical manufacturers to report information about their clinical trials on a public website (ClinicalTrials.gov) for public health reasons. Compliance with these requirements, however, has been low. Controversy over reporting clinical trials centers on the trade-off between the potential public health benefits associated with mandatory reporting of clinical trials and the costs that such requirements impose on firms.  
Research Design: Event study that examines the U.S. stock market’s reaction to proposed and enacted laws and policies affecting the amount of information companies disclose about clinical trials. Calculate cumulative abnormal returns (CAR) for 329 firms corresponding to 11 events related to potential and actual changes in clinical trial disclosure requirements.
Results: On average, there is a significant market reaction to these events. Moreover, investors react positively (negatively) to events increasing (decreasing) the likelihood that more information on clinical trials will be disclosed.
Implications and contributions:
Investors do not perceive that clinical trials reporting requirements impose overly burdensome costs on pharmaceutical firms. The interests of investors, who value disclosure for economic reasons, are aligned with those of other stakeholders, such as physicians and patients, who support disclosure to improve public health.
The market reacts not only to disclosure of nonfinancial information, but also to the regulation of such disclosure. This is the first study to find that investors react to the implementation of standards and laws governing the disclosure of nonfinancial information outside of mandatory SEC filings.
Key events surrounding rules and policies on clinical trials disclosures
Cumulative Abnormal Return
(p-value)
Events that likely to increase clinical trials transparency
2/19/2000 First version of ClinicalTrials.gov made available to public.
0.009
(0.272)
9/8/2004 International Committee of Medical Journal Editors (ICMJE) issued the first draft of editorial policy requiring disclosure of clinical status for consideration for journal publication.
0.001
(0.716)
5/5/2005 ICMJE issued the formal statement of editorial policy
0.009**
(0.015)
12/26/2007 Beginning date of the registration requirement for applicable clinical trials in accordance with FDAAA 801.
–0.010**
(0.028)
9/27/2008 Beginning date of the basic result requirement for applicable clinical trials in accordance with FDAAA 801.
0.037***
(<0.001)
9/27/2009 Beginning date of the adverse event requirement for applicable clinical trials in accordance with FDAAA 801.
0.004
(0.268)
11/19/2014 Information release date for HHS proposal regarding procedures for registering and submitting the results, in accordance with FDAAA 801.
(0.692)
11/21/2014 Publication date for HHS proposal regarding procedures for registering and submitting the results, in accordance with FDAAA 801.
0.007**
(0.038)
Events likely to decrease clinical trials transparency
10/7/2004 U.S. Representative Markey introduced the Fair Access to Clinical Trials (FACT) Act (H.R. 5252). The bill failed.
-0.016***
2/28/2005 U.S. Senator Dodd introduced an updated version of the FACT Act (S. 470). The bill failed.
–0.010***
(0.007)
1/31/2007 Senator Dodd introduced a third and final version of the FACT Act (S. 467). The bill failed.
-0.005
(0.394)
Mean of 11 event dates (the negative of the CAR is used for events likely to decrease clinical trial transparency). 
0.006***
Costs & Benefits to Firms of Disclosing Information on Clinical Trials
Costs
Undermine competitive position
Reduce value of intellectual capital
Discourage future investment in new therapies
Impose unnecessary reporting costs on firms
Benefits
Reduce agency costs
Reduce real externalities
Reduce resources investors devote to acquiring information