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Public health insurance and pharmaceutical innovation: Evidence from China

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  • Zhang, Xuan
  • Nie, Huihua

Abstract

Developing countries are characterized by low levels of pharmaceutical innovation. A likely reason is their small market size, which is not because of the population size but because of low levels of income and lack of health insurance coverage. This study exploits a natural experiment from the implementation of a public health insurance program for rural residents in China (New Cooperative Medical Scheme [NCMS]) to examine whether the pharmaceutical industry increases innovation regarding diseases covered by the NCMS that are prevalent in rural areas. We examine the 1993–2009 patent data to gauge pharmaceutical innovation in China. Diseases with a 10% higher rural patient share saw a 12.4% increase in relevant domestic pharmaceutical patent applications and a modest increase in patent quality after the NCMS implementation. By providing public health insurance to low-income individuals in developing countries, governments can create incentives for pharmaceutical firms to develop new medical technologies.

Suggested Citation

  • Zhang, Xuan & Nie, Huihua, 2021. "Public health insurance and pharmaceutical innovation: Evidence from China," Journal of Development Economics, Elsevier, vol. 148(C).
    • Handle: RePEc:eee:deveco:v:148:y:2021:i:c:s030438782030153x
    DOI: 10.1016/j.jdeveco.2020.102578
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    Cited by:

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    5. Yan Wen & Lu Liu, 2023. "Comparative Study on Low-Carbon Strategy and Government Subsidy Model of Pharmaceutical Supply Chain," Sustainability, MDPI, vol. 15(10), pages 1-26, May.
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    More about this item

    Keywords

    Pharmaceutical innovation; Public health insurance; Market size; Patent;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

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