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Market incentives and pharmaceutical innovation

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  • Yin, Wesley

Abstract

I study the impact of the Orphan Drug Act (ODA), which established tax incentives for rare disease drug development. I examine the flow of new clinical drug trials for a large set of rare diseases. Among more prevalent rare diseases, the ODA led to a significant and sustained increase in new trials. The impact for less prevalent rare diseases was limited to an increase in the stock of drugs. Tax credits can stimulate R&D; yet because they leave revenue margins unaffected, tax credits appear to have a more limited impact on private innovation in markets with smaller revenue potential.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 27 (2008)
Issue (Month): 4 (July)
Pages: 1060-1077

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Handle: RePEc:eee:jhecon:v:27:y:2008:i:4:p:1060-1077

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Web page: http://www.elsevier.com/locate/inca/505560

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  4. Michael Kremer, 2000. "Creating Markets for New Vaccines Part I: Rationale," NBER Working Papers 7716, National Bureau of Economic Research, Inc.
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  6. Michael Kremer, 2000. "Creating Markets for New Vaccines Part II: Design Issues," NBER Working Papers 7717, National Bureau of Economic Research, Inc.
  7. Hall, Bronwyn & Van Reenen, John, 2000. "How effective are fiscal incentives for R&D? A review of the evidence," Research Policy, Elsevier, vol. 29(4-5), pages 449-469, April.
  8. Amy Finkelstein, 2004. "Static and Dynamic Effects of Health Policy: Evidence From the Vaccine Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 527-564, May.
  9. Stavins, Robert & Jaffe, Adam & Newell, Richard, 1998. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," Discussion Papers dp-98-12-rev, Resources For the Future.
  10. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 1049-1090, August.
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Cited by:
  1. Jay Bhattacharya & Mikko Packalen, 2008. "The Other Ex-Ante Moral Hazard in Health," NBER Working Papers 13863, National Bureau of Economic Research, Inc.
  2. Dana Goldman & Darius Lakdawalla & Tomas J. Philipson & Wesley Yin, 2010. "Valuing health technologies at nice: recommendations for improved incorporation of treatment value in HTA," Health Economics, John Wiley & Sons, Ltd., vol. 19(10), pages 1109-1116.
  3. Carl Blankart & Tom Stargardt & Jonas Schreyögg, 2011. "Availability of and Access to Orphan Drugs," PharmacoEconomics, Springer, vol. 29(1), pages 63-82, January.
  4. Laura Magazzini & Fabio Pammolli & Massimo Riccaboni, 2009. "Nuove politiche per l'innovazione nel settore delle scienze della vita," Working Papers 03-2009, Competitività Regole Mecati (CERM).
  5. Paul Grootendorst, 2009. "How should we support pharmaceutical innovation?," Social and Economic Dimensions of an Aging Population Research Papers 246, McMaster University.
  6. Rutger P. Daems PhD & Edith L. Maes DBA, 2013. "Pharmaceutical Portfolio Management: Global Disease Burden and Corporate Performance Metrics," Working Papers 2013/07, Maastricht School of Management.
  7. Mikko Packalen & Jay Bhattacharya, 2010. "Opportunities and Benefits as Determinants of the Direction of Scientific Research," Working Papers 1014, University of Waterloo, Department of Economics, revised Dec 2010.
  8. Jeffrey Clemens & Joshua D. Gottlieb, 2012. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?," Discussion Papers 11-017, Stanford Institute for Economic Policy Research.
  9. Gilad Sorek, 2013. "Efficient Self-Protection and Progress in Curing-Technology," Auburn Economics Working Paper Series auwp2013-07, Department of Economics, Auburn University.
  10. Lockhart, Michelle & Babar, Zaheer Ud-Din & Garg, Sanjay, 2010. "Evaluation of policies to support drug development in New Zealand," Health Policy, Elsevier, vol. 96(2), pages 108-117, July.
  11. Bastian Rake, 2012. "Determinants of Pharmaceutical Innovation: The Role of Technological Opportunities Revisited," Jena Economic Research Papers 2012-018, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  12. Paul Grootendorst, 2009. "Patents, Public-Private Partnerships or Prizes – How should we support pharmaceutical innovation?," Social and Economic Dimensions of an Aging Population Research Papers 250, McMaster University.
  13. Werfel, Seth H. & Jaffe, Adam B., 2013. "Induced innovation and technology trajectory: Evidence from smoking cessation products," Research Policy, Elsevier, vol. 42(1), pages 15-22.
  14. Olga Bruyaka & Hanko Zeitzmann & Isabelle Chalamon & Richard Wokutch & Pooja Thakur, 2013. "Strategic Corporate Social Responsibility and Orphan Drug Development: Insights from the US and the EU Biopharmaceutical Industry," Journal of Business Ethics, Springer, vol. 117(1), pages 45-65, September.

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