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Do Cost-sharing and Entry Deregulation Curb Pharmaceutical Innovation?

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  • Volker Grossmann

Abstract

This paper examines the role of both cost-sharing schemes in health insurance systems and entry regulation for pharmaceutical R&D expenditure, drug prices, aggregate productivity, and income. The analysis suggests that both an increase in the coinsurance rate and stricter price regulations adversely affect R&D spending in the pharmaceutical sector. In contrast, entry deregulation may lead to quality-improvements of pharmaceuticals, despite reducing price-setting power of pharmaceutical companies. Extension to an endogenous growth context suggests that, when individual labor supply depends on health status, both cost-sharing and entry barriers in the pharmaceutical sector also affect aggregate productivity and wage rates.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3439.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3439

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Keywords: aggregate productivity; cost-sharing; entry deregulation; health insurance; pharmaceutical innovation;

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Cited by:
  1. Grossmann, Volker, 2013. "Do cost-sharing and entry deregulation curb pharmaceutical innovation?," Journal of Health Economics, Elsevier, vol. 32(5), pages 881-894.

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