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The Impact of Medicare Part D on Pharmaceutical R&D

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  • Margaret E. Blume-Kohout
  • Neeraj Sood

Abstract

Recent evidence suggests that Medicare Part D has increased prescription drug use among the elderly, and earlier studies have indicated that increasing market size induces pharmaceutical innovation. This paper assesses the impact of Medicare Part D on pharmaceutical research and development (R&D), using time-series data on (a) the number of drugs in clinical development by therapeutic class, and (b) R&D expenditures by firm. We demonstrate that the passage of Medicare Part D was associated with significantly higher pharmaceutical R&D for drug classes with higher Medicare market share, and for firms specializing in higher-Medicare-share drugs.

Suggested Citation

  • Margaret E. Blume-Kohout & Neeraj Sood, 2008. "The Impact of Medicare Part D on Pharmaceutical R&D," NBER Working Papers 13857, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13857
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    References listed on IDEAS

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    1. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(3), pages 1049-1090.
    2. Michael Kremer, 2002. "Pharmaceuticals and the Developing World," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 67-90, Fall.
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    Cited by:

    1. Freedman, Seth & Lin, Haizhen & Simon, Kosali, 2015. "Public health insurance expansions and hospital technology adoption," Journal of Public Economics, Elsevier, vol. 121(C), pages 117-131.
    2. Paul Grootendorst, 2012. "Prescription Drug Insurance and Reimbursement," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 11, Edward Elgar Publishing.
    3. Jonathan D. Ketcham & Kosali Simon, 2008. "Medicare Part D's Effects on Elderly Drug Costs and Utilization," NBER Working Papers 14326, National Bureau of Economic Research, Inc.
    4. Claudio Lucarelli & Sean Nicholson & Minjae Song, 2010. "Bundling Among Rivals: A Case of Pharmaceutical Cocktails," NBER Working Papers 16321, National Bureau of Economic Research, Inc.
    5. Margaret K. Kyle, 2019. "The Alignment of Innovation Policy and Social Welfare: Evidence from Pharmaceuticals," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 95-123, National Bureau of Economic Research, Inc.
    6. Jeffrey Clemens, 2012. "The Effect of U.S. Health Insurance Expansions on Medical Innovation," Discussion Papers 11-016, Stanford Institute for Economic Policy Research.
    7. Iain M. Cockburn & Scott Stern & Jack Zausner, 2011. "Finding the Endless Frontier: Lessons from the Life Sciences Innovation System for Energy R&D," NBER Chapters, in: Accelerating Energy Innovation: Insights from Multiple Sectors, pages 113-157, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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