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Does Misery Love Company? Evidence from pharmaceutical markets before and after the Orphan Drug Act

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  • Frank R. Lichtenberg
  • Joel Waldfogel

Abstract

With substantial fixed costs of drug development, more common conditions can support more products. If additional pharmaceutical products are beneficial, they will attract greater consumption and promote better health, e.g. greater longevity. We ask how market size measured by condition prevalence affects consumption and longevity. We document in condition cross sections that both the tendency to use a drug and longevity are higher for individuals with more prevalent conditions. We also make use of the 1983 Orphan Drug Act (ODA), which promoted development of drugs for the treatment of rare conditions. Longevity and drug use have grown more quickly for persons with rare diseases and even more quickly for persons with conditions with substantial orphan drug use.

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  • Frank R. Lichtenberg & Joel Waldfogel, 2003. "Does Misery Love Company? Evidence from pharmaceutical markets before and after the Orphan Drug Act," NBER Working Papers 9750, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9750
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    Cited by:

    1. Darren Filson & Neal Masia, 2007. "Effects of profit-reducing policies on firm survival, financial performance, and new drug introductions in the research-based pharmaceutical industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 329-351.
    2. Margaret K. Kyle & Anita M. McGahan, 2012. "Investments in Pharmaceuticals Before and After TRIPS," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1157-1172, November.
    3. Roberto Fontana & Marco Guerzoni, 2008. "Incentives and uncertainty: an empirical analysis of the impact of demand on innovation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(6), pages 927-946, November.
    4. Raphaël Godefroy, 2010. "The birth of the congressional clinic," Working Papers halshs-00564921, HAL.
    5. Lichtenberg Frank R., 2010. "Pharmaceutical Price Discrimination and Social Welfare," Capitalism and Society, De Gruyter, vol. 5(1), pages 1-32, July.
    6. Rzakhanov, Zaur, 2008. "Regulatory policy, value of knowledge assets and innovation strategy: The case of the Orphan Drug Act," Research Policy, Elsevier, vol. 37(4), pages 673-689, May.
    7. Bhattacharya, Jay & Packalen, Mikko, 2012. "The other ex ante moral hazard in health," Journal of Health Economics, Elsevier, vol. 31(1), pages 135-146.
    8. Agarwal, Ruchir & Gaule, Patrick, 2022. "What drives innovation? Lessons from COVID-19 R&D," Journal of Health Economics, Elsevier, vol. 82(C).
    9. Jay Bhattacharya & Mikko Packalen, 2008. "Is Medicine an Ivory Tower? Induced Innovation, Technological Opportunity, and For-Profit vs. Non-Profit Innovation," NBER Working Papers 13862, National Bureau of Economic Research, Inc.
    10. Yin, Wesley, 2009. "R&D policy, agency costs and innovation in personalized medicine," Journal of Health Economics, Elsevier, vol. 28(5), pages 950-962, September.
    11. Yin, Wesley, 2008. "Market incentives and pharmaceutical innovation," Journal of Health Economics, Elsevier, vol. 27(4), pages 1060-1077, July.
    12. Mueller-Langer, Frank, 2011. "Neglected infectious diseases: are push and pull incentive mechanisms suitable for promoting research?," MPRA Paper 40193, University Library of Munich, Germany.
    13. Paul Grootendorst, 2009. "How should we support pharmaceutical innovation?," Social and Economic Dimensions of an Aging Population Research Papers 246, McMaster University.
    14. Bhattacharya, Jay & Packalen, Mikko, 2011. "Opportunities and benefits as determinants of the direction of scientific research," Journal of Health Economics, Elsevier, vol. 30(4), pages 603-615, July.
    15. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.
    16. Adrian Towse, 2007. "If it ain't broke, don't price fix it: the OFT and the PPRS," Health Economics, John Wiley & Sons, Ltd., vol. 16(7), pages 653-665, July.
    17. Laura Magazzini & Fabio Pammolli & Massimo Riccaboni, 2009. "Nuove politiche per l'innovazione nel settore delle scienze della vita," Working Papers CERM 03-2009, Competitività, Regole, Mercati (CERM).
    18. Mueller-Langer, Frank, 2013. "Neglected infectious diseases: Are push and pull incentive mechanisms suitable for promoting drug development research?," Health Economics, Policy and Law, Cambridge University Press, vol. 8(2), pages 185-208, April.
    19. Frank R. Lichtenberg, 2005. "Pharmaceutical Knowledge-Capital Accumulation and Longevity," NBER Chapters, in: Measuring Capital in the New Economy, pages 237-274, National Bureau of Economic Research, Inc.
    20. Leo Wangler, 2010. "Renewables and Innovation - Empirical Assessment and Theoretical Considerations," Jena Economics Research Papers 2010-002, Friedrich-Schiller-University Jena.
    21. 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, October.

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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