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Is American Health Care Uniquely Inefficient? Evidence from Prescription Drugs

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  • Margaret Kyle
  • Heidi Williams

Abstract

Alan Garber and Jonathan Skinner (2008) famously conjectured that the US health care system was "uniquely inefficient" relative to other countries. We test this idea using cross-country data on prescription drug sales newly linked with an arguably objective measure of relative therapeutic benefits, or drug quality. Specifically, we investigate how higher and lower quality drugs diffuse in the US relative to Australia, Canada, Switzerland, and the UK. Our tabulations suggest that lower quality drugs diffuse more in the US relative to high quality drugs compared to each of our four comparison countries--consistent with Garber and Skinner's conjecture.

Suggested Citation

  • Margaret Kyle & Heidi Williams, 2017. "Is American Health Care Uniquely Inefficient? Evidence from Prescription Drugs," American Economic Review, American Economic Association, vol. 107(5), pages 486-490, May.
    • Handle: RePEc:aea:aecrev:v:107:y:2017:i:5:p:486-90
    Note: DOI: 10.1257/aer.p20171086
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    References listed on IDEAS

    as
    1. Margaret Kyle & Yi Qian, 2014. "Intellectual Property Rights and Access to Innovation: Evidence from TRIPS," NBER Working Papers 20799, National Bureau of Economic Research, Inc.
    2. Alan M. Garber & Jonathan Skinner, 2008. "Is American Health Care Uniquely Inefficient?," Journal of Economic Perspectives, American Economic Association, vol. 22(4), pages 27-50, Fall.
    3. Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
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    Citations

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    Cited by:

    1. Otilia Boldea & Bettina Drepper & Zhuojiong Gan, 2020. "Change point estimation in panel data with time‐varying individual effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(6), pages 712-727, September.
    2. Margaret K. Kyle, 2018. "Are Important Innovations Rewarded? Evidence from Pharmaceutical Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(1), pages 211-234, August.
    3. Joshua Krieger & Danielle Li & Dimitris Papanikolaou, 2022. "Missing Novelty in Drug Development," The Review of Financial Studies, Society for Financial Studies, vol. 35(2), pages 636-679.
    4. Madhu Mazumdar & Jashvant V. Poeran & Bart S. Ferket & Nicole Zubizarreta & Parul Agarwal & Ksenia Gorbenko & Catherine K. Craven & Xiaobo (Tony) Zhong & Alan J. Moskowitz & Annetine C. Gelijns & Davi, 2021. "Developing an Institute for Health Care Delivery Science: successes, challenges, and solutions in the first five years," Health Care Management Science, Springer, vol. 24(1), pages 234-243, March.
    5. Kyle, Margaret K., 2022. "Incentives for pharmaceutical innovation: What’s working, what’s lacking," International Journal of Industrial Organization, Elsevier, vol. 84(C).

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    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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