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Who Benefits from New Medical Technologies? Estimates of Consumer and Producer Surpluses for HIV/AIDS Drugs

  • Philipson Tomas J

    ()

    (University of Chicago)

  • Jena Anupam B

    ()

    (University of Chicago)

The social value of an innovation is comprised of the value to consumers and the value to innovators. We estimate that for the HIV/AIDS therapies that entered the market from the late 1980's onwards, innovators appropriated only 5% of the social surplus arising from these new technologies. Despite the high annual costs of these drugs to patients, the low share of social surplus going to innovators raises concerns about advocating cost-effectiveness criteria that would further reduce this share, and hence further reduce incentives for innovation.

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Article provided by De Gruyter in its journal Forum for Health Economics & Policy.

Volume (Year): 9 (2006)
Issue (Month): 2 (January)
Pages: 1-33

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Handle: RePEc:bpj:fhecpo:v:biomedical_research:y:2006:n:3
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  1. Alan M. Garber, 1999. "Advances in Cost-Effectiveness Analysis of Health Interventions," NBER Working Papers 7198, National Bureau of Economic Research, Inc.
  2. Tomas Philipson, 1999. "Economic Epidemiology and Infectious Diseases," NBER Working Papers 7037, National Bureau of Economic Research, Inc.
  3. Weinstein, Milton C. & Manning, Willard Jr., 1997. "Theoretical issues in cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 121-128, February.
  4. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 783-832.
  5. Tomas J. Philipson & Anupam B. Jena, 2005. "Surplus Appropriation from R&D and Health Care Technology Assessment Procedures," Public Economics 0511021, EconWPA.
  6. Bhattacharya, Jayanta & Goldman, Dana & Sood, Neeraj, 2003. "The link between public and private insurance and HIV-related mortality," Journal of Health Economics, Elsevier, vol. 22(6), pages 1105-1122, November.
  7. William D. Nordhaus, 2004. "Schumpeterian Profits in the American Economy: Theory and Measurement," NBER Working Papers 10433, National Bureau of Economic Research, Inc.
  8. David Meltzer, 1997. "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," NBER Working Papers 5946, National Bureau of Economic Research, Inc.
  9. Tomas Philipson & Stephane Mechoulan, 2003. "Intellectual Property & External Consumption Effects: Generalizations from Pharmaceutical Markets," NBER Working Papers 9598, National Bureau of Economic Research, Inc.
  10. Frank R. Lichtenberg, 2006. "The Impact of Increased Utilization of HIV Drugs on Longevity and Medical Expenditures: An Assessment Based on Aggregate U.S. Time-Series Data," NBER Working Papers 12406, National Bureau of Economic Research, Inc.
  11. Mansfield, Edwin, et al, 1977. "Social and Private Rates of Return from Industrial Innovations," The Quarterly Journal of Economics, MIT Press, vol. 91(2), pages 221-40, May.
  12. Garber, Alan M. & Phelps, Charles E., 1997. "Economic foundations of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 1-31, February.
  13. Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February.
  14. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1988. "Appropriating the Returns from Industrial R&D," Cowles Foundation Discussion Papers 862, Cowles Foundation for Research in Economics, Yale University.
  15. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2003. "The Quantity and Quality of Life and the Evolution of World Inequality," NBER Working Papers 9765, National Bureau of Economic Research, Inc.
  16. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-23, December.
  17. Johannesson, Magnus & Weinstein, Milton C., 1993. "On the decision rules of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 12(4), pages 459-467, December.
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