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Market incentives and pharmaceutical innovation

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  • Yin, Wesley

Abstract

I study the impact of the Orphan Drug Act (ODA), which established tax incentives for rare disease drug development. I examine the flow of new clinical drug trials for a large set of rare diseases. Among more prevalent rare diseases, the ODA led to a significant and sustained increase in new trials. The impact for less prevalent rare diseases was limited to an increase in the stock of drugs. Tax credits can stimulate R&D; yet because they leave revenue margins unaffected, tax credits appear to have a more limited impact on private innovation in markets with smaller revenue potential.

Suggested Citation

  • Yin, Wesley, 2008. "Market incentives and pharmaceutical innovation," Journal of Health Economics, Elsevier, vol. 27(4), pages 1060-1077, July.
  • Handle: RePEc:eee:jhecon:v:27:y:2008:i:4:p:1060-1077
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    Cited by:

    1. 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.
    2. Lockhart, Michelle & Babar, Zaheer Ud-Din & Garg, Sanjay, 2010. "Evaluation of policies to support drug development in New Zealand," Health Policy, Elsevier, vol. 96(2), pages 108-117, July.
    3. Bhattacharya, Jay & Packalen, Mikko, 2012. "The other ex ante moral hazard in health," Journal of Health Economics, Elsevier, vol. 31(1), pages 135-146.
    4. Philippe Gorry & Diego Useche, 2017. "Orphan Drug Designations as Valuable Intangible Assets for IPO Investors in Pharma-Biotech Companies," NBER Chapters,in: Economic Dimensions of Personalized and Precision Medicine National Bureau of Economic Research, Inc.
    5. Olga Bruyaka & Hanko Zeitzmann & Isabelle Chalamon & Richard Wokutch & Pooja Thakur, 2013. "Strategic Corporate Social Responsibility and Orphan Drug Development: Insights from the US and the EU Biopharmaceutical Industry," Journal of Business Ethics, Springer, vol. 117(1), pages 45-65, September.
    6. Paul Grootendorst, 2012. "Prescription Drug Insurance and Reimbursement," Chapters,in: The Elgar Companion to Health Economics, Second Edition, chapter 11 Edward Elgar Publishing.
    7. 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).
    8. Bastian Rake, 2017. "Determinants of pharmaceutical innovation: the role of technological opportunities revisited," Journal of Evolutionary Economics, Springer, vol. 27(4), pages 691-727, September.
    9. Paul Grootendorst, 2009. "Patents, Public-Private Partnerships or Prizes – How should we support pharmaceutical innovation?," Social and Economic Dimensions of an Aging Population Research Papers 250, McMaster University.
    10. Blume-Kohout, Margaret E. & Sood, Neeraj, 2013. "Market size and innovation: Effects of Medicare Part D on pharmaceutical research and development," Journal of Public Economics, Elsevier, vol. 97(C), pages 327-336.
    11. Jeffrey Clemens & Joshua D. Gottlieb, 2014. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?," American Economic Review, American Economic Association, vol. 104(4), pages 1320-1349, April.
    12. Gilad Sorek, 2013. "Efficient Self-Protection and Progress in Curing-Technology," Auburn Economics Working Paper Series auwp2013-07, Department of Economics, Auburn University.
    13. Heidi L. Williams, 2016. "Intellectual Property Rights and Innovation: Evidence from Health Care Markets," Innovation Policy and the Economy, University of Chicago Press, vol. 16(1), pages 53-87.
    14. Wellman-Labadie, Olivier & Zhou, Youwen, 2010. "The US Orphan Drug Act: Rare disease research stimulator or commercial opportunity?," Health Policy, Elsevier, vol. 95(2-3), pages 216-228, May.
    15. Paul Grootendorst, 2012. "Prescription Drug Insurance and Reimbursement," Chapters,in: The Elgar Companion to Health Economics, Second Edition, chapter 11 Edward Elgar Publishing.
    16. 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.
    17. 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.
    18. Rutger P. Daems PhD & Edith L. Maes DBA, 2013. "Pharmaceutical Portfolio Management: Global Disease Burden and Corporate Performance Metrics," Working Papers 2013/07, Maastricht School of Management.
    19. Werfel, Seth H. & Jaffe, Adam B., 2013. "Induced innovation and technology trajectory: Evidence from smoking cessation products," Research Policy, Elsevier, vol. 42(1), pages 15-22.
    20. Felipa de Mello-Sampayo & Sofia de Sousa-Vale & Francisco Camoes, 2015. "Substitutability Between Drugs, Innovation, and Fiscal Policy in the Pharmaceutical Industry," Annals of Economics and Finance, Society for AEF, vol. 16(2), pages 273-289, November.
    21. Paul Grootendorst, 2009. "How should we support pharmaceutical innovation?," Social and Economic Dimensions of an Aging Population Research Papers 246, McMaster University.
    22. IIZUKA Toshiaki & UCHIDA Gyo, 2016. "Promoting Innovation in Small Markets: Evidence from the market for rare and intractable diseases," Discussion papers 16036, Research Institute of Economy, Trade and Industry (RIETI).
    23. Carl Blankart & Tom Stargardt & Jonas Schreyögg, 2011. "Availability of and Access to Orphan Drugs," PharmacoEconomics, Springer, vol. 29(1), pages 63-82, January.

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