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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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