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Market incentives and pharmaceutical innovation

  • Yin, Wesley

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.

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Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 27 (2008)
Issue (Month): 4 (July)
Pages: 1060-1077

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Handle: RePEc:eee:jhecon:v:27:y:2008:i:4:p:1060-1077
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505560

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