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Do cost-sharing and entry deregulation curb pharmaceutical innovation?

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  • Grossmann, Volker

Abstract

This paper examines the role of both cost-sharing schemes in health insurance systems and the regulation of entry into the pharmaceutical sector for pharmaceutical R&D expenditure and drug prices. The analysis suggests that both an increase in the coinsurance rate and stricter price regulations adversely affect R&D spending in the pharmaceutical sector. In contrast, entry deregulation may lead to higher R&D spending of pharmaceutical companies. The relationship between R&D spending per firm and the number of firms may be hump-shaped. In this case, the number of rivals which maximizes R&D expenditure per firm is decreasing in the coinsurance rate and increasing in labor productivity.

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  • Grossmann, Volker, 2013. "Do cost-sharing and entry deregulation curb pharmaceutical innovation?," Journal of Health Economics, Elsevier, vol. 32(5), pages 881-894.
    • Handle: RePEc:eee:jhecon:v:32:y:2013:i:5:p:881-894
    DOI: 10.1016/j.jhealeco.2013.06.001
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    1. Grossmann, Volker, 2013. "Do cost-sharing and entry deregulation curb pharmaceutical innovation?," Journal of Health Economics, Elsevier, vol. 32(5), pages 881-894.
    2. Moreno Gigi & van Eijndhoven Emma & Benner Jennifer & Sullivan Jeffrey, 2017. "The Long-Term Impact of Price Controls in Medicare Part D," Forum for Health Economics & Policy, De Gruyter, vol. 20(2), pages 1-56, December.
    3. Grossmann Volker & Strulik Holger, 2019. "Optimal Social Insurance and Health Inequality," German Economic Review, De Gruyter, vol. 20(4), pages 913-948, December.
    4. Böhm, Sebastian & Grossmann, Volker & Strulik, Holger, 2021. "R&D-driven medical progress, health care costs, and the future of human longevity," The Journal of the Economics of Ageing, Elsevier, vol. 18(C).
    5. Böhm, Sebastian & Grossmann, Volker & Strulik, Holger, 2017. "The Future of Human Health, Longevity, and Health Costs," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168288, Verein für Socialpolitik / German Economic Association.
    6. Fossett, Sarah J. & Wunnava, Phanindra V., 2017. "Active Ingredients: Exploring the Key Factors Affecting the Rising Cost of Developing New Drugs," IZA Discussion Papers 10817, Institute of Labor Economics (IZA).
    7. Volker Grossmann, 2021. "Medical Innovations and Ageing: A Health Economics Perspective," CESifo Working Paper Series 9387, CESifo.

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    More about this item

    Keywords

    Cost-sharing; Entry deregulation; Health insurance; Patent breadth; Pharmaceutical innovation;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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