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Do cost-sharing and entry deregulation curb pharmaceutical innovation?

  • Grossmann, Volker

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

Volume (Year): 32 (2013)
Issue (Month): 5 ()
Pages: 881-894

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Handle: RePEc:eee:jhecon:v:32:y:2013:i:5:p:881-894
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505560

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