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Do Cost-sharing and Entry Deregulation Curb Pharmaceutical Innovation?

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  • Volker Grossmann

Abstract

This paper examines the role of both cost-sharing schemes in health insurance systems and entry regulation for pharmaceutical R&D expenditure, drug prices, aggregate productivity, and income. 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 quality-improvements of pharmaceuticals, despite reducing price-setting power of pharmaceutical companies. Extension to an endogenous growth context suggests that, when individual labor supply depends on health status, both cost-sharing and entry barriers in the pharmaceutical sector also affect aggregate productivity and wage rates.

Suggested Citation

  • Volker Grossmann, 2011. "Do Cost-sharing and Entry Deregulation Curb Pharmaceutical Innovation?," CESifo Working Paper Series 3439, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3439
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    References listed on IDEAS

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    Cited by:

    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. Volker Grossmann & Holger Strulik, 2015. "Optimal Social Insurance and Health Inequality," CESifo Working Paper Series 5604, CESifo Group Munich.
    3. Böhm, Sebastian & Grossmann, Volker & Strulik, Holger, 2017. "R&D-driven medical progess, health care costs, and the future of human longevity," Center for European, Governance and Economic Development Research Discussion Papers 325, University of Goettingen, Department of Economics.
    4. 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 for the Study of Labor (IZA).
    5. Böhm, Sebastian & Grossmann, Volker & Strulik, Holger, 2017. "The Future of Human Health, Longevity, and Health Costs," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168288, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    aggregate productivity; cost-sharing; entry deregulation; health insurance; pharmaceutical innovation;

    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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