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Are Important Innovations Rewarded? Evidence from Pharmaceutical Markets

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  • Kyle, Margaret

Abstract

This paper focuses on the relationship between therapeutic value and different measures of market rewards (the number of patents, price, market share, and total revenues) of a new treatment. Using an assessment of therapeutic value provided by the French Haute Authorité de Santé (HAS), I find a weak relationship between most measures of rewards and this assessment of therapeutic value, suggesting that the returns to developing a “me-too†product are not very different from developing treatments with greater therapeutic effects. One interpretation is that the HAS score is a poor assessment of therapeutic value, in which case the use of similar health technology assessments by governments and other payers should be re-examined. Alternatively, if the HAS score is informative, the results suggest countries are spending too much on less innovative products, and that a re-balancing of innovation incentives may be worth considering if therapeutic value is highly related to social welfare.

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  • Kyle, Margaret, 2017. "Are Important Innovations Rewarded? Evidence from Pharmaceutical Markets," CEPR Discussion Papers 12420, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12420
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    References listed on IDEAS

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    1. Arcidiacono, Peter & Ellickson, Paul B. & Landry, Peter & Ridley, David B., 2013. "Pharmaceutical followers," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 538-553.
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    6. Farasat A. S. Bokhari & Gary M. Fournier, 2013. "Entry in the ADHD drugs market: Welfare impact of generics and me-too's," Journal of Industrial Economics, Wiley Blackwell, vol. 61(2), pages 339-392, June.
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    9. Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
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