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Are Important Innovations Rewarded? Evidence from Pharmaceutical Markets

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  • Margaret Kyle

    (CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

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.

Suggested Citation

  • Margaret Kyle, 2017. "Are Important Innovations Rewarded? Evidence from Pharmaceutical Markets," Working Papers hal-01952727, HAL.
    • Handle: RePEc:hal:wpaper:hal-01952727
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    2. Christopher M. Snyder & Victor J. Tremblay, 2018. "Introduction to the Special Issue on “The Intersection Between Industrial Organization and Healthcare Economics”," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(1), pages 1-6, August.
    3. Margaret K. Kyle, 2020. "The Alignment of Innovation Policy and Social Welfare: Evidence from Pharmaceuticals," Innovation Policy and the Economy, University of Chicago Press, vol. 20(1), pages 95-123.
    4. Kyle, Margaret K., 2022. "Incentives for pharmaceutical innovation: What’s working, what’s lacking," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    5. Salas-Vega, Sebastian & Shearer, Emily & Mossialos, Elias, 2020. "Relationship between costs and clinical benefits of new cancer medicines in Australia, France, the UK, and the US," Social Science & Medicine, Elsevier, vol. 258(C).

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