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The Impact of Medicare Part D on Pharmaceutical R&D

  • Margaret E. Blume-Kohout
  • Neeraj Sood

Recent evidence suggests that Medicare Part D has increased prescription drug use among the elderly, and earlier studies have indicated that increasing market size induces pharmaceutical innovation. This paper assesses the impact of Medicare Part D on pharmaceutical research and development (R&D), using time-series data on (a) the number of drugs in clinical development by therapeutic class, and (b) R&D expenditures by firm. We demonstrate that the passage of Medicare Part D was associated with significantly higher pharmaceutical R&D for drug classes with higher Medicare market share, and for firms specializing in higher-Medicare-share drugs.

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File URL: http://www.nber.org/papers/w13857.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13857.

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Date of creation: Mar 2008
Date of revision:
Handle: RePEc:nbr:nberwo:13857
Note: HC HE PR
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 1049-1090, August.
  2. Michael Kremer, 2002. "Pharmaceuticals and the Developing World," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 67-90, Fall.
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