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Does Misery Love Company? Evidence from pharmaceutical markets before and after the Orphan Drug Act

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  • Frank R. Lichtenberg
  • Joel Waldfogel

Abstract

With substantial fixed costs of drug development, more common conditions can support more products. If additional pharmaceutical products are beneficial, they will attract greater consumption and promote better health, e.g. greater longevity. We ask how market size measured by condition prevalence affects consumption and longevity. We document in condition cross sections that both the tendency to use a drug and longevity are higher for individuals with more prevalent conditions. We also make use of the 1983 Orphan Drug Act (ODA), which promoted development of drugs for the treatment of rare conditions. Longevity and drug use have grown more quickly for persons with rare diseases and even more quickly for persons with conditions with substantial orphan drug use.

Suggested Citation

  • Frank R. Lichtenberg & Joel Waldfogel, 2003. "Does Misery Love Company? Evidence from pharmaceutical markets before and after the Orphan Drug Act," NBER Working Papers 9750, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9750
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    Cited by:

    1. Bhattacharya, Jay & Packalen, Mikko, 2011. "Opportunities and benefits as determinants of the direction of scientific research," Journal of Health Economics, Elsevier, vol. 30(4), pages 603-615, July.
    2. Darren Filson & Neal Masia, 2007. "Effects of profit-reducing policies on firm survival, financial performance, and new drug introductions in the research-based pharmaceutical industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 329-351.
    3. Margaret K. Kyle & Anita M. McGahan, 2012. "Investments in Pharmaceuticals Before and After TRIPS," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1157-1172, November.
    4. Roberto Fontana & Marco Guerzoni, 2008. "Incentives and uncertainty: an empirical analysis of the impact of demand on innovation," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), pages 927-946, November.
    5. Bhattacharya, Jay & Packalen, Mikko, 2012. "The other ex ante moral hazard in health," Journal of Health Economics, Elsevier, vol. 31(1), pages 135-146.
    6. Raphaël Godefroy, 2010. "The birth of the congressional clinic," PSE Working Papers halshs-00564921, HAL.
    7. Adrian Towse, 2007. "If it ain't broke, don't price fix it: the OFT and the PPRS," Health Economics, John Wiley & Sons, Ltd., vol. 16(7), pages 653-665.
    8. Rzakhanov, Zaur, 2008. "Regulatory policy, value of knowledge assets and innovation strategy: The case of the Orphan Drug Act," Research Policy, Elsevier, vol. 37(4), pages 673-689, May.
    9. Laura Magazzini & Fabio Pammolli & Massimo Riccaboni, 2009. "Nuove politiche per l'innovazione nel settore delle scienze della vita," Working Papers CERM 03-2009, Competitività, Regole, Mercati (CERM).
    10. Mueller-Langer, Frank, 2013. "Neglected infectious diseases: Are push and pull incentive mechanisms suitable for promoting drug development research?," Health Economics, Policy and Law, Cambridge University Press, vol. 8(02), pages 185-208, April.
    11. Jay Bhattacharya & Mikko Packalen, 2008. "Is Medicine an Ivory Tower? Induced Innovation, Technological Opportunity, and For-Profit vs. Non-Profit Innovation," NBER Working Papers 13862, National Bureau of Economic Research, Inc.
    12. Frank R. Lichtenberg, 2005. "Pharmaceutical Knowledge-Capital Accumulation and Longevity," NBER Chapters,in: Measuring Capital in the New Economy, pages 237-274 National Bureau of Economic Research, Inc.
    13. Leo Wangler, 2010. "Renewables and Innovation - Empirical Assessment and Theoretical Considerations," Jena Economic Research Papers 2010-002, Friedrich-Schiller-University Jena.
    14. Yin, Wesley, 2008. "Market incentives and pharmaceutical innovation," Journal of Health Economics, Elsevier, vol. 27(4), pages 1060-1077, July.
    15. Raphaël Godefroy, 2010. "The birth of the congressional clinic," Working Papers halshs-00564921, HAL.
    16. Dana Goldman & Darius Lakdawalla & Tomas J. Philipson & Wesley Yin, 2010. "Valuing health technologies at nice: recommendations for improved incorporation of treatment value in HTA," Health Economics, John Wiley & Sons, Ltd., vol. 19(10), pages 1109-1116.
    17. Mueller-Langer, Frank, 2011. "Neglected infectious diseases: are push and pull incentive mechanisms suitable for promoting research?," MPRA Paper 40193, University Library of Munich, Germany.
    18. Paul Grootendorst, 2009. "How should we support pharmaceutical innovation?," Social and Economic Dimensions of an Aging Population Research Papers 246, McMaster University.
    19. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters,in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484 National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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