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Evaluating Innovation and Moral Hazard in Pharmaceuticals

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  • Paris Cleanthous

Abstract

This paper formulates an empirical methodology that evaluates pharmaceutical innovation in the American antidepressant market by quantifying patient welfare benefits from innovation. While evaluating pharmaceutical innovation in antidepressants, I uncover and address the moral hazard issue that arises due to the existence of prescription drug insurance coverage. A combination of market-level data, drug and patient characteristics are used to estimate demand for all antidepressants between 1980 and 2001. The paper estimates large and varied patient welfare gains due to innovation and helps explain a detected divergence between social and private patient benefits by the existence of insurance.

Suggested Citation

  • Paris Cleanthous, 2011. "Evaluating Innovation and Moral Hazard in Pharmaceuticals," University of Cyprus Working Papers in Economics 03-2011, University of Cyprus Department of Economics.
    • Handle: RePEc:ucy:cypeua:03-2011
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    File URL: https://papers.econ.ucy.ac.cy/RePEc/papers/03-11.pdf
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    References listed on IDEAS

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    Cited by:

    1. Yin, Nina, 2023. "Pharmaceuticals, incremental innovation and market exclusivity," International Journal of Industrial Organization, Elsevier, vol. 87(C).

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    Keywords

    Health; Innovation; Moral Hazard; Pharmaceuticals; Welfare;
    All these keywords.

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