May 24, 2011
Do Cost-Sharing and Entry Deregulation Curb Pharmaceutical Innovation?
Posted by D. Daniel Sokol
Volker Grossmann, University of Fribourg - Faculty of Economics and Social Science asks Do Cost-Sharing and Entry Deregulation Curb Pharmaceutical Innovation?
ABSTRACT: This paper examines the role of both cost-sharing schemes in health insurance systems and entry regulation for pharmaceutical R&D expenditure, drug prices, aggregate productivity, and income. The analysis suggests that both an increase in the coinsurance rate and stricter price regulations adversely affect R&D spending in the pharmaceutical sector. In contrast, entry deregulation may lead to quality-improvements of pharmaceuticals, despite reducing price-setting power of pharmaceutical companies. Extension to an endogenous growth context suggests that, when individual labor supply depends on health status, both cost-sharing and entry barriers in the pharmaceutical sector also affect aggregate productivity and wage rates.
May 24, 2011 | Permalink
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