Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Tuesday, 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.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/05/do-cost-sharing-and-entry-deregulation-curb-pharmaceutical-innovation.html

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