“…These estimates imply an elasticity of Phase I clinical trials with respect to market size of 2.4 to 4.7, bracketing Acemoglu and Linn’s estimated elasticity of 3.5 for approved new molecular entities (NMEs). However, when we consider all clinical trials combined—including Phase III trials for supplemental indications—our estimated elasticity of clinical trials with respect to market size is 3.3, rather lower than Acemoglu and Linn’s estimated elasticity of 6 for all new drug approvals, but certainly still larger than the Dubois et al (2011) estimate of about 0.25. What might explain the differences we observe here?…”
Section: Discussioncontrasting
confidence: 62%
“…First, in contrast with the U.S. market focus of both our paper and Acemoglu & Linn’s, Dubois et al (2011) estimate expected future revenues due to changes in market size using brand-name drugs’ sales revenues across 14 countries. Several of these countries regulate prescription drug prices, and regulations may change rapidly over time.…”
Section: Discussionmentioning
confidence: 95%
“…Although previous studies have shown that increases in market size are significant drivers of pharmaceutical innovation, magnitudes of the estimates of elasticity of innovation with respect to market size vary widely (Acemoglu and Linn, 2004; Dubois et al, 2011)…”
Recent evidence suggests that Medicare Part D increased prescription drug use among seniors, and increased pharmaceutical firms’ revenues from sales. Previous studies also indicate that increases in market size induce pharmaceutical innovation. This paper assesses the impact of the Medicare Part D legislation on pharmaceutical research and development (R&D), using time-series data on the number of drugs entering preclinical and clinical development by therapeutic class and phase. We find that the passage and implementation of Medicare Part D is associated with significant increases in pharmaceutical R&D for therapeutic classes with higher Medicare market share.
“…These estimates imply an elasticity of Phase I clinical trials with respect to market size of 2.4 to 4.7, bracketing Acemoglu and Linn’s estimated elasticity of 3.5 for approved new molecular entities (NMEs). However, when we consider all clinical trials combined—including Phase III trials for supplemental indications—our estimated elasticity of clinical trials with respect to market size is 3.3, rather lower than Acemoglu and Linn’s estimated elasticity of 6 for all new drug approvals, but certainly still larger than the Dubois et al (2011) estimate of about 0.25. What might explain the differences we observe here?…”
Section: Discussioncontrasting
confidence: 62%
“…First, in contrast with the U.S. market focus of both our paper and Acemoglu & Linn’s, Dubois et al (2011) estimate expected future revenues due to changes in market size using brand-name drugs’ sales revenues across 14 countries. Several of these countries regulate prescription drug prices, and regulations may change rapidly over time.…”
Section: Discussionmentioning
confidence: 95%
“…Although previous studies have shown that increases in market size are significant drivers of pharmaceutical innovation, magnitudes of the estimates of elasticity of innovation with respect to market size vary widely (Acemoglu and Linn, 2004; Dubois et al, 2011)…”
Recent evidence suggests that Medicare Part D increased prescription drug use among seniors, and increased pharmaceutical firms’ revenues from sales. Previous studies also indicate that increases in market size induce pharmaceutical innovation. This paper assesses the impact of the Medicare Part D legislation on pharmaceutical research and development (R&D), using time-series data on the number of drugs entering preclinical and clinical development by therapeutic class and phase. We find that the passage and implementation of Medicare Part D is associated with significant increases in pharmaceutical R&D for therapeutic classes with higher Medicare market share.
“…Second, as expected, we Önd that a larger population and higher GDP per capita in- 17 We also experimented with a log-logistic model that is more áexible in that it can generate a distribution with a non-monotonic hazard rate. The parameter estimates from that speciÖcation indicated that the hazard declines over time after a few weeks.…”
This project was initiated by Jean (Jenny) Lanjouw. Tragically, Jenny died in late 2005, but had asked us to complete the project. This took much longer than expected because it involved complete reconstruction of the data set and empirical work. It is essentially a new paper in its current form, but it remains an important part of Jenny's legacy and a topic to which she devoted much of her intellectual and policy efforts. We hope she would be satisfied with our work which, for us, was a labor of love. We thank Judy Chevalier, Alberto Galasso, Matt Gentry, Bronwyn Hall, Saul Lach, Margaret Kyle, Scott Stern, Glen Weyl, Brian Wright, and seminar participants at Berkeley, MIT Sloan School, the USPTO, and numerous other universities for their suggestions on earlier versions of the paper. We are grateful to the World Bank, the Brookings
ABSTRACTThis paper studies how patent rights and price regulation affect how fast new drugs are launched in different countries, using newly constructed data on launches of 642 new drugs in 76 countries for the period 1983-2002, and information on the duration and content of patent and price control regimes. Price regulation strongly delays launch, while longer and more extensive patent protection accelerates it. Health policy institutions, and economic and demographic factors that make markets more profitable, also speed up diffusion. The effects are robust to using instruments to control for endogeneity of policy regimes. The results point to an important role for patents and other policy choices in driving the diffusion of new innovations.
“…In the model and analyses that follow, I account for firm and disease-specific factors that may influence the duration of the regulatory approval process. Acemoglu and Linn (2004) find that potential market size has a strong influence on the entry of non-generic drugs and new molecular entities and DuBois et. al.…”
Section: A Model Of Approval Regulation and Firm Strategymentioning
This paper explores how the regulatory approval process affects innovation incentives in medical technologies. Prior studies have found early mover regulatory advantages for drugs. I find the opposite for medical devices, where pioneer entrants spend 34 percent (7.2 months) longer than follow-on entrants in regulatory approval. Back-of-the- envelope calculations suggest that the cost of a delay of this length is upwards of 7 percent of the total cost of bringing a new high-risk device to market. Considering potential explanations, I find that approval times are largely unrelated to technological novelty, but are meaningfully reduced by the publication of objective regulatory guidelines. Finally, I consider how the regulatory process affects small firms’ market entry patterns and find that small firms are less likely to be pioneers in new device markets, a fact consistent with relatively higher costs of doing so for more financially constrained firms.
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