Do cost-sharing and entry deregulation curb pharmaceutical innovation?

This paper examines the role of both cost-sharing schemes in health insurance systems and the regulation of entry into the pharmaceutical sector for pharmaceutical R&D expenditure and drug prices. The analysis suggests that both an increase in the coinsurance rate and stricter price regulations...

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Published in:Journal of health economics Vol. 32; no. 5; pp. 881 - 894
Main Author: Grossmann, Volker
Format: Journal Article
Language:English
Published: Netherlands Elsevier B.V 01-09-2013
Elsevier Sequoia S.A
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Abstract This paper examines the role of both cost-sharing schemes in health insurance systems and the regulation of entry into the pharmaceutical sector for pharmaceutical R&D expenditure and drug prices. 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 higher R&D spending of pharmaceutical companies. The relationship between R&D spending per firm and the number of firms may be hump-shaped. In this case, the number of rivals which maximizes R&D expenditure per firm is decreasing in the coinsurance rate and increasing in labor productivity.
AbstractList This paper examines the role of both cost-sharing schemes in health insurance systems and the regulation of entry into the pharmaceutical sector for pharmaceutical R&D expenditure and drug prices. 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 higher R&D spending of pharmaceutical companies. The relationship between R&D spending per firm and the number of firms may be hump-shaped. In this case, the number of rivals which maximizes R&D expenditure per firm is decreasing in the coinsurance rate and increasing in labor productivity.
This paper examines the role of both cost-sharing schemes in health insurance systems and the regulation of entry into the pharmaceutical sector for pharmaceutical R&D expenditure and drug prices. 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 higher R&D spending of pharmaceutical companies. The relationship between R&D spending per firm and the number of firms may be hump-shaped. In this case, the number of rivals which maximizes R&D expenditure per firm is decreasing in the coinsurance rate and increasing in labor productivity. [PUBLICATION ABSTRACT]
This paper examines the role of both cost-sharing schemes in health insurance systems and the regulation of entry into the pharmaceutical sector for pharmaceutical R&D expenditure and drug prices. 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 higher R&D spending of pharmaceutical companies. The relationship between R&D spending per firm and the number of firms may be hump-shaped. In this case, the number of rivals which maximizes R&D expenditure per firm is decreasing in the coinsurance rate and increasing in labor productivity.
Author Grossmann, Volker
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  givenname: Volker
  surname: Grossmann
  fullname: Grossmann, Volker
  email: volker.grossmann@unifr.ch
  organization: University of Fribourg, Switzerland
BackLink https://www.ncbi.nlm.nih.gov/pubmed/23896384$$D View this record in MEDLINE/PubMed
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Issue 5
Keywords Cost-sharing
Health insurance
Patent breadth
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Entry deregulation
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Pharmaceutical innovation
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Language English
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SSID ssj0000539
Score 2.1900682
Snippet This paper examines the role of both cost-sharing schemes in health insurance systems and the regulation of entry into the pharmaceutical sector for...
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elsevier
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StartPage 881
SubjectTerms Coinsurance
Control
Cost engineering
Cost Sharing
Deregulation
Drug and Narcotic Control - legislation & jurisprudence
Drug Costs
Drug Discovery
Drug Industry - legislation & jurisprudence
Economics
Entry deregulation
Expenditures
Health
Health administration
Health insurance
Labor
Models, Statistical
Patent breadth
Patents as Topic
Pharmaceutical industry
Pharmaceutical innovation
Pharmaceuticals
Price regulations
Productivity
Research & development expenditures
Studies
United States
Title Do cost-sharing and entry deregulation curb pharmaceutical innovation?
URI https://dx.doi.org/10.1016/j.jhealeco.2013.06.001
https://www.ncbi.nlm.nih.gov/pubmed/23896384
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Volume 32
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