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Are Important Innovations Rewarded? Evidence from Pharmaceutical Markets

Authors
  • Kyle, Margaret K.1
  • 1 MINES ParisTech (CERNA), PSL Research University and CEPR, 60 boulevard Saint Michel, Paris, 75005, France , Paris (France)
Type
Published Article
Journal
Review of Industrial Organization
Publisher
Springer US
Publication Date
Jun 07, 2018
Volume
53
Issue
1
Pages
211–234
Identifiers
DOI: 10.1007/s11151-018-9639-7
Source
Springer Nature
Keywords
License
Yellow

Abstract

This paper focuses on the relationship between therapeutic value and different measures of market rewards: the number of patents, price, market share, and revenues. Using an assessment of therapeutic value that is provided by the French Haute Authorité de Santé (HAS), I find a weak relationship between most measures of rewards and this assessment of therapeutic value, which suggests that the returns to developing a “me-too” product are not very different from developing treatments with greater therapeutic effects. One interpretation is that the HAS score is a poor assessment of therapeutic value, in which case the use of similar health technology assessments by governments and other payers should be re-examined. Alternatively, if the HAS score is informative, the results suggest that countries are overspending on less innovative products, and that a re-balancing of innovation incentives may be worth considering if therapeutic value is highly related to social welfare.

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