DP12420 Are Important Innovations Rewarded? Evidence from Pharmaceutical Markets
|Author(s):||Margaret K Kyle|
|Publication Date:||November 2017|
|Programme Areas:||Industrial Organization|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12420|
This paper focuses on the relationship between therapeutic value and different measures of market rewards (the number of patents, price, market share, and total revenues) of a new treatment. Using an assessment of therapeutic value 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, suggesting 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 countries are spending too much 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.