Understanding Incentives in Health Care - Executive Summary

9 Pages Posted: 2 Apr 2009

Date Written: July 1, 2008

Abstract

First I empirically show how market structure influences the split of producer surplus innovators receive for successful innovation in the biotechnology pharmaceutical industry. After identifying the drivers of firms' values for adding a new drug to their product portfolio, I show that when the distribution of marketing rights for products in a physician specialty are concentrated in a single firm, the bargaining position of the innovator is weakened and this effect becomes more severe as the size of the physician specialty increases. Next, I examine the effect of state legislation restricting physician investment in magnetic resonance imaging (MRI) facilities on the usage and availability of MRI technology. I find this legislation decreases the number of MRI machines available by 12% and shifts where procedures are performed from hospital to non-hospital based facilities.

Keywords: market structure, innovator, biotechnology, pharmaceutical, drug, distribution, legislation

Suggested Citation

Levine Taub, Anna, Understanding Incentives in Health Care - Executive Summary (July 1, 2008). Available at SSRN: https://ssrn.com/abstract=1371769 or http://dx.doi.org/10.2139/ssrn.1371769

Anna Levine Taub (Contact Author)

Northeastern University ( email )

321 Lake Hall
Boston, MA 02115
United States

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