Do Cost-Sharing and Entry Deregulation Curb Pharmaceutical Innovation?
University of Fribourg - Faculty of Economics and Social Science; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)
April 29, 2011
CESifo Working Paper Series No. 3439
This paper examines the role of both cost-sharing schemes in health insurance systems and entry regulation for pharmaceutical R&D expenditure, drug prices, aggregate productivity, and income. 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 quality-improvements of pharmaceuticals, despite reducing price-setting power of pharmaceutical companies. Extension to an endogenous growth context suggests that, when individual labor supply depends on health status, both cost-sharing and entry barriers in the pharmaceutical sector also affect aggregate productivity and wage rates.
Number of Pages in PDF File: 43
Keywords: aggregate productivity, cost-sharing, entry deregulation, health insurance, pharmaceutical innovation
JEL Classification: I10, L10, O30
Date posted: May 18, 2011