The Dynamics of Pharmaceutical Regulation and R&D Investments

37 Pages Posted: 6 Aug 2013

See all articles by Rosella Levaggi

Rosella Levaggi

University of Brescia - Department of Economics and Management

Michele Moretto

University of Padua, Dep of Economics and Management

Paolo Pertile

University of Verona - Department of Economics

Date Written: June 24, 2013

Abstract

The paper uses a real option approach to investigate the impact of performance-based risk-sharing agreements for the reimbursement of new drugs in comparison with standard cost-effectiveness thresholds. The results show that the exact definition of the risk-sharing agreement is key in determining its economic effects. In particular, despite the concerns expressed by some authors, the incentive for a firm to invest in R&D may be the same or even greater than under cost-effectiveness thresholds. When this is the case, patients would benefit from earlier access to innovations. The price for this is less value for money for the insurer at the time of adoption of the innovation.

Keywords: pharmaceutical regulation, real options, R&D, risk-sharing

JEL Classification: I18, L51, C61

Suggested Citation

Levaggi, Rosella and Moretto, Michele and Pertile, Paolo, The Dynamics of Pharmaceutical Regulation and R&D Investments (June 24, 2013). University of Verona Department of Economics Working Paper No. 13/2013. Available at SSRN: https://ssrn.com/abstract=2306569 or http://dx.doi.org/10.2139/ssrn.2306569

Rosella Levaggi

University of Brescia - Department of Economics and Management ( email )

Via San Faustino 74B
Brescia, 25122
Italy
+39 03 0298 8825 (Phone)
+39 03 0298 8837 (Fax)

HOME PAGE: http://www.eco.unibs.it/segdse/rlev/index.htm

Michele Moretto

University of Padua, Dep of Economics and Management ( email )

via Del Santo 33
Padova, 35123
Italy
+39 049 8274265 (Phone)
+39 049 8274211 (Fax)

Paolo Pertile (Contact Author)

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
Verona, 37129
Italy

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