Innovation Incentives in the Pharmaceutical Sector: Re-thinking Competition and Public Policy?

World Competition - Law and Economics Review, Volume 44, Issue 3 (2021) pp. 307 – 332

22 Pages Posted: 14 May 2021 Last revised: 7 Oct 2021

See all articles by Frank P. Maier-Rigaud

Frank P. Maier-Rigaud

IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods; ABC economics

Robert Lauer

Marsh & McLennan Companies - NERA Economic Consulting (Berlin Office)

Laura Robles

ABC economics

Date Written: May 13, 2021

Abstract

The incentives of pharmaceutical companies to innovate and how competition affects these incentives has been topical in recent years: for the general public, as evidenced by a patent race at an unprecedented pace during the ongoing COVID-19 pandemic; and more specifically for competition authorities, as demonstrated for example by the role innovation played in the assessment of the Bayer/Monsanto (2018), Dow/DuPont (2017), and the Novartis/GSK (2015) mergers. This paper contributes to the innovation debate, notably in the pharmaceutical industry, by giving an overview on firm and market-level incentives to carry out research and development (R&D). Understanding these innovation incentives is relevant for a proper competition assessment where the effect of a particular conduct or structural change on these incentives is considered, but also more generally in the context of public policy or regulatory questions. We review the fundamental elements driving innovation incentives and tentatively relate these to the development of new drugs for neurodegenerative diseases (NDD), in particular Parkinson’s disease (PD) and Alzheimer’s disease (AD).

Keywords: Health Economics, Pharmaceutical Products, Innovation, R&D, Information Asymmetry, Coase Conjecture, Replacement Effect, Patent Race, Competition, Neurodegenerative Diseases, Parkinson’s Disease, Alzheimer’s Disease

JEL Classification: I18, L13, O31

Suggested Citation

Maier-Rigaud, Frank P. and Maier-Rigaud, Frank P. and Lauer, Robert and Robles, Laura, Innovation Incentives in the Pharmaceutical Sector: Re-thinking Competition and Public Policy? (May 13, 2021). World Competition - Law and Economics Review, Volume 44, Issue 3 (2021) pp. 307 – 332, Available at SSRN: https://ssrn.com/abstract=3845568 or http://dx.doi.org/10.2139/ssrn.3845568

Frank P. Maier-Rigaud (Contact Author)

IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods ( email )

Socle de la Grande Arche
1 Parvis de la Défense
Paris, La Défense Cedex, 92044
France

ABC economics ( email )

Berlin, 10115
Germany
10115 (Fax)

HOME PAGE: http://www.ABCecon.com

Robert Lauer

Marsh & McLennan Companies - NERA Economic Consulting (Berlin Office) ( email )

Unter den Linden 14
Berlin, 10117
Germany

Laura Robles

ABC economics ( email )

Berlin, 10115
Germany

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