Can medical progress be sustained?
Subtitle: implications of the link between development and output markets
By: Anup Malani, Tomas J. Philipson
Contributors: Philipson, Tomas J.; National Bureau of Economic Research
Series: NBER working paper series -- working paper 17011; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17011.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.  Improvements in health have been a major contributor to gains in overall economic welfare.  In this paper, we argue that previous economic research on R&D has overlooked an important difference between medical R&D and R&D in other sectors.  The health care sector exhibits a unique linkage between product development and output markets.  Participants in clinical trials for new medical products are also potential consumers of existing approved medical products.  This overlap between input supply and output demand has non-standard effects on innovative returns over time and across geography.  First, medical R&D has a self-limiting effect.  Contemporary innovation discourages trial participation and slows down development necessary for future innovation.  Thus, medical R&D suffers increasing costs over time, driven by improvements in the standard of care.  Second, policies that affect output markets, such as universal coverage and price controls, affect the returns to innovation, not only by altering the firm's variable profits, but also by increasing the length and cost of development.  Third, the amount of medical R&D in a location is driven, not only by the local relative R&D talent, but also by consumer demographics and output market policies in that location.  We provide evidence of the input-output linkage for the break-through HIV therapies introduced in 1996.  We document the substantial drop in trial recruitment induced by these new innovations and argue that this has slowed down development and lowered returns to subsequent HIV-related innovations"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/21/2011.

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