Publications
Publications
- 2021
- HBS Working Paper Series
Which Markets (Don't) Drive Pharmaceutical Innovation? Evidence From U.S. Medicaid Expansions
By: Craig Garthwaite, Rebecca Sachs and Ariel Dora Stern
Abstract
Pharmaceutical innovation policy involves managing a tradeoff between high prices for new products in the short-term and stronger incentives to develop products for the future. Prior research has documented a causal relationship between market size and pharmaceutical research and development (R&D) activities. The existing literature, however, provides no evidence of how this relationship varies across markets. We investigate whether recent expansions in state Medicaid programs caused an increase in R&D. We find no evidence of a response, potentially a result of Medicaid’s low reimbursement for pharmaceuticals, suggesting low(er) price markets may have different dynamics with respect to innovation policy.
Keywords
Pharmaceuticals; Medicaid; Innovation and Invention; Policy; Markets; Research and Development; Pharmaceutical Industry
Citation
Garthwaite, Craig, Rebecca Sachs, and Ariel Dora Stern. "Which Markets (Don't) Drive Pharmaceutical Innovation? Evidence From U.S. Medicaid Expansions." NBER Working Paper Series, No. 28755, May 2021.
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