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Are Important Innovations Rewarded? Evidence from Pharmaceutical Markets

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  • Margaret K. Kyle

    (MINES ParisTech (CERNA), PSL Research University and CEPR)

Abstract

This paper focuses on the relationship between therapeutic value and different measures of market rewards: the number of patents, price, market share, and revenues. Using an assessment of therapeutic value that is provided by the French Haute Authorité de Santé (HAS), I find a weak relationship between most measures of rewards and this assessment of therapeutic value, which suggests that the returns to developing a “me-too” product are not very different from developing treatments with greater therapeutic effects. One interpretation is that the HAS score is a poor assessment of therapeutic value, in which case the use of similar health technology assessments by governments and other payers should be re-examined. Alternatively, if the HAS score is informative, the results suggest that countries are overspending on less innovative products, and that a re-balancing of innovation incentives may be worth considering if therapeutic value is highly related to social welfare.

Suggested Citation

  • Margaret K. Kyle, 2018. "Are Important Innovations Rewarded? Evidence from Pharmaceutical Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(1), pages 211-234, August.
    • Handle: RePEc:kap:revind:v:53:y:2018:i:1:d:10.1007_s11151-018-9639-7
    DOI: 10.1007/s11151-018-9639-7
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    References listed on IDEAS

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    1. Arcidiacono, Peter & Ellickson, Paul B. & Landry, Peter & Ridley, David B., 2013. "Pharmaceutical followers," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 538-553.
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    5. Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
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    7. Margaret K. Kyle & Anita M. McGahan, 2012. "Investments in Pharmaceuticals Before and After TRIPS," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1157-1172, November.
    8. Margaret Kyle & Heidi Williams, 2017. "Is American Health Care Uniquely Inefficient? Evidence from Prescription Drugs," American Economic Review, American Economic Association, vol. 107(5), pages 486-490, May.
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    Cited by:

    1. Kyle, Margaret K., 2022. "Incentives for pharmaceutical innovation: What’s working, what’s lacking," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    2. Margaret K. Kyle, 2019. "The Alignment of Innovation Policy and Social Welfare: Evidence from Pharmaceuticals," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 95-123, National Bureau of Economic Research, Inc.
    3. Christopher M. Snyder & Victor J. Tremblay, 2018. "Introduction to the Special Issue on “The Intersection Between Industrial Organization and Healthcare Economics”," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(1), pages 1-6, August.
    4. Salas-Vega, Sebastian & Shearer, Emily & Mossialos, Elias, 2020. "Relationship between costs and clinical benefits of new cancer medicines in Australia, France, the UK, and the US," Social Science & Medicine, Elsevier, vol. 258(C).

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