IDEAS home Printed from https://ideas.repec.org/a/spr/hecrev/v4y2014i1p1-910.1186-s13561-014-0023-5.html
   My bibliography  Save this article

Pharmaceutical regulation in Europe and its impact on corporate R&D

Author

Listed:
  • Stephan Eger
  • Jörg Mahlich

Abstract

The results can be interpreted as further evidence of the deteriorating effect of regulation on firm’s incentives to invest in R&D. Copyright Eger and Mahlich; licensee Springer. 2014

Suggested Citation

  • Stephan Eger & Jörg Mahlich, 2014. "Pharmaceutical regulation in Europe and its impact on corporate R&D," Health Economics Review, Springer, vol. 4(1), pages 1-9, December.
    • Handle: RePEc:spr:hecrev:v:4:y:2014:i:1:p:1-9:10.1186/s13561-014-0023-5
    DOI: 10.1186/s13561-014-0023-5
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1186/s13561-014-0023-5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1186/s13561-014-0023-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wright, Donald J., 2004. "The drug bargaining game: pharmaceutical regulation in Australia," Journal of Health Economics, Elsevier, vol. 23(4), pages 785-813, July.
    2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    3. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    4. Lacy Glenn Thomas, 1990. "Regulation and Firm Size: FDA Impacts on Innovation," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 497-517, Winter.
    5. Fabio Pammolli & Massimo Riccaboni & Laura Magazzini, 2010. "The productivity crisis in pharmaceutical R&D," Working Papers 06/2010, University of Verona, Department of Economics.
    6. Martikainen, Jaana & Kivi, Ismo & Linnosmaa, Ismo, 2005. "European prices of newly launched reimbursable pharmaceuticals - a pilot study," Health Policy, Elsevier, vol. 74(3), pages 235-246, November.
    7. repec:adr:anecst:y:2005:i:79-80:p:17 is not listed on IDEAS
    8. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(3), pages 1049-1090.
    9. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    10. Koenig, Pamina & MacGarvie, Megan, 2011. "Regulatory policy and the location of bio-pharmaceutical foreign direct investment in Europe," Journal of Health Economics, Elsevier, vol. 30(5), pages 950-965.
    11. John Vernon, 2003. "The relationship between price regulation and pharmaceutical profit margins," Applied Economics Letters, Taylor & Francis Journals, vol. 10(8), pages 467-470.
    12. Keyhani, S. & Wang, S. & Hebert, P. & Carpenter, D. & Anderson, G., 2010. "US pharmaceutical innovation in an international context," American Journal of Public Health, American Public Health Association, vol. 100(6), pages 1075-1080.
    13. Werner Hölzl, 2009. "Is the R&D behaviour of fast-growing SMEs different? Evidence from CIS III data for 16 countries," Small Business Economics, Springer, vol. 33(1), pages 59-75, June.
    14. Henschke, Cornelia & Sundmacher, Leonie & Busse, Reinhard, 2013. "Structural changes in the German pharmaceutical market: Price setting mechanisms based on the early benefit evaluation," Health Policy, Elsevier, vol. 109(3), pages 263-269.
    15. Kamien,Morton I. & Schwartz,Nancy L., 1982. "Market Structure and Innovation," Cambridge Books, Cambridge University Press, number 9780521293853, December.
    16. Wiggins, Steven N, 1983. "The Impact of Regulation on Pharmaceutical Research Expenditures: A Dynamic Approach," Economic Inquiry, Western Economic Association International, vol. 21(1), pages 115-128, January.
    17. Civan Abdulkadir & Maloney Michael T., 2009. "The Effect of Price on Pharmaceutical R&D," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-24, April.
    18. Kanavos, Panos G. & Vandoros, Sotiris, 2011. "Determinants of branded prescription medicine prices in OECD countries," Health Economics, Policy and Law, Cambridge University Press, vol. 6(3), pages 337-367, July.
    19. Jörg Ruof & Friedrich Schwartz & J.-Matthias Schulenburg & Charalabos-Markos Dintsios, 2014. "Early benefit assessment (EBA) in Germany: analysing decisions 18 months after introducing the new AMNOG legislation," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(6), pages 577-589, July.
    20. Joseph Golec & John Vernon, 2010. "Financial Effects of Pharmaceutical Price Regulation on R&D Spending by EU versus US Firms," PharmacoEconomics, Springer, vol. 28(8), pages 615-628, August.
    21. 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.
    22. Rebecca Henderson & Iain Cockburn, 1994. "Measuring Competence? Exploring Firm Effects in Pharmaceutical Research," Strategic Management Journal, Wiley Blackwell, vol. 15(S1), pages 63-84, December.
    23. Giaccotto, Carmelo & Santerre, Rexford E & Vernon, John A, 2005. "Drug Prices and Research and Development Investment Behavior in the Pharmaceutical Industry," Journal of Law and Economics, University of Chicago Press, vol. 48(1), pages 195-214, April.
    24. Grabowski, Henry G & Mueller, Dennis C, 1972. "Managerial and Stockholder Welfare Models of Firm Expenditures," The Review of Economics and Statistics, MIT Press, vol. 54(1), pages 9-24, February.
    25. Henry Grabowski & John Vernon, 2000. "The determinants of pharmaceutical research and development expenditures," Journal of Evolutionary Economics, Springer, vol. 10(1), pages 201-215.
    26. Victor Ivandic, 2014. "Requirements for benefit assessment in Germany and England – overview and comparison," Health Economics Review, Springer, vol. 4(1), pages 1-14, December.
    27. Jaffe, Adam B, 1989. "Real Effects of Academic Research," American Economic Review, American Economic Association, vol. 79(5), pages 957-970, December.
    28. Stephen Bond & Dietmar Harhoff & John Van Reenen, 2010. "Investment, R&D and Financial Constraints in Britain and Germany," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 433-460, National Bureau of Economic Research, Inc.
    29. Stremersch, S. & Lemmens, A., 2008. "Sales Growth of New Pharmaceuticals Across the Globe: The Role of Regulatory Regimes," ERIM Report Series Research in Management ERS-2008-026-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    30. Jörg Mahlich & Thomas Roediger-Schluga, 2006. "The Determinants of Pharmaceutical R&D Expenditures: Evidence from Japan," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(2), pages 145-164, March.
    31. Michael Kremer, 2002. "Pharmaceuticals and the Developing World," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 67-90, Fall.
    32. Stefan Stremersch & Aurélie Lemmens, 2009. "Sales Growth of New Pharmaceuticals Across the Globe: The Role of Regulatory Regimes," Marketing Science, INFORMS, vol. 28(4), pages 690-708, 07-08.
    33. Darren Filson, 2012. "A Markov‐perfect equilibrium model of the impacts of price controls on the performance of the pharmaceutical industry," RAND Journal of Economics, RAND Corporation, vol. 43(1), pages 110-138, March.
    34. Ogawa, Kazuo, 2007. "Debt, R&D investment and technological progress: A panel study of Japanese manufacturing firms' behavior during the 1990s," Journal of the Japanese and International Economies, Elsevier, vol. 21(4), pages 403-423, December.
    35. John A. Vernon, 2005. "Examining the link between price regulation and pharmaceutical R&D investment," Health Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 1-16, January.
    36. Allan P. O. Williams, 2006. "Impact of Strategies," Palgrave Macmillan Books, in: The Rise of Cass Business School, chapter 13, pages 167-181, Palgrave Macmillan.
    37. Danzon, Patricia M. & Chao, Li-Wei, 2000. "Cross-national price differences for pharmaceuticals: how large, and why?," Journal of Health Economics, Elsevier, vol. 19(2), pages 159-195, March.
    38. Bryan P. Schmutz & Rexford E. Santerre, 2013. "Examining The Link Between Cash Flow, Market Value, And Research And Development Investment Spending In The Medical Device Industry," Health Economics, John Wiley & Sons, Ltd., vol. 22(2), pages 157-167, February.
    39. Fritz von der Schulenburg & Sotiris Vandoros & Panos Kanavos, 2011. "The effects of drug market regulation on pharmaceutical prices in Europe: overview and evidence from the market of ACE inhibitors," Health Economics Review, Springer, vol. 1(1), pages 1-8, December.
    40. Thomas A. Abbott & John A. Vernon, 2007. "The cost of US pharmaceutical price regulation: a financial simulation model of R&D decisions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 293-306.
    41. Darren Filson & Neal Masia, 2007. "Effects of profit-reducing policies on firm survival, financial performance, and new drug introductions in the research-based pharmaceutical industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 329-351.
    42. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
    43. Ward, Michael R & Dranove, David, 1995. "The Vertical Chain of Research and Development in the Pharmaceutical Industry," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 70-87, January.
    44. Cockburn, Iain M. & Henderson, Rebecca M., 2001. "Scale and scope in drug development: unpacking the advantages of size in pharmaceutical research," Journal of Health Economics, Elsevier, vol. 20(6), pages 1033-1057, November.
    45. Joseph Golec & John Vernon, 2009. "Financial risk of the Biotech Industry versus the Pharmaceutical Industry," Applied Health Economics and Health Policy, Springer, vol. 7(3), pages 155-165, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Moreno Gigi & van Eijndhoven Emma & Benner Jennifer & Sullivan Jeffrey, 2017. "The Long-Term Impact of Price Controls in Medicare Part D," Forum for Health Economics & Policy, De Gruyter, vol. 20(2), pages 1-56, December.
    2. Stojchevska, Ivana & Baftijari, Agon, 2015. "The Impact of Governmental Policy on R&D Projects in the Pharmaceutical Industry," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2015), Kotor, Montengero, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Kotor, Montengero, 10-11 September 2015, pages 72-79, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    3. Mujaheed Shaikh & Pietro Giudice & Dimitrios Kourouklis, 2021. "Revisiting the Relationship Between Price Regulation and Pharmaceutical R&D Investment," Applied Health Economics and Health Policy, Springer, vol. 19(2), pages 217-229, March.
    4. Jörg Mahlich & Arne Bartol & Srirangan Dheban, 2021. "Can adaptive clinical trials help to solve the productivity crisis of the pharmaceutical industry? - a scenario analysis," Health Economics Review, Springer, vol. 11(1), pages 1-10, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.
    2. Bastian Rake, 2017. "Determinants of pharmaceutical innovation: the role of technological opportunities revisited," Journal of Evolutionary Economics, Springer, vol. 27(4), pages 691-727, September.
    3. Barrenho, E & Smith, PC & Miraldo, M, 2013. "The determinants of attrition in drug development: a duration analysis," Working Papers 12204, Imperial College, London, Imperial College Business School.
    4. Agarwal, Ruchir & Gaule, Patrick, 2022. "What drives innovation? Lessons from COVID-19 R&D," Journal of Health Economics, Elsevier, vol. 82(C).
    5. Jobjörnsson, Sebastian & Forster, Martin & Pertile, Paolo & Burman, Carl-Fredrik, 2016. "Late-stage pharmaceutical R&D and pricing policies under two-stage regulation," Journal of Health Economics, Elsevier, vol. 50(C), pages 298-311.
    6. Shilpi Tyagi & D. K. Nauriyal & Rachita Gulati, 2018. "Firm level R&D intensity: evidence from Indian drugs and pharmaceutical industry," Review of Managerial Science, Springer, vol. 12(1), pages 167-202, January.
    7. Cohen, Wesley M., 2010. "Fifty Years of Empirical Studies of Innovative Activity and Performance," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 129-213, Elsevier.
    8. Moreno Gigi & van Eijndhoven Emma & Benner Jennifer & Sullivan Jeffrey, 2017. "The Long-Term Impact of Price Controls in Medicare Part D," Forum for Health Economics & Policy, De Gruyter, vol. 20(2), pages 1-56, December.
    9. Martin Kukuk & Manfred Stadler, 2001. "Financing Constraints and the Timing of Innovations in the German Services Sector," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 28(3), pages 277-292, September.
    10. Verniers, Isabel & Stremersch, Stefan & Croux, Christophe, 2011. "The global entry of new pharmaceuticals: A joint investigation of launch window and price," International Journal of Research in Marketing, Elsevier, vol. 28(4), pages 295-308.
    11. Danzon, Patricia M. & Nicholson, Sean & Pereira, Nuno Sousa, 2005. "Productivity in pharmaceutical-biotechnology R&D: the role of experience and alliances," Journal of Health Economics, Elsevier, vol. 24(2), pages 317-339, March.
    12. Muhammad Kaleem Khan & Ahmad Kaleem & Salman Zulfiqar & Umair Akram, 2019. "Innovation Investment: Behaviour Of Chinese Firms Towards Financing Sources," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 23(07), pages 1-29, October.
    13. Toole, Andrew A, 2007. "Does Public Scientific Research Complement Private Investment in Research and Development in the Pharmaceutical Industry?," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 81-104, February.
    14. Rosella Levaggi & Michele Moretto & Paolo Pertile, 2017. "The Dynamics of Pharmaceutical Regulation and R&D Investments," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(1), pages 121-141, February.
    15. Dirk Czarnitzki & Hanna Hottenrott, 2011. "Financial Constraints: Routine Versus Cutting Edge R&D Investment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 121-157, March.
    16. Stojchevska, Ivana & Baftijari, Agon, 2015. "The Impact of Governmental Policy on R&D Projects in the Pharmaceutical Industry," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2015), Kotor, Montengero, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Kotor, Montengero, 10-11 September 2015, pages 72-79, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    17. Klaus Gugler, 2003. "Corporate governance and investment," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 10(3), pages 261-289.
    18. Paolo Pertile & Simona Gamba & Martin Forster, 2018. "Free-Riding in Pharmaceutical Price Regulation: Theory and Evidence," Discussion Papers 18/04, Department of Economics, University of York.
    19. Dirk Czarnitzki & Hanna Hottenrott & Susanne Thorwarth, 2011. "Industrial research versus development investment: the implications of financial constraints," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(3), pages 527-544.
    20. Lorenz, Steffi, 2015. "Diversität und Verbundenheit der unternehmerischen Wissensbasis: Ein neuartiger Messansatz mit Indikatoren aus Innovationsprojekten," Discussion Papers on Strategy and Innovation 15-01, Philipps-University Marburg, Department of Technology and Innovation Management (TIM).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:hecrev:v:4:y:2014:i:1:p:1-9:10.1186/s13561-014-0023-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com/economics/journal/13561 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.