TY  - JOUR
AU  - Dranove, David
AU  - Garthwaite, Craig
AU  - Hermosilla, Manuel
TI  - Pharmaceutical Profits and the Social Value of Innovation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 20212
PY  - 2014
Y2  - June 2014
DO  - 10.3386/w20212
UR  - http://www.nber.org/papers/w20212
L1  - http://www.nber.org/papers/w20212.pdf
N1  - Author contact info:
David Dranove
Department of Strategy
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
E-Mail: d-dranove@kellogg.northwestern.edu

Craig Garthwaite
Kellogg School of Management
Northwestern University
2211 Campus Drive
Evanston, IL 60208
Tel: 847/491-2509
Fax: 847/467-1777
E-Mail: c-garthwaite@kellogg.northwestern.edu

Manuel I. Hermosilla
Carey Business School
Johns Hopkins University
100 International Dr
Baltimore, MD 21202 
E-Mail: mh@jhu.edu
AB  - Prior research has shown that exogenous shocks to the demand for medical products spur additional product development. These studies do not distinguish between breakthrough products and those that largely duplicate the performance of existing products. In this paper, we use a novel data set to explore the impact of the introduction of Medicare Part D on the development of new biotechnology products. We find that the law spurred development of products targeting illnesses that affect the elderly, but most of this effect is concentrated among products aimed at diseases that already have multiple existing treatments. Moreover, we find no increase in products targeting orphan disease or those receiving either fast track or priority review status from the FDA. This suggests that marginal changes in demand may have little effect on the development of products with large welfare benefits.
ER  -