Endogenous productivity of demand‐induced R&amp;D: evidence from pharmaceuticals

Myers, Kyle; Pauly, Mark V.

doi:10.1111/1756-2171.12289

Cited by 8 publications

(8 citation statements)

References 39 publications

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“…The pressure generated by demand conditions, which drives firms to innovate, is a fact widely reported in the innovation literature (BOON; EDLER, 2018), since its proposition by Schmookler (1966), and corroborated mainly for hightech products and manufacturing industries (JUSTMAN, 1994;PORTER, 1998b;BÖNTE, 2004;FABRIZIO;THOMAS, 2012;LÜTHJE;HERSTATT;VON HIPPEL, 2005;EVANSCHITZKY et al 2012;KUTSCHKE;RESE;BAIER, 2016;MOEN;TVEDTEN;WOLD , 2018;MYERS;PAULY, 2019). In other words, in markets with more demanding consumers, intense feedback on solutions developed by ecosystem companies generates more pressure on companies, which can help explain even the differences in innovation rates between countries.…”

Section: Innovation Ecosystems and Digital Platformsmentioning

confidence: 98%

Ecossistema de inovação em plataformas de aplicativos

2020

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As plataformas de aplicativos fazem parte de ecossistemas de inovação, onde as interações entre usuários finais e desenvolvedores autorregulam o crescimento do próprio ecossistema. Uma das informações mais importantes para esse processo são as avaliações dos usuários. Com o intuito de analisar o impacto dessas informações, este artigo utiliza uma regressão por mínimos quadrados ordinários (MQO) para o ano de 2016, com base em 19 variáveis para 60 países. É mensurado o grau de exigência do mercado consumidor, utilizando um novo indicador baseado nas avaliações dos usuários finais para verificar a consistência de relações entre qualidade da demanda (mensurada pelo novo indicador) e o desempenho inovador de diferentes países nesse segmento. Os resultados evidenciam a robustez e as novas possibilidades de pesquisa que surgem, dadas as características positivas apresentadas pelo novo indicador construído através da utilização de ferramentas de big data e data analytics. Esse indicador mostra que a qualidade da demanda apoia inovações no segmento produtivo, o que levou à concussão de que obter feedback da demanda mais sofisticada representa um estímulo potencial poderoso ao avanço no desenvolvimento de aplicativos.

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Section: Innovation Ecosystems and Digital Platformsmentioning

confidence: 98%

Ecossistema de inovação em plataformas de aplicativos

2020

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“…For drugs with alternatives available for the same medical indication, "the daily price of the new medicine is to be equal to that of the comparable drug, to secure fair competition in the market" [34, pp. [13][14][15]. Price competition is then intentionally absent as between drugs.…”

Section: Prices and Quantities In Japan And The United Statesmentioning

confidence: 99%

“…In contrast, for drugs without available alternatives, the "cost calculation method" is used, which rests on manufacturing, R&D and marketing costs along with provision for an "operating profit of 14.7%" [34, pp. [13][14][15]. Furthermore, drug prices calculated through either method are "adjusted in case of large disparity between average foreign price, [as determined by the] average of US, UK, Germany and France."…”

Section: Prices and Quantities In Japan And The United Statesmentioning

confidence: 99%

“…Pharmaceutical Research and Development is an economic activity that rests fundamentally on what output is being produced and what revenues are anticipated. On this point, there is considerable evidence that pharmaceutical price regulation designed to lower drug prices leads directly to reduced R&D outlays [7,11,15,25]. In contrast, higher prices incentivize increased R&D outlays and promotes the development of new pharmaceuticals [31].…”

Section: Pharmaceutical Industry Randd As a Global Public Goodmentioning

confidence: 99%

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Pharmaceutical markets in Japan and the United States

Comanor

2022

IJEPS

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Although the United States and Japan are the two largest markets for branded pharmaceuticals, their structures and market performance are quite different. Like its European counterparts, a Japanese government ministry sets the prices paid to national and international drug companies. In contrast, US prices are set largely through negotiations between private health insurers and drug companies. Related to these different structures are quite different results. In particular, for pharmaceuticals sold in both countries, US prices are about twice what they are in Japan. Since many of the same companies sell pharmaceuticals in both countries, these differences require an explanation. A frequent one offered is that Japanese authorities exercise their inherent monopsony power to obtain the low prices, which private insurers in the United States are unable to impose. While correct on the surface, this explanation fails to confront deeper policy issue concerned with promoting public health. Because pharmaceutical research and development is a global public good, there are strong incentives for buyers to “free ride” on the outlays of others. Under those circumstances, global R&D outlays, based on country-specific incentives, would be set below optimal levels, and the supply price of substantial pharmaceutical innovation would not be covered. Because the US market is more than half the world total, its incentive structure is fundamentally different from that of Japan. Indeed, higher US drug prices, which drive worldwide incentives, are needed to promote current numbers of new pharmaceuticals introduced in both countries.

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“…None of this literature has attempted to incorporate the growing body of evidence of how the quantity and quality of pharmaceutical innovation responds to payment (Acemoglu & Linn, 2004; Adams, 2021; Bennette et al., 2019; Blume‐Kohout & Sood, 2013; Cerda, 2007; Dubois, de Mouzon, Scott‐Morton, & Seabright, 2015; Finkelstein, 2004; Myers & Pauly, 2019; Rake, 2017; Toole, 2012) to identify the optimal level of reward to manufacturers which accounts for the long‐term value beyond IPP, while carefully distinguishing the consumption value of health and the health opportunity costs associated with health care expenditure. Equally, the empirical literature has not estimated the likely effect of payment on health outcomes, or other welfare arguments, to identify what level of payment might be optimal and evaluate which pricing policies or approval norms would deliver this payment.…”

Section: Introductionmentioning

confidence: 99%

Achieving dynamic efficiency in pharmaceutical innovation: Identifying the optimal share of value and payments required

Woods,

Lomas,

Sculpher

et al. 2024

Health Economics

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It has been argued that cost‐effectiveness analysis of branded pharmaceuticals only considers static efficiency, neglects dynamic effects and undermines incentives for socially valuable innovation. We present a framework for designing pharmaceutical pricing policy to achieve dynamic efficiency. We develop a coherent framework that identifies the long‐term static and dynamic benefits and costs of offering manufacturers different levels of reward. The share of value that would maximise long‐term population health depends on how the quantity and quality of innovation responds to payment. Using evidence of the response of innovation to payment, the optimal share of value of new pharmaceuticals to offer to manufacturers is roughly 20% (range: 6%–51%). Reanalysis of a sample of NICE technology appraisals suggests that, in most cases, the share of value offered to manufacturers and the price premium paid by the English NHS were too high. In the UK, application of optimal shares would offer considerable benefits under both a public health objective and a broader view of social welfare. We illustrate how an optimal share of value can be delivered through a range of payment mechanisms including indirect price regulation via the use of different approval norms by an HTA body.

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Endogenous productivity of demand‐induced R&D: evidence from pharmaceuticals

Cited by 8 publications

References 39 publications

Ecossistema de inovação em plataformas de aplicativos

Ecossistema de inovação em plataformas de aplicativos

Pharmaceutical markets in Japan and the United States

Achieving dynamic efficiency in pharmaceutical innovation: Identifying the optimal share of value and payments required

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