Racing To Invest? The Dynamics of Competition in Ethical Drug Discovery (original) (raw)

Two Puzzles Resolved: Of the Schumpeter - Arrow Stalemate and Pharmaceutical Innovation Markets

One of the most heated discussions in economics in recent years has concerned the relationship between market structure and innovation. After a half-century of debate and innumerable studies, the consensus is that there is no clear answer to the question. On a concrete level, the uncertainty underlies the most fundamental critique of "innovation markets," or markets for research and development (R&D). After all, if concentration leads to innovation, then antitrust challenges are not appropriate even for mergers that lead to monopoly. In this Article, I closely parse the economic studies to arrive at a more nuanced answer that highlights factors determining the ideal market structure. I show that both competition and size play a role in pharmaceutical innovation. In addition, analysis of the pharmaceutical industry rebuts the most cogent critiques of innovation markets. The Article also includes the first empirical analysis of pharmaceutical innovation market cases. This is...

The Dynamics of Pharmaceutical Regulation and R&D Investments

Journal of Public Economic Theory, 2016

The paper uses a real option approach to investigate the potential impact of performance-based risk-sharing agreements for the reimbursement of new drugs in comparison with standard cost-effectiveness thresholds. The results show that the exact definition of the risksharing agreement is key in determining its economic effects. In particular, despite the concerns expressed by some authors, the incentive for a firm to invest in R&D may be the same or even greater than under cost-effectiveness thresholds, if the agreement is sufficiently mild in defining the conditions under which the product is not (fully) reimbursed to the firm. In this case, patients would benefit from earlier access to innovations. The price for this is less value for money for the insurer at the time of adoption of the innovation. * We are grateful to Gijsbert Zwart for excellent comments on an earlier version of the paper. We also thank other participants at the 13 th European Health Economics Workshop, MMRG seminar series at Catholic University, Milan, and EARIE 2012 conference.

The Unexpected Consequences of Asymmetric Competition. An Application to Big Pharma

Political Economy - Development: Health eJournal, 2017

This paper shows that a pro-competitive shock leading to a steep price drop in one market segment may benefit substitute products. Consumers move away from the cheaper product and demand for the substitutes increases, possibly leading to a drop in consumer surplus. The channel leading to this outcome is non-price competition: the competitive shock on thefirst set of products decreases the firms' ability to invest in promotion, which cripples their ability to lure consumers. To assess the empirical relevance of these findings, we study the effects of generic entry into the pharmaceutical industry by exploiting a large product-level dataset for the US covering the period 1994Q1 to 2003Q4. We find strong empirical support for the model's theoretical predictions. Our estimates rationalize a surprising finding, namely that a molecule that loses patent protection (the originator drug plus its generic competitors) typically experiences a drop in the quantity market share-despite be...

Generic Competition and the Incentives for Early-Stage Pharmaceutical Innovation

2014

#1064122 and #1360057. Authors are listed alphabetically and the usual disclaimers apply. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

R&D AS A PRISONER'S DILEMMA AND R&D?AVOIDING CARTELS

2011

Duopoly firms engaged in a standard two-stage game of R&D and Cournot competition are caught in a prisoner's dilemma for their R&D decisions whenever spillover effects are low. This effect works to the advantage of consumers and society. This result provides an interesting perspective on the well-known wedge between private and social incentives for R&D. The prisoner's dilemma is the key effect behind this wedge under low spillovers. The latter take over when sufficiently high, as is widely recognized. This mutually exclusive nature of the prisoner's dilemma and significant spillovers also serves to explain the incentives to form R&D cartels.

A transaction costs analysis of innovations in the organization of pharmaceutical R & D

Journal of Economic Behavior & Organization, 1989

This paper uses transaction costs economics to analyze the increasing importance of vertical disintegration of R&D by large pharmaceutical and chemical firms. First, it discusses three characteristics of the research-based pharmaceutical industry. Then, it shows that market failures related to long-term joint-venture R& D contracts between lirms and university laboratories are less signilicant than appears at first and may account for their striking increase over the past fifteen years.

Determinants of PRO-industry interactions in pharmaceutical R&D: the case of Mexico

arno.unimaas.nl

Interactive learning, particularly between firms and public research organizations (PRO), nurtures the dynamics of systems of innovation. Limited interaction contributes to explain poor performance in R&D and ultimately, in innovation by developing countries. But why this is so? Based on evidence from the pharmaceutical industry in Mexico, this paper identifies some determinants of PRO-industry interaction for pharmaceutical R&D. Particular attention is granted to factors hindering such interactions; arguably the barriers differ throughout the diverse stages of the R&D process. The paper decomposes the Research and Development processes, thus it is possible to identify determinants to interactions in each of those instances. Drug development is further split in two stages: clinical research and drug manufacturing. The analysis indicates that macroeconomic and business environments, firms' strategies, ethical considerations, incentives and perceptions of PRO-industry interaction among the agents in the system, support/hinder interactivity in pharmaceutical R&D.