Essays on health economics and innovation
This dissertation consists of three chapters. In chapter 1, we studied the impact of competition on incremental innovation in the pharmaceutical context. Research and development is not a linear process that ends when a patent is granted. Instead, pioneer innovators continue innovating after their product has been patented. We study how competition affects post-patent innovation incentives for pharmaceutical firms that introduce first-in-class drugs. We find that “me-too” competition reduces R&D directed towards finding alternative uses for a safe drug. Our estimates suggest that the entry of a me-too drug reduces the number of post-approval clinical trials by 8.9 percent. In chapter 2, we ask that Does the market punish physicians’ misconducts? We answer this question in the context of California physicians. We assemble a novel dataset that includes a history of disciplinary actions, detailing payments, Medicare information, and physicians’ referral network. About 4.3 percent of physicians in California have at least one prior disciplinary action (DA). For those physicians who remain active after receiving a DA, we show that prior DAs have a negative impact on detailing payments. Physicians with prior DAs receive a less severe punishment from firms that have invested more in them. In chapter 3, we study innovation incentives in the presence of “product hopping,” whereby the incumbent patents a minor modification of a drug (e.g., a new delivery method) and invests in marketing to switch demand towards the minor modification. In our setting, firms compete sequentially to discover two innovative drugs. The winner of the first R&D race (the incumbent) can alter the market structure that follows the second R&D race through product hopping. This can increase investments during the second R&D race when product hopping softens competition or when the incumbent benefits from becoming a multi-product monopolist. The change in expected continuation values can increase or decrease investments during the first R&D race. Thus, the welfare effect of product hopping is ambiguous. We discuss our results in the context of the current policy debate on product hopping, welfare, and antitrust.
University of Illinois - Urbana-Champaign
Networked Digital Library of Theses and Dissertations
University of Illinois at Urbana-Champaign