Market Size and Research: Evidence from the Pharmaceutical Industry / Dennis Byrski, Fabian Gaessler, Matthew J. Higgins.

Format:

Book

Author/Creator:

Byrski, Dennis.

Contributor:

National Bureau of Economic Research.

Gaessler, Fabian.

Higgins, Matthew J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28858.

NBER working paper series no. w28858

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

Prior literature has established a link between changes in market size and pharmaceutical innovation; whether a link exists with scientific research remains an open question. If upstream research is not responsive to these changes, the kinds of scientific discoveries that flow into future drug development could be disconnected from downstream demand. We explore this question by exploiting the effects of quasi-experimental variation in market size introduced by Medicare Part D. We find no causal relationship between market size and biomedical research in the decade following the implementation of Medicare Part D. While many factors have been shown to motivate scientists to conduct research, this result suggests that changes in market size provide no such incentive. We do find, however, limited support for a response by corporate scientists conducting applied research. Implications for pharmaceutical innovation policy are discussed.

Notes:

Print version record

May 2021.