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Insurance Design and Pharmaceutical Innovation / Leila Agha, Soomi Kim, Danielle Li.
- Format:
- Book
- Author/Creator:
- Agha, Leila.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w27563.
- NBER working paper series no. w27563
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- This paper studies how insurance coverage policies impact pharmaceutical innovation. In the United States, most patients obtain prescription drugs through insurance plans administered by Pharmacy Benefit Managers (PBMs). Beginning in 2012, PBMs began excluding coverage for many newly approved drugs when cheaper alternatives were available. Relative to firms' existing practices, we show that exclusions substantially reduced insurance claims for targeted drugs, lowering their profitability. This new risk of coverage exclusion reshaped upstream pharmaceutical R&D: for every 1 standard deviation increase in drug class exclusion risk, we estimate an 11% decline in subsequent development activity. This change translated into a relative decline in the development of drug candidates that appear more incremental: that is, those in drug classes with more pre-existing therapies and with less scientifically novel research.
- Notes:
- Print version record
- July 2020.
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