Working Paper: NBER ID: w10038
Authors: Daron Acemoglu; Joshua Linn
Abstract: This paper investigates the effect of (potential) market size on entry of new drugs and pharmaceutical innovation. Focusing on exogenous changes driven by U.S. demographic trends, we find that a 1 percent increase in the potential market size for a drug category leads to a 4 to 6 percent increase in the number of new drugs in that category. This response comes from both the entry of generic drugs and new non-generic drugs, and is generally robust to controlling for a variety of non-profit factors, pre-existing trends
Keywords: Market Size; Innovation; Pharmaceutical Industry; Demographic Trends
JEL Codes: O31; O33; L65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market Size (L25) | Drug Entry (Y20) |
| Current Market Size (D49) | Drug Entry Rates (K37) |
| Future Anticipated Market Size (L25) | Drug Entry Rates (K37) |
| Future Anticipated Market Size (L25) | Pharmaceutical Patents (L65) |
| Market Size (L25) | Entry of Generic Drugs (L65) |
| Market Size (L25) | Entry of New Non-Generic Drugs (L65) |