Working Paper: NBER ID: w13857
Authors: Margaret E. Blumekohout; Neeraj Sood
Abstract: Recent evidence suggests that Medicare Part D has increased prescription drug use among the elderly, and earlier studies have indicated that increasing market size induces pharmaceutical innovation. This paper assesses the impact of Medicare Part D on pharmaceutical research and development (R&D), using time-series data on (a) the number of drugs in clinical development by therapeutic class, and (b) R&D expenditures by firm. We demonstrate that the passage of Medicare Part D was associated with significantly higher pharmaceutical R&D for drug classes with higher Medicare market share, and for firms specializing in higher-Medicare-share drugs.
Keywords: Medicare Part D; Pharmaceutical R&D; Innovation; Elderly; Prescription Drugs
JEL Codes: H51; I18; O30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Medicare Part D (H51) | pharmaceutical R&D (O32) |
| Medicare Part D (H51) | number of drugs entering clinical development (O32) |
| Medicare market share (I11) | R&D expenditures by firm (O32) |
| Medicare Part D (H51) | expanded market size (D40) |
| expanded market size (D40) | increases in R&D (O39) |