Working Paper: NBER ID: w17011
Authors: Anup Malani; Tomas J. Philipson
Abstract: There is considerable debate about the impact of health care reform on the growth in medical spending. Medical innovation is thought to be a central contributor to that growth. We argue that there is a unique linkage between reforms that affect output markets for medical care and medical R&D costs. This linkage is due to the fact that potential consumers of medical care are also potential participants in clinical trials that are required to develop new medical products. Therefore, reforms that increase the quality or reduce the price of already developed treatments reduce the incentive of patients to participate in trials of experimental treatments. This delays development and reduce the returns to in innovation. We provide evidence of this "subject market effect" by considering the impact of changes in the quality of conventional care on development. We document a dramatic drop in trial recruitment following introduction of break-through HIV/AIDS therapies in 1996. We conclude by discussing additional positive and normative implications of the subject market effect that link input and output markets for medical products.
Keywords: medical innovation; health care reform; clinical trials; HIV/AIDS; subject market effect
JEL Codes: I11; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Health care reforms that raise the quality or lower the price of conventional care (I18) | Reduction in trial participation rates (K41) |
| Improvements in conventional care (I15) | Decrease in the supply of trial participants (J26) |
| Reduction in trial participation rates (K41) | Increased development times for new therapies (O39) |
| Introduction of HAART in 1996 (C41) | Changes in trial participation trends (K41) |
| Improvements in conventional care (I15) | Increased time required to develop new HIV/AIDS treatments (C41) |