Working Paper: NBER ID: w18918
Authors: Ernst R. Berndt; Iain M. Cockburn
Abstract: We estimate hedonic price indexes for clinical trial research, an important component of biomedical R&D, using a large sample of agreements between trial sponsors and clinical investigators obtained from Medidata Solutions Worldwide Inc. Nominal prices measured as total grant cost per patient rose by a factor of 4.5 between 1989 and 2011, while the NIH Biomedical R&D Price Index (BRDPI) focused on input costs rose only 2.2-fold. Most of the disparity appears to be attributable to changes in the nature and organization of clinical trials: during this period the average number of patients per site fell substantially while "site work effort" more than doubled. After controlling for these changes in the characteristics of investigator agreements using a variety of methods based on hedonic regressions, we find that the estimated rate of inflation in clinical trials costs tracks the BDRPI very closely. Results from this study suggest that it should be feasible for statistical agencies to develop a producer price index for this type of R&D activity, contributing to broader efforts to develop a deflator for contracted R&D services.
Keywords: Hedonic Price Index; Clinical Trials; R&D Expenditures
JEL Codes: E31; L65; O49
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nominal prices measured as total grant cost per patient (H51) | inflation of clinical trial costs (E31) |
| nominal prices measured as total grant cost per patient (H51) | more rapid inflation rate in clinical trial costs compared to general input costs (E31) |
| observed increases in costs are not solely attributable to rising input prices (J39) | inflation of clinical trial costs (E31) |
| increases in trial complexity (K41) | inflation of clinical trial costs (E31) |
| controlling for trial characteristics (C90) | lower growth rates of TGPP (O49) |
| elasticity of total grant cost per patient (TGPP) with respect to site work effort (SWE) (H43) | inflation of clinical trial costs (E31) |
| growth of price index based on hedonic regression (C43) | validity of findings (C90) |