Working Paper: NBER ID: w21469
Authors: Jeffrey Clemens; Stan Veuger
Abstract: We describe the broad range of uncertainties faced by the developers of medical technologies. Empirically, we estimate the asset market incidence of two realizations of uncertainties we classify as within-market policy risks. The events we analyze concern the intellectual property of Myriad Genetics, Inc., an American molecular diagnostics firm. In June 2013, the Supreme Court invalidated several of Myriad's intellectual property claims. Subsequently, the Center for Medicare and Medicaid Services (CMS) re-evaluated the reimbursements it pays for the services at issue in the Supreme Court's ruling. Each of these events moved Myriad's market capitalization by several hundred million dollars, or on the order of 20 percent. Myriad's exposure to the realization of these events reflected the concentration of its revenue streams among the affected services. We discuss the implications of the risks we analyze for the total volume of medical innovation and for its organization across firms.
Keywords: medical innovation; policy risks; Myriad Genetics; market capitalization
JEL Codes: H51; H57; I18; O31; O32; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Supreme Court's invalidation of Myriad's patents (L49) | decrease in Myriad Genetics' market capitalization (G34) |
| reevaluation of Medicare's reimbursement rates for Myriad's tests (I18) | increase in Myriad Genetics' market capitalization (G34) |
| Supreme Court's invalidation of Myriad's patents (L49) | negative abnormal return (G12) |
| negative abnormal return (G12) | decrease in Myriad Genetics' market capitalization (G34) |
| reevaluation of Medicare's reimbursement rates for Myriad's tests (I18) | unexpected nature of reimbursement increase (I13) |
| unexpected nature of reimbursement increase (I13) | increase in Myriad Genetics' market capitalization (G34) |