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Insurance Design and Pharmaceutical Innovation†

Insurance Design and Pharmaceutical Innovation† AbstractThis paper studies how insurance coverage policies impact pharmaceutical innovation. In the United States, most patients obtain prescription drugs through insurance plans administered by Pharmacy Benefit Managers (PBMs). Beginning in 2012, PBMs began refusing to provide coverage for many newly approved drugs when cheaper alternatives were available. We document a shift in pharmaceutical R&D strategies after this policy took effect: therapeutic classes at greater risk of exclusion experienced a relative reduction in investments. This shift reduced development of drug candidates that appear more incremental: that is, those in drug classes with more preexisting therapies and less scientifically novel research. (JEL G22, I13, L65, O31) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review: Insights American Economic Association

Insurance Design and Pharmaceutical Innovation†

Insurance Design and Pharmaceutical Innovation†

American Economic Review: Insights , Volume 4 (2) – Jun 1, 2022

Abstract

AbstractThis paper studies how insurance coverage policies impact pharmaceutical innovation. In the United States, most patients obtain prescription drugs through insurance plans administered by Pharmacy Benefit Managers (PBMs). Beginning in 2012, PBMs began refusing to provide coverage for many newly approved drugs when cheaper alternatives were available. We document a shift in pharmaceutical R&D strategies after this policy took effect: therapeutic classes at greater risk of exclusion experienced a relative reduction in investments. This shift reduced development of drug candidates that appear more incremental: that is, those in drug classes with more preexisting therapies and less scientifically novel research. (JEL G22, I13, L65, O31)

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Publisher
American Economic Association
Copyright
Copyright © 2022 © American Economic Association
ISSN
2640-205X
eISSN
2640-2068
DOI
10.1257/aeri.20210063
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper studies how insurance coverage policies impact pharmaceutical innovation. In the United States, most patients obtain prescription drugs through insurance plans administered by Pharmacy Benefit Managers (PBMs). Beginning in 2012, PBMs began refusing to provide coverage for many newly approved drugs when cheaper alternatives were available. We document a shift in pharmaceutical R&D strategies after this policy took effect: therapeutic classes at greater risk of exclusion experienced a relative reduction in investments. This shift reduced development of drug candidates that appear more incremental: that is, those in drug classes with more preexisting therapies and less scientifically novel research. (JEL G22, I13, L65, O31)

Journal

American Economic Review: InsightsAmerican Economic Association

Published: Jun 1, 2022

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