Promoting Innovation in Small Markets: Evidence from the market for rare and intractable diseases

Toshiaki Iizuka and Gyo Uchida

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: In many medical care markets with limited profit potential, firms often have little incentive to innovate. These include the markets for rare diseases, "neglected" tropical diseases, and personalized medicine. Governments and not-for-profit organizations attempt to promote innovation in such markets, but empirical evidence on the policy effect is limited. We study this issue by analyzing the impact of a demand-side policy in Japan, which reduces the cost sharing of patients with some rare and intractable diseases and attempts to establish and promote the treatment of those diseases. Using clinical trials data taken from public registries, we identify the effect of the policy using a difference-in-difference approach. We exploit the institutional detail that the diseases covered by the policy increased in an arbitrary fashion over time. We find that the demand-side policy increased firms' incentive to innovate: firm-sponsored new clinical trials increased by as much as 181% when covered by the policy. This result indicates that the demand-side policy can be an important part of innovation policies in markets with limited profit potential.

Pages: 26 pages
Date: 2016-03
New Economics Papers: this item is included in nep-cse, nep-ino and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.rieti.go.jp/jp/publications/dp/16e036.pdf (application/pdf)

Related works:
Journal Article: Promoting innovation in small markets: Evidence from the market for rare and intractable diseases (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:16036

Access Statistics for this paper

More papers in Discussion papers from Research Institute of Economy, Trade and Industry (RIETI) Contact information at EDIRC.
Bibliographic data for series maintained by TANIMOTO, Toko ().