Evaluating Innovation and Moral Hazard in Pharmaceuticals

Paris Cleanthous

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: This paper formulates an empirical methodology that evaluates pharmaceutical innovation in the American antidepressant market by quantifying patient welfare benefits from innovation. While evaluating pharmaceutical innovation in antidepressants, I uncover and address the moral hazard issue that arises due to the existence of prescription drug insurance coverage. A combination of market-level data, drug and patient characteristics are used to estimate demand for all antidepressants between 1980 and 2001. The paper estimates large and varied patient welfare gains due to innovation and helps explain a detected divergence between social and private patient benefits by the existence of insurance.

Keywords: Health; Innovation; Moral Hazard; Pharmaceuticals; Welfare (search for similar items in EconPapers)
Pages: 49 pages
Date: 2011-01
New Economics Papers: this item is included in nep-com, nep-cta, nep-hea and nep-ino
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:03-2011

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