Public health insurance and pharmaceutical innovation: Evidence from China

Xuan Zhang and Huihua Nie

Journal of Development Economics, 2021, vol. 148, issue C

Abstract: Developing countries are characterized by low levels of pharmaceutical innovation. A likely reason is their small market size, which is not because of the population size but because of low levels of income and lack of health insurance coverage. This study exploits a natural experiment from the implementation of a public health insurance program for rural residents in China (New Cooperative Medical Scheme [NCMS]) to examine whether the pharmaceutical industry increases innovation regarding diseases covered by the NCMS that are prevalent in rural areas. We examine the 1993–2009 patent data to gauge pharmaceutical innovation in China. Diseases with a 10% higher rural patient share saw a 12.4% increase in relevant domestic pharmaceutical patent applications and a modest increase in patent quality after the NCMS implementation. By providing public health insurance to low-income individuals in developing countries, governments can create incentives for pharmaceutical firms to develop new medical technologies.

Keywords: Pharmaceutical innovation; Public health insurance; Market size; Patent (search for similar items in EconPapers)
JEL-codes: H51 I13 L65 O12 O31 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:148:y:2021:i:c:s030438782030153x

DOI: 10.1016/j.jdeveco.2020.102578

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