This article is based on the 2nd chapter of my Ph.D. Dissertation, written at the Eitan Berglas School of Economics at Tel-Aviv University.
PRICE CONTROLS FOR MEDICAL INNOVATIONS IN A LIFE CYCLE PERSPECTIVE
Article first published online: 22 JAN 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Volume 23, Issue 1, pages 108–116, January 2014
How to Cite
Sorek, G. (2014), PRICE CONTROLS FOR MEDICAL INNOVATIONS IN A LIFE CYCLE PERSPECTIVE. Health Econ., 23: 108–116. doi: 10.1002/hec.2903
- Issue published online: 16 DEC 2013
- Article first published online: 22 JAN 2013
- Manuscript Accepted: 10 DEC 2012
- Manuscript Revised: 25 OCT 2012
- Manuscript Received: 18 APR 2011
- medical innovations;
- price regulation;
- dynamic and static efficiency
We study the market for new medical technologies from a life cycle perspective, incorporating the fact that healthcare utilization is biased towards old age. Contrary to conventional wisdom, we find that price controls on medical innovations can expand investment in medical R&D and results in Pareto superior social outcomes, a consequence of the price controls' ability to increase saving. Importantly, this finding occurs only when the price cap regime is extensive: selective regulation on few technologies – such as pharmaceuticals alone – have the conventional negative effect on innovation. Copyright © 2013 John Wiley & Sons, Ltd.