Does consumer demand pull scientifically novel drug innovation?

David Dranove*, Craig Garthwaite, Manuel Hermosilla

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Prior literature shows that stronger consumer demand leads to increased pharmaceutical R&D. However, how strong these “demand-pull” effects are for more scientifically novel drug innovation remains unknown. We address this question using comprehensive clinical trial data that include precise characterizations of the scientific approaches used in tested molecules. We characterize scientific novelty as the number of times each approach has been used in the past. Exploiting exogenous demand variation introduced by the introduction of Medicare Part D, we find strong evidence that demand-pull effects are markedly skewed in favor of non-novel or “follow-on” drug R&D.

Original languageEnglish (US)
Pages (from-to)590-638
Number of pages49
JournalRAND Journal of Economics
Volume53
Issue number3
DOIs
StatePublished - Sep 1 2022

ASJC Scopus subject areas

  • Economics and Econometrics

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