NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Impact of Medicare Part D on Pharmaceutical R&D

Margaret E. Blume-Kohout, Neeraj Sood

NBER Working Paper No. 13857
Issued in March 2008
NBER Program(s):   HC   HE   PR

Recent evidence suggests that Medicare Part D has increased prescription drug use among the elderly, and earlier studies have indicated that increasing market size induces pharmaceutical innovation. This paper assesses the impact of Medicare Part D on pharmaceutical research and development (R&D), using time-series data on (a) the number of drugs in clinical development by therapeutic class, and (b) R&D expenditures by firm. We demonstrate that the passage of Medicare Part D was associated with significantly higher pharmaceutical R&D for drug classes with higher Medicare market share, and for firms specializing in higher-Medicare-share drugs.

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Document Object Identifier (DOI): 10.3386/w13857

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