Innovation and Technology Adoption in Health Care Markets
Book Forum

Almost all pharmaceuticals are purchased by third parties (insurance or government) through the use of reimbursements. Yet, as University of Chicago health economists Anupam B. Jena and Tomas J. Philipson demonstrate in their new book, Innovation and Technology Adoption in Health Care Markets (AEI Press, August 2008), reimbursement levels based on the cost-effectiveness of drugs--usually measured as the cost per quality-adjusted life-year saved by a drug--tend to sacrifice future drug development because they limit profits to be made and therefore discourage manufacturers from investing in useful innovation.

Based on the careful empirical analysis of drugs used to treat HIV/AIDS, Philipson and Jena conclude that drug manufacturers glean only about 5 percent of the mammoth returns brought about by these life-saving therapies. As a result, patients may be worse off than they would be with policies based less on cost-savings and more on incentives to develop new technologies. The implications of these findings, when taking account of other valuable drug classes, suggest that we face the prospect of paying less money for drugs now while getting far fewer new drug treatments later.

Joining the authors to discuss this important book will be pharmaceutical economist Christopher Adams from the Federal Trade Commission. AEI's John E. Calfee will moderate.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

John E.
Calfee
  • Economist John E. Calfee (1941-2011) studied the pharmaceutical industry and the Food and Drug Administration (FDA), along with the economics of tobacco, tort liability, and patents. He previously worked at the Federal Trade Commission's Bureau of Economics. He had also taught marketing and consumer behavior at the business schools of the University of Maryland at College Park and Boston University. While Mr. Calfee's writings are mostly on pharmaceutical markets and FDA regulation, his academic articles and opinion pieces covered a variety of topics, from patent law and tort liability to advertising and consumer information. His books include Prices, Markets, and the Pharmaceutical Revolution (AEI Press, 2000) and Biotechnology and the Patent System (AEI Press, 2007). Mr. Calfee wrote regularly for AEI's Health Policy Outlook series. He testified before Congress and federal agencies on various topics, including alcohol advertising; biodefense vaccine research; international drug prices; and FDA oversight of drug safety.

 

Tomas J.
Philipson

What's new on AEI

Poverty in America—and What to Do About It
image GDP for second quarter: Strong headline, weak innards
image Paul Ryan and the emerging conservative reform agenda in higher education
image Democrats' impeachment fixation
AEI on Facebook
Events Calendar
  • 28
    MON
  • 29
    TUE
  • 30
    WED
  • 31
    THU
  • 01
    FRI
Tuesday, July 29, 2014 | 10:00 a.m. – 12:00 p.m.
Is Medicare's future secure? The 2014 Trustees Report

Please join AEI as the chief actuary for Medicare summarizes the report’s results, followed by a panel discussion of what those spending trends are likely to mean for seniors, taxpayers, the health industry, and federal policy.

Friday, August 01, 2014 | 10:30 a.m. – 12:00 p.m.
Watergate revisited: The reforms and the reality, 40 years later

Please join us as four of Washington’s most distinguished political observers will revisit the Watergate hearings and discuss reforms that followed.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.