Essays in the Economics of Health and Innovation

Abstract

This dissertation explores three questions at the intersection of health economics and the economics of innovation. The first chapter of this dissertation explores how publicly available scientific information shapes the quantity and profitability of private-sector research. I examine the impact of large-scale cancer genome mapping studies, which systematically map the genetic abnormalities in cancer, on research productivity in the pharmaceutical industry. Using a newly-constructed dataset from cancer genome mapping studies and clinical trials, I find that mapping information increases private-sector investment in clinical trials by nearly 50 percent. Considering the types of private-sector research investments, I find that cancer mapping significantly increases trials evaluating drugs previously approved or tested for one disease in an additional disease. Using trial results reported in abstracts submitted to a major cancer conference, I also find that cancer mapping information increases the profitability of firms' research decisions: when genetic information is known, firms are more likely terminate drug investments that are unlikely to be successful in the long run and to continue investment projects that are most likely to generate promising clinical results. This evidence suggests that publicly available, detailed scientific maps can increase and improve private research efforts. The second chapter considers firms' incentives to disclose information about novel medical products. Using a dataset of 16,000 clinical trials over a 17-year period, I examine the relationship between competition and pharmaceutical firms' incentives to disclose clinical trial information regarding drug safety and efficacy in the public database, ClinicalTrials.gov. I find evidence suggesting that greater competition spurs firms to positively influence consumers' perceptions of drug quality through investments in well-designed and more specialized trials. Further, I find that firms experiencing more competition are 24 percent more likely to disclose trial results, even after controlling for drug and firm characteristics. The results suggest that investment in perceived product quality and the subsequent disclosure of quality information is an important firm strategy for market entry. The final chapter examines what happens when an institution that supports the speed and diversity of medical research is strained and is based on joint work with Pierre Azoulay and Misty Heggeness. Academic Medical Centers (AMCs)-comprising medical schools, teaching hospitals, and their affiliated physicians, residents, and students play an important role in the American system of biomedical research and innovation. We consider how changes in the level of health care financing affect research productivity within academic medical centers (AMCs). We examine the role of the Balanced Budget Act of 1997, which changed the formula used to reimburse Medicare inpatient claims and teaching hospital subsidies, on research outcomes within AMCs. We compare AMCs' relative exposure to the reform and how these differences affect their researchers' ability to attract scientific grant funding and produce scientific publications. We find that in response to the BBA, research activity falls by 4 percent among the average teaching hospital and nearly 7 percent among major teaching hospitals. Further, we analyze how changes in financing shift the quality and direction of research by examining heterogeneity across publication types. We find little evidence of concurrent changes in clinical outcomes. Our estimates offer insight into how changes in reimbursements to health care providers can shape the rate and direction of scientific progress within biomedical research.