Publication Type

Journal Article

Version

acceptedVersion

Publication Date

1-2021

Abstract

Developing countries are characterized by low levels of pharmaceutical innovation. A likely reason is their small market size, which is not because of the population size but because of low levels of income and lack of health insurance coverage. This study exploits a natural experiment from the implementation of a public health insurance program for rural residents in China (New Cooperative Medical Scheme [NCMS]) to examine whether the pharmaceutical industry increases innovation regarding diseases covered by the NCMS that are prevalent in rural areas. We examine the 1993–2009 patent data to gauge pharmaceutical innovation in China. Diseases with a 10% higher rural patient share saw a 12.4% increase in relevant domestic pharmaceutical patent applications and a modest increase in patent quality after the NCMS implementation. By providing public health insurance to low-income individuals in developing countries, governments can create incentives for pharmaceutical firms to develop new medical technologies.

Keywords

Pharmaceutical innovation, Public health insurance, Market size, Patent, China

Discipline

Asian Studies | Health Economics | Industrial Organization | Technology and Innovation

Research Areas

Applied Microeconomics

Publication

Journal of Development Economics

Volume

148

First Page

1

Last Page

27

ISSN

0304-3878

Identifier

10.1016/j.jdeveco.2020.102578

Publisher

Elsevier

Embargo Period

1-1-2022

Copyright Owner and License

Publisher

Additional URL

https://doi.org/10.1016/j.jdeveco.2020.102578

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