Economists have also found that drug development responds to incentives created by the patent system. Diseases that offer robust or expanding drug markets receive particular attention.
Clinical trial activity increased during the years immediately following these changes.Īdditional evidence has shown that the introduction of Medicare’s drug benefit (passed in 2003 and enacted in 2005) sped pharmaceutical research for diseases that impact the elderly. This research has showcased the power of incentives.įor example, with the introduction of guidelines, mandates or other government policies that increased projected profits, vaccine development accelerated. Most research into the economics of medical innovation has focused on pharmaceuticals. Tang Ming Tung/GettyImages The economics of medical innovation By 1870, there were 24 manufacturers in the industry.Ī researcher holding vials of COVID-19 vaccine that will be used in clinical trials. That year, the Union Army furnished some 2,020 artificial legs and 1,441 artificial arms to its soldiers. By 1865, production had increased tenfold. Just prior to the war, in 1860, five manufacturers sold an estimated 350 prostheses in the U.S. Production responded dramatically to the unprecedented needs. In total, 87 patents for prostheses were granted from 1863 through 1867, compared with 15 new patents between 18.
While prosthetic arms and legs remained quite primitive by modern standards, inventors emphasized improvements in comfort and modest gains in functionality. The program’s cost-conscious approach shaped inventors’ efforts, leading them to emphasize simplicity in design and low-cost production. Officials examined and certified inventors’ prototypes, and wounded veterans then chose from approved products, which the government then acquired at preset prices: US$75 per leg and $50 per arm. Roughly 70,000 veterans who survived the bloody, four-year conflict lost limbs.Īs disabled veterans returned home, the government launched the “Great Civil War Benefaction” to provide prostheses. With advances in weaponry, destructive Minié bullets and a lack of surgical experience among doctors, many Civil War soldiers with leg or arm wounds required amputation. The example resonates because wars, like pandemics, create dramatic, unanticipated needs for medical innovations. My colleague Parker Rogers and I recently analyzed innovations in the design and manufacture of artificial limbs during the U.S. In my research as an economist, I investigate the effects of government insurance programs on patient care, pricing and innovation across the health system. Portraits of Civil War veteran amputees, Left to right: G.L. The National Institutes of Health and the National Science Foundation allocate funding for both basic and applied medical research. patent system shapes pharmaceutical prices, which impacts companies’ financial returns. By determining if and when competitors can enter the market, the U.S. The Medicare program sets prices that have effects across the heath care system. Public and private insurance administrators determine what treatments to cover. Food and Drug Administration approves new treatments. Governments play far-reaching roles in health care. But what’s the best way to catalyze and accelerate public health developments? Research and history show that the federal government can play a major role in spurring private-sector innovation. Moving forward, medical innovation can play a substantial role in controlling and preventing infection – and treating those who have contracted the virus. There is also great need for widely available inexpensive, rapid tests the infrastructure to administer them and most importantly, safe, effective vaccines. still faces shortages of personal protective equipment for both front-line medical workers and the general public. has had the most diagnosed cases – surpassing 6 million – and more than 180,000 deaths.īut six months into the pandemic, the U.S. The current COVID-19 pandemic, the largest public health crisis in a century, threatens the health of people across the globe.