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Collection: Faculty Working Papers  
Title An Ounce of Prevention or a Pound of Cure? Short- and Long-Run Effects of Pharmaceutical Patents on U.S. Health Care Expenditures
Author Johnson, Hilary S.
Johnson, Daniel K. N.
Type of Resource text
Digital Origin born digital
Date Created 2009-04
Abstract This study examines the relationship between pharmaceutical R&D and health care expenditures, distinguishing between the short- and long-run impacts. To measure these relationships quantitatively, we focus on patents as a key factor driving the costs of pharmaceuticals, and develop a structured vector autoregressive (SVAR) model to measure the social rate of return to pharmaceutical research as protected by patents. We conclude with unambiguous results that pharmaceutical patents are not correlated with higher short-run prices in any measure of medical costs. They are associated with higher long-run prices in pharmaceuticals themselves, but with lower long-run prices in the aggregate medical sector which includes pharmaceuticals as a component part. Further, the TRIPS Agreement and Hatch-Waxman Act to enable generic competition have both been demonstrably effective at lowering prices across the spectrum of medical sector prices. We conclude that pharmaceutical patents may be economically medicinal themselves, acting as the 'ounce of prevention' that saves a 'pound of cure', the cure which would come in the form of even higher costs elsewhere in the medical sector.
Keywords health
structured vector autoregression
Rights Statement Copyright restrictions apply. Contact the author for permission to publish.
Note (admin) Acquired as PDF from Colorado College Department of Economics and Business. Converted to PDF/A1.b using Adobe Acrobat Professional.
Publisher Colorado College
Place of Publication Colorado Springs, Colorado
Local Identifier 2009-01
Handle http://hdl.handle.net/10176/coccc:2166
Attached Files
Name Description MIMEType Size Downloads
OunceofPrevention.pdf   master application/pdf 895.33KB 0

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Created: Tue, 12 Jan 2010, 16:22:55 MST by Christine Ashlock (admin) . Detailed History