Work

Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials

Year: 2015

Type: article

Abstract: We investigate whether private research investments are distorted away from long-term projects. Our theoretical model highlights two potential sources of this distortion: short-termism and the fixed patent term. Our empirical context is cancer research, where clinical trials--and hence, project durations--are shorter for late-stage cancer treatments relative to early-stage treatments or cancer prevention. Using newly constructed data, we document several sources of evidence that together show private research investments are distorted away from long-term projects. The value of life-years at stake appears large. We analyze three potential policy responses: surrogate (non-mortality) clinical-trial endpoints, targeted R&D subsidies, and patent design.

Source: American Economic Review

DOI: 10.1257/aer.20131176

Authors: Eric Budish, Benjamin N. Roin, Heidi Williams

Institutions: University of Chicago, Massachusetts Institute of Technology

Language: English

Topic: Pharmaceutical Economics and Policy

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: National Institute on Aging

Awards: Empirical Studies of the Development and Diffusion of Medical Technologies, NBER Training Program in Aging and Health Economics