Understanding the effects of insurance changes on pharmaceutical innovation can highlight downstream side-effects of government policy. This paper expands upon this body of empirical research by assessing the impact of Medicare Part D (one of the most substantial expansions of public health insurance coverage in U.S. history) on pharmaceutical innovation for drugs treating diseases predominantly affecting the elderly. Using USPTO data on pharmaceutical patenting activities of 40 therapeutic classes and controlling for expected market size, I employ a difference-in-differences analysis to show that the announcement of Medicare Part D increases drug innovation for therapeutic classes affecting elderly populations relative to those affecting younger populations, but that those differential innovation effects are transient.
Read MoreBest known for introducing the concept of the invisible hand, Adam Smith appears (at least on the surface-level) to be the founding champion of laissez-faire economic theory. Both economists and libertarians deify Smith for supposedly pioneering a market framework consisting of purely self-interested participants. But as game theorists continue to prove that people do not solely consider their own payoffs when making decisions, economic scholars have had to reconsider their neoclassical models pointing in favor of a fully deregulated economy. Among left-leaning political circles, these inconsistencies in classic economic theory have added fuel to the notion that Smith’s ideas are merely archaic relics resting on false assumptions (see Norman 2018). These circles of thinkers are considered paternalists, who are thought to be deeply skeptical of free choice (see Goodin 1991). By nature, it follows that paternalists cannot possibly embrace the libertarian schools of thought so pervasively tied to Smith’s legacy.
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