Media type: E-Article Title: Examining the link between price regulation and pharmaceutical R&D investment Contributor: Vernon, John A. Published: Wiley, 2005 Published in: Health Economics, 14 (2005) 1, Seite 1-16 Language: English DOI: 10.1002/hec.897 ISSN: 1057-9230; 1099-1050 Keywords: Health Policy Origination: Footnote: Description: <jats:title>Abstract</jats:title><jats:p>This paper examines the link between price regulation and pharmaceutical research and development (R&D) investment. I identify two mechanisms through which price regulation may exert an influence on R&D: an expected‐profit effect and a cash‐flow effect. Using established models of the determinants of pharmaceutical R&D, I exploit a unique fact to quantify firm exposure to pharmaceutical price regulation: relative to the rest of the world, the U.S. pharmaceutical market is largely unregulated with respect to price. Using this fact within the context of a system of quasi‐structural equations, I simulate how a new policy regulating pharmaceutical prices in the U.S. will affect R&D investment. I find that such a policy will lead to a decline in industry R&D by between 23.4 and 32.7%. This prediction, however, is accompanied by several caveats. Moreover, it says nothing about the implications for social welfare; therefore, these issues are also discussed. Copyright © 2004 John Wiley & Sons, Ltd.</jats:p>