Date of Award

12-2024

Degree Name

MS in Statistics

Department/Program

Statistics

College

College of Science and Mathematics

Advisor

Samuel Frame

Advisor Department

Statistics

Advisor College

College of Science and Mathematics

Abstract

There is substantive literature surrounding the impact of price controls on the research and development (R&D) of new pharmaceutical products. The European Union (EU) and United States (US) are often studied in contrast to examine the influence of price controls as the US has fewer pharmaceutical price controls than the EU.

We find moderate evidence that the US spent more on annual domestic pharmaceutical R&D than the EU between 2004 and 2021, on average, before and after adjusting for GDP growth per capita and year. We find strong evidence that the US increased annual domestic R&D spending at a faster rate than the EU between 2004 and 2021, on average, before and after adjusting for GDP growth per capita.

Prior studies have asserted that increased US R&D spending leads to the production of more pharmaceutical products. Our study aims to quantify the differences in US and EU orphan drug development. Orphan drugs are pharmaceutical products that treat rare diseases. Both the EU and US aim to stimulate orphan drug production with policies including national grants, tax credits, and extended periods of market exclusivity.

Our study gives indication that these policies in the US and EU are effective at spurring rare disease drug creation. We find evidence that orphan drug market authorizations increased annually, on average, in both the US and EU from 2004 to 2021, before and after adjusting for GDP growth rate per capita and the interaction between year and region. We find the same when isolating market authorizations for new orphan drugs.

The US awarded more annual orphan drug market authorizations and market authorizations for new orphan drugs than the EU every year from 2004 to 2021, except in 2007. We find evidence that from 2004 to 2021, the US awarded more annual orphan drug market authorizations and market authorizations for new orphan drugs than the EU, on average, before and after adjusting for GDP growth per capita and year. There is also evidence that the US increased the number of these authorizations at a faster rate annually than the EU, on average, before and after adjusting for GDP growth per capita.

Our results suggest an association between EU price controls and reduced pharmaceutical innovation. This is seen in the form of less annual R&D spending growth, orphan drug market authorizations, and new orphan drugs compared to the US, on average. However, the benefits of this innovation may not reach patients, as US consumers pay higher pharmaceutical prices due to limited price controls. This may contribute to the expansion of existing health inequities in the US. We are also unsure if the quality of US innovation exceeds that of the EU and if increased innovation is truly the result of lower price controls.

Download

Share

COinS