The effect of patented drug price on the share of new medicines across OECD countries

Abstract

The Government of Canada plans to implement new controls on the prices of patented drugs sold in Canada. The literature indicates that such controls delay drug launches. The Government of Canada, in its cost benefit analysis of the proposed regulatory changes, claims that they do not. To examine this claim, we use recent OECD country level data to estimate regression models of drug launches. These estimates suggest that higher drug list prices increase the number of launches of new medicines; the estimates are larger in the short term than in the longer term. If our estimates have a causal interpretation, then, consistent with the extant literature, drug list price reductions delay availability of new medicines in the OECD countries. We explore the implications of these findings.