The Effect of Market Size on Pharmaceutical Innovation: Matching Estimates to Policy Questions

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ID: 318586
2026
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Abstract
Abstract Background The elasticity of pharmaceutical innovation with respect to market size is a key input for evaluating pricing reforms, yet published estimates vary widely. Objective We examine how much of this variation reflects measurement choices—such as which drugs are counted in innovation outcomes and which countries are included in market size measures—rather than differences in research design. Data and Methods Using a comprehensive dataset of global pharmaceutical sales, we estimate period-class Poisson regressions following the specification of Dubois et al. (2015), systematically varying the sample of drugs and the measure of market size. Results Under our preferred specification, estimated elasticities range from 0.21 to 0.30, with estimates as high as 0.47 in other specifications. Restricting to drugs launched in the US or other large, high-income markets yields significantly higher elasticities than the global sample, but US and global revenue measures produce similar estimates within each sample, contrary to a common conjecture in the literature. Conclusions Matching the right elasticity to the right policy question is essential for accurate projections; analysts should select estimates from studies whose measurement choices align with the specific policy and outcomes under evaluation.
Reference Key
openalex_W7165731415 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Luca Maini, Mai Anh Tran, Josh Feng
Journal Health Affairs Scholar
Year 2026
DOI
10.1093/haschl/qxag160
URL
https://doi.org/10.1093/haschl/qxag160
Keywords Keywords not found

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