Bending the Productivity Curve: Why America Leads the World in Medical Innovation

24 Pages Posted: 14 Mar 2013

See all articles by Douglas Glen Whitman

Douglas Glen Whitman

California State University, Northridge - Department of Economics

Raymond Raad

Cornell University - Weill Cornell Medical College

Multiple version iconThere are 2 versions of this paper

Date Written: 2009

Abstract

The health care issues commonly considered most important today — controlling costs and covering the uninsured — arguably should be regarded as secondary to innovation, inasmuch as a medical treatment must first be invented before its costs can be reduced and its use extended to everyone. To date, however, none of the most influential international comparisons have examined the contributions of various countries to the many advances that have improved the productivity of medicine over time. We hope this paper can help fill that void.

In three of the four general categories of innovation examined in this paper — basic science, diagnostics, and therapeutics — the United States has contributed more than any other country, and in some cases, more than all other countries combined. In the last category, business models, we lack the data to say whether the United States has been more or less innovative than other nations; innovation in this area appears weak across nations. In general, Americans tend to receive more new treatments and pay more for them — a fact that is usually regarded as a fault of the American system. That interpretation, if not entirely wrong, is at least incomplete. Rapid adoption and extensive use of new treatments and technologies create an incentive to develop those techniques in the first place. When the United States subsidizes medical innovation, the whole world benefits. That is a virtue of the American system that is not reflected in comparative life expectancy and mortality statistics. Policymakers should consider the impact of reform proposals on innovation. For example, proposals that increase spending on diagnostics and therapeutics could encourage such innovation. Expanding price controls, government health care programs, and health insurance regulation, on the other hand, could hinder America’s ability to innovate.

Keywords: global health innovation, new medical innovations, U.S. healthcare system, federal government regulations, healthcare laws, Obamacare, Affordable Care Act, pharmaceuticals, new treatments, new medical devices

JEL Classification: I10, I13, I18

Suggested Citation

Whitman, Douglas Glen and Raad, Raymond, Bending the Productivity Curve: Why America Leads the World in Medical Innovation (2009). Cato Institute Policy Analysis No. 654, November 18, 2009, Available at SSRN: https://ssrn.com/abstract=2232915

Douglas Glen Whitman (Contact Author)

California State University, Northridge - Department of Economics ( email )

18111 Nordhoff Street
Northridge, CA 91330
United States
818-677-4542 (Phone)

Raymond Raad

Cornell University - Weill Cornell Medical College ( email )

1300 York Avenue
New York, NY 10065
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
30
Abstract Views
399
PlumX Metrics