Pricing in the Market for Anticancer Drugs Howard, David H.; Bach, Peter B.; Berndt, Ernst R. ...
The Journal of economic perspectives,
2015, Letnik:
29, Številka:
1
Journal Article
Recenzirano
Odprti dostop
In 2011, Bristol-Myers Squibb set the price of its newly approved melanoma drug ipilimumab—brand name Yervoy—at $120,000 for a course of therapy. The drug was associated with an incremental increase ...in life expectancy of four months. Drugs like ipilimumab have fueled the perception that the launch prices of new anticancer drugs and other drugs in the so-called “specialty” pharmaceutical market have been increasing over time and that increases are unrelated to the magnitude of the expected health benefits. In this paper, we discuss the unique features of the market for anticancer drugs and assess trends in the launch prices for 58 anticancer drugs approved between 1995 and 2013 in the United States. We restrict attention to anticancer drugs because the use of median survival time as a primary outcome measure provides a common, objective scale for quantifying the incremental benefit of new products. We find that the average launch price of anticancer drugs, adjusted for inflation and health benefits, increased by 10 percent annually—or an average of $8,500 per year—from 1995 to 2013. We argue that the institutional features of the market for anticancer drugs enable manufacturers to set the prices of new products at or slightly above the prices of existing therapies, giving rise to an upward trend in launch prices. Government-mandated price discounts for certain classes of buyers may have also contributed to launch price increases as firms sought to offset the growth in the discount segment by setting higher prices for the remainder of the market.
Abstract
We study the speed with which investors learn about managers’ skills by examining how quickly investor and managers’ beliefs converge. After showing our measure proxies for the change in the ...dispersion of beliefs, we find that hedge fund investors learn as fast as suggested by Bayes’ rule. However, we find mutual fund investors learn more slowly than suggested by Bayes’ rule. Mutual fund investors’ slow learning is not due to the use of different performance measures, institutional frictions, or lack of sophistication, but could be due to a low payoff from learning. Our results indicate learning speed depends on financial participants’ incentives.
Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
A large literature finds evidence that pricing kernels nonparametrically estimated from option prices and historical returns are not monotonically decreasing in market index returns. We argue that ...existing estimation methods are inconsistent and propose a new nonparametric estimator of the pricing kernel that reflects the information available to investors who set asset prices. In simulations, the estimator outperforms existing techniques. Our empirical estimates using S&P 500 index option data from 1996 to 2014 and FTSE 100 index option data from 2002 to 2014 suggest that the “pricing kernel puzzle” is due to flaws in existing estimators rather than a behavioral or economic phenomenon.
Abstract
Many countries provide financial incentives to spur innovation, ranging from tax incentives to research and development grants. In this paper, we study how such financial incentives affect ...individuals’ decisions to pursue careers in innovation. We first present empirical evidence on inventors’ career trajectories and income distributions using deidentified data on 1.2 million inventors from patent records linked to tax records in the United States. We find that the private returns to innovation are extremely skewed—with the top 1% of inventors collecting more than 22% of total inventors’ income—and are highly correlated with their social impact, as measured by citations. Inventors tend to have their most impactful innovations around age 40 and their incomes rise rapidly just before they have high-impact patents. We then build a stylized model of inventor career choice that matches these facts as well as recent evidence that childhood exposure to innovation plays a critical role in determining whether individuals become inventors. The model predicts that financial incentives, such as top income tax reductions, have limited potential to increase aggregate innovation because they only affect individuals who are exposed to innovation and have essentially no impact on the decisions of star inventors, who matter most for aggregate innovation. Importantly, these results hold regardless of whether the private returns to innovation are fully known at the time of career choice or are fully stochastic. In contrast, increasing exposure to innovation (e.g., through mentorship programs) could have substantial impacts on innovation by drawing individuals who produce high-impact inventions into the innovation pipeline. Although we do not present direct evidence supporting these model-based predictions, our results call for a more careful assessment of the impacts of financial incentives and a greater focus on alternative policies to increase the supply of inventors.
Summary
This paper investigates the impact of regional political instability on the political instability of a country. Our identification strategy relies on the spatial nature of international ...relations. We use the characteristics of the neighbors’ neighbors as the instruments for the neighbors’ political instability and regional dummies to control for common regional shocks. We show that political instability in neighboring countries has a strong positive impact on a given country's political instability. The average of neighbors’ population size appears to be a significant mediating factor behind this relationship.
We study the effect of investor sentiment on the relation between the option to stock volume ratio (O/S) and future stock returns. Relative option volume has return predictability under short sale ...constraints. For this reason, we expect and find a stronger O/S-return relation during high sentiment periods than during low sentiment periods. We find that Baker and Wurgler's Investor Sentiment Index affects the O/S-return relation after controlling for consumer sentiment indices and economic environment factors. While prior studies have used consumer sentiment indices as alternative measures of investor sentiment, our results suggest these effects are distinct.
Market Responses to Court Rulings Beltrametti, Silvia; Marrone, James V.
The Journal of law & economics,
11/2016, Letnik:
59, Številka:
4
Journal Article
Recenzirano
Although a vast literature considers whether the enactment of laws and regulations impacts markets, very little attention has been paid to the ability of courts to have such an effect. This paper ...fills this gap by providing evidence that court decisions can bring to bear existing legal standards and can have significant effects on market behavior, especially if they convey credible commitments to enforce sanctions. This study shows that the outcome of certain court decisions can reduce illicit trade. By analyzing novel disaggregated data of antiquities sold at auction in the past 20 years, our results indicate that, following punitive court rulings, the share of legitimate items (measured by their ownership history, or provenance) and the price premium paid for such items both increased. In addition, we show that standard assumptions behind repeat-sales indices fail to hold as buyers’ tastes change.
This paper explores the age-dependent reliance on agglomeration externalities from a dynamic perspective by investigating the determinants of manufacturing establishments’ relocation decisions at the ...stages of the
initial
and the
post-initial
relocations. The relocation decisions are conceptually split into those on
whether to relocate
and
where to relocate
, specified by a nested-logistic model structure. The results indicate that manufacturing establishments’ preference to intra-industry agglomeration changes non-monotonically during their lifetime. While they prefer to stay in or move into municipalities characterized by the own-industry agglomeration in their initial relocation decision, they shun the intra-industry agglomeration in the stages of post-initial relocation. These findings suggest that to achieve the goal of industrial decentralization, policies to induce incumbent firms to relocate into rural areas could be more effective than those to attract start-up firms in peripheral area because they have lower dependence on agglomeration externalities.
The hedge-fund industry has grown rapidly over the past two decades, offering investors unique investment opportunities that often reflect more complex risk exposures than those of traditional ...investments. In this article, we present a selective review of the recent academic literature on hedge funds as well as updated empirical results for this industry. Our review is written from several distinct perspectives: the investor's, the portfolio manager's, the regulator's, and the academic's. Each of these perspectives offers a different set of insights into the financial system, and the combination provides surprisingly rich implications for the Efficient Markets Hypothesis, investment management, systemic risk, financial regulation, and other aspects of financial theory and practice.
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