Essays on technological change in health care markets

This dissertation consists of three essays studying the causes and consequences of technological change in health care markets. The first and third essays shed light on factors affecting the rate and direction of technological change in health care markets, and the second essay contributes a methodology for measuring the impacts of technological change on health care costs and health outcomes. The first essay provides empirical evidence on how intellectual property (IP) on a given technology affects subsequent innovation. To shed light on this question, I analyze the sequencing of the human genome by the public Human Genome Project and the private firm Celera, and estimate the impact of Celera's gene-level IP on subsequent scientific research and product development outcomes. The analyses suggest Celera's IP led to reductions in subsequent scientific research and product development outcomes on the order of 30 percent. The second essay (co-authored with Doug Almond, Joe Doyle, and Amanda Kowalski) proposes a research design to estimate the marginal returns to medical spending. Specifically, we use a regression discontinuity design to compare health outcomes and medical treatment provision for newborns on either side of the "very low birth weight" threshold at 1500 grams. Assuming that observed medical spending fully captures the impact of the "very low birth weight" designation on mortality, our estimates suggest that the cost of saving a statistical life of a newborn with birth weight near 1500 grams is on the order of $550,000 in 2006 dollars. The third essay analyzes whether changes in the availability of complementary technologies can induce changes in market size, and in turn impact incentives for innovation. I analyze the introduction of the prostate-specific antigen (PSA) test, a screening test for prostate cancer that dramatically increased the number of men diagnosed as "having" prostate cancer, relative to the previously used screening test. In a difference-in-difference framework, I find evidence that the introduction of the PSA test led to a positive and statistically significant increase in innovation on treatments for prostate cancer, relative to other types of cancer