The UCLA Seminar on Pharmaceutical Economics and Policy: The 2026 Stuart Schweitzer Distinguished Speaker
The 2026 Stuart Schweitzer Distinguished Speaker on Pharmaceutical Economics and Policy will be Professor Darius Lakdawalla, Quintiles Chair in Pharmaceutical Development and Regulatory Innovation & Chief Scientific Officer, USC Schaeffer Center for Health Policy and Economics.
“The Effect of Market Size on the Cost and Quality of Pharmaceutical Innovation”
Tuesday, March 3, 2026 at 3:30 p.m. (PT)
Lecture Hall CHS 23-105
We study the effect of market size on the cost and clinical quality of the marginal pharmaceutical innovation by developing and testing the implications of upward-sloping innovation supply curve. When demand increases, innovators become more willing to bet on drug candidates with higher risks of failure. We test this theoretical conjecture using Medicare Part D as an exogenous shock to demand. Empirically, we find Part D increased the risk of drug candidate approval failures by 7.7% a year. As a result, the marginal drug induced by Part D demand expansion cost $530 million (or 24%) more to launch than the average pre-Part D drug. The increased marginal cost bought higher-quality drugs, as marginal drugs were 17% more likely to represent major clinical improvement. Our findings highlight how demand growth contributes to both rising drug costs and to greater drug quality.
Registration is not required to attend this event.