Innovation, Diffusion, and Valuation of New Medical Technologies
This session explores the development, diffusion, and valuation of new medical technologies. New technology adoption is a major driver of cost growth in the healthcare industry as well as improvements in longevity and wellbeing. Understanding how to maximize value from new medical technologies by providing optimal incentives for innovation and encouraging diffusion of effective technologies is critically important to shaping health policy. The three papers in this session each tackle an important aspect of the economics of new medical technologies. In “The Effect of U.S. Health Insurance Expansions on Medical Innovation, “ Jeff Clemens uncovers the importance of insurance expansions in increasing the rate of innovation and ultimately raising healthcare spending. “The Local Influence of Principal Investigators on Technology Adoption” (Agha and Molitor) probes how information spreads to physicians who prescribe new cancer drugs and how the quality of the new innovation influences its diffusion path. Lastly, “The Insurance Value of Medical Innovation” (Reif, Lakdawalla, and Malani) analyzes how technological change can provide consumers with improved protection against mortality and illness risks, and valuing this insurance function of medical technologies is critical to accurately estimating technologies’ worth to risk-averse consumers. Each paper relies on innovative empirical analysis to support findings with important economic policy implications for realizing value from new medical technologies. Three discussants have agreed to comment on these papers, Jonathan Kostad, David Chan, and Marika Cabral, which will ensure a lively and insightful discussion of this research.