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RISKS TO THE RETURNS TO MEDICAL INNOVATION: THE CASE OF MYRIAD GENETICS
Author(s) -
Clemens Jeffrey,
Veuger Stan
Publication year - 2017
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12189
Subject(s) - supreme court , intellectual property , medicaid , order (exchange) , capitalization , revenue , market capitalization , asset (computer security) , business , economics , actuarial science , finance , law , political science , health care , economic growth , paleontology , linguistics , philosophy , computer security , horse , computer science , stock market , biology
We describe the broad range of uncertainties faced by the developers of medical technologies. Empirically, we estimate the asset market incidence of two realizations of uncertainties we classify as ex post policy risks. The events we analyze concern the intellectual property of Myriad Genetics, Inc., an American molecular diagnostics firm. In June 2013, the Supreme Court invalidated several of Myriad's intellectual property claims. Subsequently, the Center for Medicare and Medicaid Services ( CMS ) re‐evaluated the reimbursements it pays for the services at issue in the Supreme Court's ruling. Each of these events moved Myriad's market capitalization by several hundred million dollars, or on the order of 20%. Myriad's exposure to the realization of these events reflected the concentration of its revenue streams among the affected services. We discuss the implications of the risks we analyze for the total volume of medical innovation and for its organization across firms. ( JEL I18, O3, D8)