Risks to the Returns to Medical Innovation : The Case of Myriad Genetics

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 within-market 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 percent. 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