"It is well known that public or pooled insurance coverage can induce a form of ex-ante moral hazard: people make inefficiently low investments in self-protective activities. This paper points out another ex-ante moral hazard that arises through an induced innovation externality. This...

"Recent evidence suggests that Medicare Part D has increased prescription drug use among the elderly, and earlier studies have indicated that increasing market size induces pharmaceutical innovation. This paper assesses the impact of Medicare Part D on pharmaceutical research and development...