Medicare price cuts led to a decline in new product introductions and a decrease inpatent filings

See Quantifying the Super-Villains from Tyler Cowen.

"There is a new paper on this topic:

We investigate the effects of substantial Medicare price reductions in the medical device industry, which amounted to a 61% decrease over 10 years for certain device types. Analyzing over 20 years of administrative and proprietary data, we find these price cuts led to a 25% decline in new product introductions and a 75% decrease in patent filings, indicating significant reductions in innovation activity. Manufacturers decreased market entry and increased outsourcing to foreign producers, associated with higher rates of product defects. Our calculations suggest the value of lost innovation may fully offset the direct cost savings from the price cuts. We propose that better-targeted pricing reforms could mitigate these negative effects. These findings underscore the need to balance cost containment with incentives for innovation and quality in policy design.

By Yunan Ji and Parker Rogers.  Here is a summary tweet storm.  Via Sam Hammond."