Black Americans suffer strikingly worse health outcomes than White Americans. This study investigates one plausible reason for Black Americans' inferior health outcomes: under-investment by the private and public sectors in developing treatments for conditions that predominantly affect Black populations. Using longitudinal data from 2000 to 2019, we provide evidence that the private and public sectors act as imperfect substitutes. Specifically, we find that the U.S. private sector undertakes significantly fewer clinical trials for treatments of diseases that affect primarily Black Americans. This finding holds, after accounting for differences among diseases in terms of factors like mortality, research productivity, and market size of treatments. In contrast to the private sector, the U.S. public sector, through the National Institutes of Health, allocates more funding for research on conditions that harm Black Americans more, but not sufficiently enough to offset the private sector's under-investment. Policies that provide incentives to increase private sector efforts in disease areas that primarily affect Black populations could significantly reduce racial disparities.

I provide novel evidence that physicians respond to changes in insurance reimbursement for in-office treatments, though responses vary and can be unexpected. To estimate physician elasticity to private insurance reimbursement, I exploit a plausibly exogenous regulatory change in Medicare payment. Specifically, I document how private reimbursement typically follows Medicare reimbursement (Clemens and Gottlieb, 2016; Chan and Dickstein, 2019) and use the estimated payer-specific relationship between the two prices to construct a valid instrument. My findings show that supply generally exhibits a positive slope—lower reimbursement reduces treatment provision. However, for certain treatments, e.g. flu vaccines, the supply curve is negatively sloped. I provide suggestive evidence that physicians compensate for reduced reimbursement by increasing provision of these and related treatments that can be easily combined in single patient visits.

Idea: How do typical insurance payment schemes influence price competition and pharmaceutical innovation?