@article {371411,
	title = {When is Prevention More Profitable than Cure? The Impact of Time-Varying Consumer Heterogeneity},
	year = {2013},
	abstract = {We argue that in pharmaceutical markets, variation in the arrival time of consumer heterogeneity creates differences between a producer{\textquoteright}s ability to extract consumer surplus with preventives and treatments, potentially distorting R\&amp;D decisions. If consumers vary only in disease risk, revenue from treatments{\textemdash}sold after the disease is contracted, when disease risk is no longer a source of private information{\textemdash}always exceeds revenue from preventives. The revenue ratio can be arbitrarily high for sufficiently skewed distributions of disease risk. Under some circumstances, heterogeneity in harm from a disease, learned after a disease is contracted, can lead revenue from a treatment to exceed revenue from a preventative. Calibrations suggest that skewness in the U.S. distribution of HIV risk would lead firms to earn only half the revenue from a vaccine as from a drug. Empirical tests are consistent with the predictions of the model that vaccines are less likely to be developed for diseases with substantial disease-risk heterogeneity.},
	author = {Michael Kremer and Christopher Snyder}
}
