Dementia kills about 1.5 million people worldwide each year. This figure may not surprise Americans, where the problems of Alzheimer’s and dementia are (rightly) getting a lot of attention, including a Presidential Proclamation last year. What may surprise many Americans, however, is that tuberculosis kills about the same number of people worldwide (so does diarrhea).

What explains the difference? In part, it’s the nature of each disease’s victims. Dementia is the third leading cause of death in high-income countries, while tuberculosis doesn’t even crack the top 13. The story is reversed in lower middle-income countries such as Nigeria and Indonesia — tuberculosis makes the top five, while dementia doesn’t make the list. The point is not that the life of a rich person matters more than that of a poor person, but that the amount countries are willing to pay for treatments matters in setting development priorities.

What we pay for medicines today affects the number and kinds of drugs discovered tomorrow. Empirical research has established that drug development activity is sensitive to expected future revenues in the market for those drugs. The most recent evidence suggests that it takes $2.5 billion in additional drug revenue to spur one new drug approval, based on data from 1997 to 2007. Another study assesses the Orphan Drug Act, passed in 1982 to stimulate development of treatments for rare diseases. Its key feature was the granting of market exclusivity that would restrict entry by competitors — in other words, allow for higher prices. The result was a dramatic increase in the number of compounds brought into development to treat rare diseases.

Read the full article about medical innovations across the globe by Dana Goldman and Darius Lakdawalla at Brookings.