This paper examines the role of cost-sharing schemes in health insurance systems for pharmaceutical R&D expenditure, drug prices, aggregate productivity, and wages. The analysis suggests that an increase in the coinsurance rate, a price cap on the reimbursement of patients' expenses for pharmaceuticals, and direct price controls adversely affect both R&D spending in the pharmaceutical sector and drug prices. In contrast, entry deregulation may increase the quality of pharmaceuticals while lowering prices. Extension to an endogenous growth context suggests that, when individual labor supply depends on health status, cost-sharing also affects aggregate productivity and wage rates.