Pharmaceutical innovation can be enormously valuable, leading to the development of medical treatments that save lives and improve patient quality of life. However, new medications that are powerful and effective are often accompanied by painful and uncomfortable side effects. This article summarizes a recent paper, “Why Medical Innovation is Valuable: Health, Human Capital, and the Labor Market”. The author develops a dynamic framework to assess the value of pharmaceutical innovation. The framework incorporates patient incentives for long-run health along with their preferences for treatments with fewer side effects. A key finding is that evaluating effective medical treatments without considering their side effects can be misleading.