Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price
- (pp. 45-66)
AbstractThe U.S. pharmaceutical industry has again become the focus of considerable controversy. In understanding the economics underlying this industry, distinctions between short, medium and long-run costs are critical, as is that between economic and accounting costs. Consumers' heterogeneous valuations create strong incentives for non-uniform pricing and targeted marketing. The conflict between static efficiency (price new drugs low, near short-run marginal cost) and dynamic efficiency (price new drugs high, maintain incentives for innovation) is deep and enduring. This trade-off is becoming more severe as the relative costs of bringing new drugs to market have increased sharply.
CitationBerndt, Ernst, R. 2002. "Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price ." Journal of Economic Perspectives, 16 (4): 45-66. DOI: 10.1257/089533002320950975
- I11 Analysis of Health Care Markets
- L65 Chemicals; Rubber; Drugs; Biotechnology
- I18 Health: Government Policy; Regulation; Public Health