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  3. Journal of Economic Perspectives
  4. Summer 1993
  5. Pricing, Profits, and Technological Progress in the Pharmaceutical Industry

Pricing, Profits, and Technological Progress in the Pharmaceutical Industry

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Abstract

The decades-old debate over pharmaceutical industry prices, profits, and innovation has again intensified. A number of events coalesced to refocus public interest on pharmaceuticals. Contributing to public concern were Bureau of Labor Statistics price index increases for pharmaceuticals far outpacing those for the products of other industries. Another prominent characteristic of the pharmaceutical industry has been its extraordinarily high reported profitability. This article examines the phenomena that precipitated the current pharmaceuticals debate, their historical antecedents, and the principal questions at issue. In the author's considered judgment, a pell-mell march toward regulation of pharmaceutical industry pricing could seriously impair the industry's incentives for investment in new products.

Citation

Scherer, F M. 1993. "Pricing, Profits, and Technological Progress in the Pharmaceutical Industry." Journal of Economic Perspectives, 7 (3): 97-115. DOI: 10.1257/jep.7.3.97

JEL Classification

  • L65 Chemicals; Rubber; Drugs; Biotechnology
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