The question as to how society should support pharmaceutical (‘pharma’) innovation is both pertinent and timely: Pharma drugs are an integral component of modern health care and hold the promise to treat more effectively various debilitating health problems. The rate of pharma innovation, however, has declined since the 1980s. Many observers question whether the patent system is capable of providing the appropriate incentives for pharma innovation and point to several promising alternative mechanisms. These mechanisms include both ‘push’ programs – subsidies directed towards the cost of pharma R&D – and ‘pull’ programs – lumpsum rewards for the outputs of pharma R&D, that is, new drugs. I review evidence why our current system of pharma patents is defective and outline the various alternative mechanisms that may spur pharma innovation more effectively.
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Find related papers by JEL classification: I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
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