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 productivity of the pharma R&D enterprise, however, has declined since the 1980s. Many observers question whether the patent system is conducive to 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 and royalty-based 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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