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Pricing, Profits, and Technological Progress in the Pharmaceutical Industry

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  • F. M. Scherer

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.

Suggested Citation

  • F. M. Scherer, 1993. "Pricing, Profits, and Technological Progress in the Pharmaceutical Industry," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 97-115, Summer.
  • Handle: RePEc:aea:jecper:v:7:y:1993:i:3:p:97-115
    Note: DOI: 10.1257/jep.7.3.97
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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