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Financing Pharmaceutical Innovation: How Much Should Poor Countries Contribute?

Author

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  • William Jack
  • Jean O. Lanjouw

Abstract

We use a public economics framework to consider how pharmaceuticals should be priced when at least some of the R&D incentive comes from sales revenues. We employ familiar techniques of public finance to relax some of the restrictions implied in the standard use of Ramsey pricing. In the more general model, poor countries should not necessarily cover even their own marginal costs, and the pricing structure is not related to that which would be chosen by a monopolist in a simple way. We use this framework to examine on-going debates regarding the international patent system as embodied in the WTO’s TRIPS agreement.

Suggested Citation

  • William Jack & Jean O. Lanjouw, 2003. "Financing Pharmaceutical Innovation: How Much Should Poor Countries Contribute?," Working Papers 28, Center for Global Development.
    • Handle: RePEc:cgd:wpaper:28
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    File URL: http://www.cgdev.org/content/publications/detail/2762
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    Citations

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    Cited by:

    1. Fabio Pammolli & Armando Rungi, 2016. "Access to Medicines and European Market Integration," Working Papers 01/2016, IMT School for Advanced Studies Lucca, revised Jan 2016.
    2. Banri ITO & Tatsufumi YAMAGATA, 2007. "Who Develops Innovations In Medicine For The Poor? Trends In Patent Applications Related To Medicines For Hiv/Aids, Tuberculosis, Malaria, And Neglected Diseases," The Developing Economies, Institute of Developing Economies, vol. 45(2), pages 141-171, June.
    3. Shi, Wunan & Wouters, Olivier J. & Liu, Gordon & Mossialos, Elias & Yang, Xiuyun, 2020. "Association between provincial income levels and drug prices in China over the period 2010–2017," Social Science & Medicine, Elsevier, vol. 263(C).
    4. Ebenezer Tetteh, 2009. "Implementing differential pricing for essential medicines via country-specific bilateral negotiated discounts," Applied Health Economics and Health Policy, Springer, vol. 7(2), pages 71-89, June.
    5. Patricia Danzon & Adrian Towse & Jorge Mestre‐Ferrandiz, 2015. "Value‐Based Differential Pricing: Efficient Prices for Drugs in a Global Context," Health Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 294-301, March.
    6. Fimpel, Julia & Stolpe, Michael, 2006. "The welfare costs of HIV/AIDS in Eastern Europe: An empirical assessment using the economic value-of-life approach," Kiel Working Papers 1297, Kiel Institute for the World Economy (IfW Kiel).
    7. Pedro Barros & Xavier Martinez-Giralt, 2008. "On international cost-sharing of pharmaceutical R&D," International Journal of Health Economics and Management, Springer, vol. 8(4), pages 301-312, December.
    8. Patricia M. Danzon & Andrew W. Mulcahy & Adrian K. Towse, 2015. "Pharmaceutical Pricing in Emerging Markets: Effects of Income, Competition, and Procurement," Health Economics, John Wiley & Sons, Ltd., vol. 24(2), pages 238-252, February.
    9. Mahlich Jörg & Sindern Jörn & Suppliet Moritz, 2015. "Vergleichbarkeit internationaler Arzneimittelpreise," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(2), pages 164-172, June.
    10. Pedro Pita Barros & Xavier Martínez-Giralt, 2006. "On insurance and the cost-sharing of pharmaceutical R&D," Working Papers 293, Barcelona School of Economics.
    11. Adrian Towse & Michele Pistollato & Jorge Mestre-Ferrandiz & Zeba Khan & Satyin Kaura & Louis Garrison, 2015. "European Union Pharmaceutical Markets: A Case for Differential Pricing?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 22(2), pages 263-275, July.
    12. Michael Stolpe, 2003. "Weltweiter Patentschutz für pharmazeutische Innovationen: Gibt es sozialverträgliche Alternativen?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 4(4), pages 437-448, November.
    13. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    pharmaceutical; poor countries; pricing structure; patent system;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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