Medicine for tomorrow: Some alternative proposals to promote socially beneficial research and development in pharmaceuticals

Journal of Generic Medicines

Volumn 7, Issue 3, 2010, Pages 217-226

  Stiglitz, Joseph E ^a   Jayadev, Arjun ^b  

^a Och Spine at New York Presbyterian Hospitals   (United States)

^b UNIVERSITY OF MASSACHUSETTS BOSTON   (United States)

Author keywords

Generic medicine; Innovation; Patents; Prizes; TRIPS; Value based pricing

Indexed keywords

GENERIC DRUG;

CLINICAL RESEARCH; COST; COST CONTROL; COST EFFECTIVENESS ANALYSIS; DRUG COST; DRUG DEVELOPMENT; DRUG INFORMATION; DRUG MARKETING; DRUG RESEARCH; FUNDING; HEALTH CARE ACCESS; MANAGEMENT; PATENT; POLICY; POLITICS; REVIEW;

EID: 77955703767     PISSN: 17411343     EISSN: 17417090     Source Type: Journal    
DOI: 10.1057/jgm.2010.21     Document Type: Review

References (33)

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3. We do not review here the well-established reasons for the role of government in the public sector, associated with market failures (externalities) and distributional concerns.
4. Some companies appear to be less concerned by this possibility. For example, Schering-Plough (which merged with Merck in March 2009) predicted in its last R & D update that perhaps seven of the drugs in its pipeline could become blockbusters in the near future.
5. Aitken et al 6 argue that insurers and payers are looking for cheaper alternatives more aggressively, whereas Lakdawalla et al 7 suggest that there is increasing pressure to reduce prices through regulation in the United States.
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8. This said, the threat of generic competition for new drugs may also begin to diminish, given that the development of generics will be impeded by the imposition of the TRIPS agreement in several countries with thriving generic industries. Diminished generic competition is certainly going to have serious deleterious consequences for global health, even as it makes profi t margins more secure for large R & D-based pharmaceutical fi rms.
9. For a less-than-sanguine view of this process from an anti-trust viewpoint, see Shapiro 10 and Hemphill 11.
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15. Although the Advanced Market Commitment reduces the risk faced by the innovator, it leaves in place the market distortions associated with patent based monopolization. See the following discussion.
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19. This problem exists in any imperfectly competitive market. But the problem is particularly acute in the case of pharmaceuticals, because there is so little price sensitivity. A me-too drug that is identical to existing drugs might be able to receive close to the existing market price.
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22. Such a system can also be used to replace the patent system with a prize system. A prize system has the advantage of rewarding the innovator for his innovation without inducing distortions in the marketing of the drug; a well-designed system can also reduce the risk facing the innovator, thereby lowering the total compensation required to elicit a given level of research effort.
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25. If drug companies price by charging a markup over marginal cost of producing each pill, then without regulation (government negotiation over prices), prices would fall only if changing the way that testing is conducted changes the elasticity of demand.
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28. The recent court decision invalidating the Myriad patents may curtail some of this kind of socially ineffi cient expenditure.
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30. The standard commons problem is that free access to the commons results in overusage, such as overgrazing or overfi shing.
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33. Needless to say, there are other issues that we have not addressed here, which are also important in promoting global health outcomes, notably remedying some of the excesses of the TRIPS agreement and bilateral trade agreements.