Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
Economic Markets and Pharmaceutical Innovation
Journal of Economic Perspectives
vol. 39,
no. 2, Spring 2025
(pp. 3–26)
(Complimentary)
Abstract
Pharmaceutical innovations reach the market after a long and risky process that requires large, fixed, and sunk investments. Governments provide incentives for firms to make these investments through various forms of intellectual property protection that attempt to provide a return on capital for investors. As a result, pharmaceutical innovation results from an explicit intersection of public policy and private market incentives. Developing optimal policy therefore requires understanding market features such as how innovation is financed, how firms commercialize pharmaceutical products, the influence of insurance coverage on consumption and spending, and how competition emerges after intellectual property protection ends.Citation
Garthwaite, Craig. 2025. "Economic Markets and Pharmaceutical Innovation." Journal of Economic Perspectives 39 (2): 3–26. DOI: 10.1257/jep.20251438Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- G22 Insurance; Insurance Companies; Actuarial Studies
- L13 Oligopoly and Other Imperfect Markets
- L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology
- O31 Innovation and Invention: Processes and Incentives
- O34 Intellectual Property and Intellectual Capital
- O38 Technological Change: Government Policy