Affiliation:
1. Professor of Applied Economics, MIT Sloan School of Management, and Research Associate, National Bureau of Economic Research, both in Cambridge, Massachusetts.
Abstract
The U.S. pharmaceutical industry has again become the focus of considerable controversy. In understanding the economics underlying this industry, distinctions between short, medium and long-run costs are critical, as is that between economic and accounting costs. Consumers' heterogeneous valuations create strong incentives for non-uniform pricing and targeted marketing. The conflict between static efficiency (price new drugs low, near short-run marginal cost) and dynamic efficiency (price new drugs high, maintain incentives for innovation) is deep and enduring. This trade-off is becoming more severe as the relative costs of bringing new drugs to market have increased sharply.
Publisher
American Economic Association
Subject
Economics and Econometrics,Economics and Econometrics
Cited by
116 articles.
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