Is it Possible to have Cheaper Drugs and Preserve the Incentive to Innovate? The Benefits of Privatizing the Drug Approval Process
Robert M. Sauer
University of London - Royal Holloway College
Jerusalem Institute for Market Studies
Journal of Technology Transfer, Vol. 32, No. 3, May 2007
In this paper, we argue that lower prices for pharmaceuticals can be achieved by fostering a new type of competition in the pharmaceutical industry. Lower drug development costs, and hence prices, can be brought about by abolishing national drug administrations and replacing them with private certification boards that compete on the basis of safety, efficiency and cost of their drug approval process. A major benefit of this type of privatization is that it would not necessitate limits on data exclusivity in order to achieve lower prices. Drug approval privatization could achieve the same positive results as generic competition, in terms of lower costs and prices, without the negative effects of intellectual property rights violation and the consequent discouragement of innovative activities.
Keywords: Privatization, Competition, Monopoly, Innovation, Drugs, Generics, Pharmaceuticals
JEL Classification: D42,D73,D92,F02,G38,H11,I11,I18,K23,L11,O31Accepted Paper Series
Date posted: April 18, 2006
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