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Economics of the Pharmaceutical Industry

Author

Listed:
  • Darius N. Lakdawalla

Abstract

The pharmaceutical industry accounts for a substantial chunk of the US economy's research and development investments, which have resulted in significant medical breakthroughs. At the same time, the costs of pharmaceutical products continue to rise, as does pressure to adopt direct or indirect controls on pharmaceutical prices. We review the economics literature on the pharmaceutical industry, focusing particularly on its positive and normative implications for the innovation, pricing, and marketing decisions of pharmaceutical firms. We discuss the major achievements of, and persistent gaps in, the literature, along with lessons for policy.

Suggested Citation

  • Darius N. Lakdawalla, 2018. "Economics of the Pharmaceutical Industry," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 397-449, June.
    • Handle: RePEc:aea:jeclit:v:56:y:2018:i:2:p:397-449
    Note: DOI: 10.1257/jel.20161327
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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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