How can innovation policy address “market failures” in the development of novel medicines?

Jin Ding, Michael M. Hopkins and Jorge Mestre-Ferrandiz

Chapter 6 in Handbook of Pharmaceutical Science and Technology Studies, 2026, pp 89-109 from Edward Elgar Publishing

Abstract: A growing academic literature highlights how market forces alone fail to deliver the novel medicines that societies need. This chapter charts how the diagnosis of market failure, long associated with neglected diseases in low-and-middle income countries, has been applied more widely. The term is now associated with rare diseases in affluent markets and the challenge of developing antimicrobials needed to combat the growing threat of drug-resistant microbes, as well as preparations to counter viral pandemics. We review the literature, describing a proliferation of policy instruments applied in support of innovation processes that aim to spur the development of new medicines. The chapter is motivated by a desire to promote awareness of available policies and encourage their appropriate and systematic use, as well as to advance the debate around these. The chapter identifies 28 families of distinct policy instruments while also showing how a prevalent framing of these instruments as “push” or “pull” can obscure some instruments that do not fit easily within this dichotomy. Those that might be overlooked include instruments that support the formation of new capabilities, stimulate communication, collaboration, and coordination across stakeholder groups, or those that compel action.

Keywords: Policy instruments and intervention; Market failure; System failures; Pharmaceutical innovation system; Innovation governance (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035338443
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