Financial Effects of Pharmaceutical Price Regulation on R&D Spending by EU versus US Firms

Joseph Golec and John Vernon

PharmacoEconomics, 2010, vol. 28, issue 8, 615-628

Abstract: EU countries closely regulate pharmaceutical prices, whereas theUS does not. This paper shows how price constraints affect the profitability, stock returns and R&D spending of EU and US firms. Compared with EU firms, US firms are more profitable, earn higher stock returns and spend more on R&D. We tested the relationship between price regulation and R&D spending, and estimated the costs of tight EU price regulation. Although results show that EU consumers enjoyed much lower pharmaceutical price inflation, we estimated that price controls cost EU firms 46 fewer new medicines and 1680 fewer research jobs during our 19-year sample period. Had theUS used controls similar to those used in the EU,we estimate itwould have led to 117 fewer new medicines and 4368 fewer research jobs in the US. Copyright Adis Data Information BV 2010

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.2165/11535580-000000000-00000 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:pharme:v:28:y:2010:i:8:p:615-628

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40273

DOI: 10.2165/11535580-000000000-00000

Access Statistics for this article

PharmacoEconomics is currently edited by Timothy Wrightson and Christopher I. Carswell

More articles in PharmacoEconomics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().