Economic Markets and Pharmaceutical Innovation

Craig Garthwaite

Journal of Economic Perspectives, 2025, vol. 39, issue 2, 3-26

Abstract: Pharmaceutical innovations reach the market after a long and risky process that requires large, fixed, and sunk investments. Governments provide incentives for firms to make these investments through various forms of intellectual property protection that attempt to provide a return on capital for investors. As a result, pharmaceutical innovation results from an explicit intersection of public policy and private market incentives. Developing optimal policy therefore requires understanding market features such as how innovation is financed, how firms commercialize pharmaceutical products, the influence of insurance coverage on consumption and spending, and how competition emerges after intellectual property protection ends.

JEL-codes: E21 G22 L13 L65 O31 O34 O38 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/jep.20251438

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