Jump to ContentJump to Main Navigation
Incentives and Choice in Health Care$
Users without a subscription are not able to see the full content.

Frank A. Sloan and Hirschel Kasper

Print publication date: 2008

Print ISBN-13: 9780262195775

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262195775.001.0001

Show Summary Details
Page of

PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 06 July 2022

The Effects of Incentives on Pharmaceutical Innovation

The Effects of Incentives on Pharmaceutical Innovation

(p.226) (p.227) 9 The Effects of Incentives on Pharmaceutical Innovation
Incentives and Choice in Health Care

Frank A. Sloan

Chee-Ruey Hsieh

The MIT Press

This chapter examines the role of incentives in technological innovation in the pharmaceutical industry. Pharmaceutical companies make significant investments in research to discover and develop new and improved drug products, but not when they expect no adequate returns in advance. According to another view, certain controls, such as price controls and/or stringent utilization standards, are required to prevent companies from earning economic rents by introducing new products that result only in substantial increases in health expenditures. Patents create market power that allows pharmaceutical research firms to recoup their research and development cost, thus creating incentives for innovation. A crucial feature of the pharmaceutical sector is the large initial fixed cost of research and development and the small marginal cost of producing and distributing drugs. The chapter cites empirical evidence suggesting that incentives stimulate research and development.

Keywords:   incentives, technological innovation, pharmaceutical industry, investments, economic rents, patents, research and development, marginal cost

MIT Press Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs, and if you can't find the answer there, please contact us.