This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. Journal of Economic Perspectives
  4. Search Results
  5. Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price

Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price

  • Ernst R. Berndt
Journal of Economic Perspectives
vol. 16, no. 4, Fall 2002
(pp. 45–66)
Download Full Text PDF
(Complimentary)

Abstract

The U.S. pharmaceutical industry has again become the focus of considerable controversy. In understanding the economics underlying this industry, distinctions between short, medium and long-run costs are critical, as is that between economic and accounting costs. Consumers' heterogeneous valuations create strong incentives for non-uniform pricing and targeted marketing. The conflict between static efficiency (price new drugs low, near short-run marginal cost) and dynamic efficiency (price new drugs high, maintain incentives for innovation) is deep and enduring. This trade-off is becoming more severe as the relative costs of bringing new drugs to market have increased sharply.

Citation

Berndt, Ernst, R. 2002. "Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price ." Journal of Economic Perspectives, 16 (4): 45–66. DOI: 10.1257/089533002320950975

JEL Classification

  • I11 Analysis of Health Care Markets
  • L65 Chemicals; Rubber; Drugs; Biotechnology
  • I18 Health: Government Policy; Regulation; Public Health
There are no comments for this article.
Login to Comment