Pharmaceutical Price Regulation: Lessons From Europe

Abstract

The United States is often cited as both having the world’s highest pharmaceutical prices and developing the most new therapeutic drugs, two facts that many in the industry claim to be connected. The United States is unique among developed nations in its lack of price controls on pharmaceuticals. This paper attempts to examine the price controls used in European nations and attempt to determine if an application to the United States would be at all successful. The key issue to be addressed is whether regulation can successfully decrease prices without an overly negative effect on research and development undertaken by profit driven firms. While some decrease in R&D spending is to be expected, this paper seeks for instances of price controls where this effect is relatively mild.