Gary Becker on Medicare Part D

Medicare is inefficient and expensive. Medicare has been expanded through Medicare Part D, which covers prescription drugs. Can expanding an inefficient, expensive system be a good thing? Gary Becker argues yes. Since drugs have high fixed research costs but low marginal costs, having the government pay for drugs can increase innovation. In fact, a working…

Importation and Innovation

Would drug importation from countries such as Canada be welfare improving for the U.S.? In the short run, the answer is yes. Lower prices will made pharmaceuticals more affordable and more pharmaceutical consumption closer to the static equilibrium level. In the long run, however, lower drug company profits may lead to less innovation in terms…

Value-based pricing

In February of 2007, the UK’s Office of Fair Trading (OFT) recommended reform to Britain’s current Pharmaceutical Price Regulation Scheme (PPRS). The PPRS sets maximum and minimum profit levels from the sale of branded drugs to the NHS. The PPRS allows companies freedom to set prices as they please on new substances, but restricts subsequent…