Coming soon
Series: Elements in Corporate Governance
Innovation versus Financialization in the US Pharmaceutical Industry
Expected online publication date: 03 November 2025
Summary
Mandated by the Inflation Reduction Act of 2022, the US government is negotiating with pharmaceutical companies over the 'maximum fair price' of ten drugs widely used by Medicare patients. The pharmaceutical companies contend that a 'fair' price is a 'value-based price' that enables their shareholders to capture the value the drug creates for society and warn that lowering drug prices will reduce investments in new drugs. This Element responds to these arguments by showing that pharmaceutical companies (a) should have their drug prices regulated, given scale economies in supplying drugs and price inelasticity of drug demand; (b) use their profits from unregulated drug prices to distribute cash dividends and stock buybacks to shareholders; (c) do not typically rely upon investment by shareholders to fund drug innovation; and (d) benefit from 'collective and cumulative learning' in foundational and translational research that is antecedent and external to their investments in clinical research.
Information
- Type
- Element
- Information
- Series: Elements in Corporate GovernanceOnline ISBN: 9781009708012Publisher: Cambridge University Press
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