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Innovation versus Financialization in the US Pharmaceutical Industry

Expected online publication date:  27 October 2025

Öner Tulum
Affiliation:
The Academic-Industry Research Network
William Lazonic
Affiliation:
The Academic-Industry Research Network

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.

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Type
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Online ISBN: 9781009708012
Publisher: Cambridge University Press

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Innovation versus Financialization in the US Pharmaceutical Industry
  • Öner Tulum, The Academic-Industry Research Network, William Lazonic, The Academic-Industry Research Network
  • Online ISBN: 9781009708012
Available formats No formats are currently available for this content.
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Innovation versus Financialization in the US Pharmaceutical Industry
  • Öner Tulum, The Academic-Industry Research Network, William Lazonic, The Academic-Industry Research Network
  • Online ISBN: 9781009708012
Available formats No formats are currently available for this content.
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To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Innovation versus Financialization in the US Pharmaceutical Industry
  • Öner Tulum, The Academic-Industry Research Network, William Lazonic, The Academic-Industry Research Network
  • Online ISBN: 9781009708012
Available formats No formats are currently available for this content.
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