ABSTRACT
This chapter examines the nature of pharmaceutical research, the nature of competition in the industry, and the nature of the public policies that promote and/or discourage innovative activity in the industry. Many innovative new products are introduced each year in addition to new drugs. The investment in innovative activity in the pharmaceutical industry is more appropriately measured by the value of the resources that are committed to the development of new products than by the number of products that are eventually obtained. Pharmaceutical products promise consumers substantial therapeutic benefits and, at the same time, pose substantial risks. The Drug Price Competition and Patent Term Restoration Act of 1984 restored part of the patent life that had been lost in establishing proof of efficacy and has facilitated the introduction of generic products after patent expiration. The chapter concludes with an examination of the impact of current public policy on pharmaceutical innovation.
