Health Affairs

Health Affairs, 28, no. 1 (2009): w165-w168 (Published online 16 December 2008) doi: 10.1377/hlthaff.28.1.w165 © 2009 by Project HOPE	New Online   Getting Health Reform Done   After the State of the Union   Incremental Reform   E-Health in Developing World   Most-Read Articles in 2009

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PERSPECTIVE

Two Ideas To Increase Innovation And Reduce Pharmaceutical Costs And Prices

Arjun Jayadev and Joseph Stiglitz

The pharmaceutical industry is undergoing a period of uncertainty. Profits are being squeezed by increasing costs and competitive pressures, and new drug production is slowing down. This Perspective reviews two policies that could assist in realigning incentives toward genuine innovation while also keeping drug spending growth under check. Value-based pricing can incentivize genuinely new discoveries and align research and development with social welfare. Public funding of clinical trials likewise can reduce both pharmaceutical costs and prices and direct research effort in a manner that is more socially productive than the current state of affairs.

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