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Pharmaceutical Manufacturing Efficiency, Drug Prices, and Public Health: Examining the Causal Links

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Abstract

There are important fundamental links among the efficiency of pharmaceutical manufacturing, drug prices, and public health in the United States. This article seeks to probe these links because recent research (by academics and even the US Food and Drug Administration) suggests there are significant opportunities to improve the manufacturing processes for pharmaceuticals. Two models are developed that consider the impact of reduced manufacturing costs on pharmaceutical prices and firm profits. The two models effectively bound the range of potential future benefits from greater manufacturing efficiency and estimate that, for example, a 30% reduction in manufacturing costs will generate between $1.0 and $12.3 trillion in social value to the United States.

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Authors and Affiliations

  1. Department of Finance, University of Connecticut and NBER, 2100 Hillside Road, Storrs, CT, 06269-1041, USA

    John A. Vernon

  2. Department of Finance, University of California, Berkeley, USA

    W. Keener Hughen

  3. College of Public Affairs, University of Central Florida, USA

    Antonio J. Trujillo

Authors
  1. John A. Vernon
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  2. W. Keener Hughen
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  3. Antonio J. Trujillo
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Correspondence to John A. Vernon.

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Vernon, J.A., Hughen, W.K. & Trujillo, A.J. Pharmaceutical Manufacturing Efficiency, Drug Prices, and Public Health: Examining the Causal Links. Ther Innov Regul Sci 41, 229–239 (2007). https://doi.org/10.1177/009286150704100217

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