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date: 18 January 2021

Abstract and Keywords

This article focuses on the pharmaceutical industry. The pharmaceutical industry (including biological therapies and vaccines) is heavily regulated and yet has no intrinsic natural monopoly characteristics. Indeed it is highly competitive from research through to selling. Market power is temporary and derived from public policy in the form of government-granted patents on individual products. The regulatory issues in pharmaceuticals therefore arise from a number of factors that characterise this field. This article looks at the special challenges of regulating in the face of such factors as poor observability of efficacy, high dangers of moral hazard, and the potential exclusion from desirable services of those who lack wealth. In response to the need for private sector investment in drugs and vaccines to treat Less Developed Country-only diseases, the advantages and disadvantages of ‘push’ and ‘pull’ subsidy proposals are also considered in this article.

Keywords: pharmaceutical industry, market power, public policy, government-granted patents, private sector investment

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