By Matt Barg
Over the last several decades, there have been intermittent, but unsuccessful, efforts to rein in the pharmaceutical industry with legislation and increased regulation affecting pricing, corporate tax, and intellectual property protections. Pharmaceutical corporations invariably argue that such actions would harm innovation. The industry’s contention under this theory is that profits need to be higher than what the market would normally demand in order to supplement research and develop (R&D) costs. If their profits are not protected, there will be no incentive for pharmaceutical companies to innovate, either by developing new drugs or making novel improvements on existing drugs. As a result, pharmaceutical companies are the beneficiaries of, for example, 20-year patent protections, R&D tax credits, and minimal regulation of drug pricing in order to ensure higher profits to augment R&D spending and bolster innovation.
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