Tools to Incentivize Research and Development for Pharmaceuticals

Pull Mechanisms and Differential Pricing

Abstract

This article is a review of the current state of pull mechanisms and differential pricing in relation to incentivizing pharmaceutical research and development. In many developing nations, there is a shortage of pharmaceuticals for their specific infectious diseases because these markets are not always viewed as profitable to firms. To combat this issue, governments and organizations need to work with firms to incentivize research and development for medications and vaccines for these diseases. Pull mechanisms are one way to achieve this goal as they only reward successful products; through the use of tax credits, patent buyouts, purchase agreements, or a combination, we could reward firms which makes the market more attractive to other developers too. We could also use differential pricing for the same purpose. Allowing firms to charge varied prices based on specific factors like a country's real gross domestic product per capita would increase access to needed pharmaceuticals while still keeping the market attractive. The synthesis of current literature shows that although these strategies have been moderately successful on their own, such as with the GAVI fund, they have also failed because of a lack of support, such as with the Vaccines for the New Millennium Act. Therefore, we might need to develop new strategies, such as combining policies, to spur innovation and development.