19 August 2020 - The current US drug innovation financing framework rests on the notion that a defined period of marketing exclusivity combined with the expectation of reimbursement for clinically valuable, cost-effective therapies, followed by vigorous price competition from generic drugs and biosimilars ensures a sufficient return on investment to incent private sector risk-based investment and research and development activities while providing access for new treatments to patients. 

While periodically, alternatives such as government prizes, direct purchases or development, and limits on certain incentives have been proposed, the basic approach has remained intact since the 1980s, with incremental provisions addressing specific gaps and priorities, and adding provisions for biosimilar entry. 

This paper reviews the main elements of the current US system to financing drug innovation and its approach to balancing multiple objectives.

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