Governments in developing countries seeking to combat the rising costs of health care have increasingly focused on the pharmaceutical industry. They often set the amount they will pay for pharmaceutical prices through reference to other countries' prices when negotiating with pharmaceutical companies in an effort to control health care expenditures. This system of international reference pricing inhibits access to essential pharmaceuticals in underdeveloped countries and decreases pharmaceutical innovation and equitable research and development cost-sharing between developed countries.
This Note explores the tension between market forces in the pharmaceutical industry and promoting pharmaceutical innovation, equitable research, development cost-sharing, and access to affordable drugs in underdeveloped countries. The interaction of parallel trade and the lack of international regulation or restriction on the practice of international reference pricing causes this tension. The United States should enter into a series of free trade agreements with developed countries that utilize international reference pricing for pharmaceuticals providing for pricing principles restricting or limiting the practice of reference pricing, parallel trade, and other inhibitions on a socially optimal pharmaceutical market.
Medication Misadventures: The Interaction of International Reference Pricing and Parallel Trade in the Pharmaceutical Industry,
37 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vjtl/vol37/iss2/5