Understanding the ‘Productivity Crisis’ in the Pharmaceutical Industry: Over-regulation or Lack of Innovation?

Abstract

Concern over productivity and innovation in the modern pharmaceutical industry has a long history (Abraham, 1995: 36–86). However, it first gained prominence in the 1970s and 1980s when the industry itself and various academic/professional commentators on both sides of the Atlantic claimed that government regulatory activity in Western Europe and North America was stifling innovation. One national pharmaceutical industry association after another pointed to how its national regulatory agency was too slow and inefficient in approving new drugs on to the market compared with other countries. For example, during the 1980s, the Association of the British Pharmaceutical Industry (ABPI) complained that the British drug authorities’ ‘over-regulation’ was detrimental to the British economy because drug development work was going abroad. In Germany and Sweden, the pharmaceutical industry also pressed their drug regulatory agencies to accelerate drug approvals and reduce regulatory checks in order to promote innovation (Abraham and Lewis, 2000: 43–79).