The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Pharmaceutical Industry

  • Sara Fisher Ellison
Reference work entry


The pharmaceutical industry comprises firms which manufacture medicines, including vaccines. Many of these firms also perform some or all of the following functions: conducting basic scientific research to identify (patentable) chemical compounds with medicinal properties, developing those chemical compounds into safe, effective, and commercially viable medicines, gaining government approval to sell those medicines, and marketing those medicines to potential consumers and prescribers. This industry has been widely studied by those interested in the analysis of health care systems. However, I focus here on industrial organization research which seeks to explain general economic phenomena by using the pharmaceutical industry as a setting.


Agency problems Asymmetric information Entry Industrial organization Innovation Patents Pharmaceutical industry Rregulation Research 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Azoulay, P. 2004. Capturing knowledge across and within firm boundaries: Evidence from clinical development. American Economic Review 94: 1591–1612.CrossRefGoogle Scholar
  2. Berndt, E., Z. Griliches, and J. Rosett. 1993. Auditing the producer price index: Micro evidence from prescription pharmaceutical preparations. Journal of Business and Economic Statistics 2: 251–264.Google Scholar
  3. Berndt, E., R. Pindyck, and P. Azoulay. 2003. Consumption externalities and diffusion in pharmaceutical markets: Antiulcer drugs. Journal of Industrial Economics 51: 243–270.CrossRefGoogle Scholar
  4. Boskin, M., E. Dulberger, R. Gordon, Z. Griliches, and D. Jorgenson. 1996. Toward a more accurate measure of the cost of living. Final report to the Senate Finance Committee from the Advisory Commission to Study the Consumer Price Index. Washington, DC: Senate Finance Committee.Google Scholar
  5. Caves, R., M. Whinston, and M. Hurwitz. 1991. Patent expiration, entry and competition in the US pharmaceutical industry: An exploratory analysis. Brookings Papers on Economic Activity 1991: 1–48.CrossRefGoogle Scholar
  6. Danzon, P., and L. Chao. 2000. Cross-national price differences for pharmaceuticals: How large and why? Journal of Health Economics 19: 159–195.CrossRefGoogle Scholar
  7. Ellison, G., and S. Ellison. 2000. Strategic entry deterrence and the behavior of pharmaceutical incumbents prior to patent expiration. Mimeo. Cambridge, MA: MIT.Google Scholar
  8. Ellison, S., and W. Mullin. 2001. Gradual incorporation of information: Pharmaceutical stocks and the evolution of President Clinton’s health care reform. Journal of Law and Economics 44: 89–129.CrossRefGoogle Scholar
  9. Ellison, S., and C. Snyder. 2001. Countervailing power in wholesale pharmaceuticals, Working Paper 01-27. Cambridge, MA: MIT.Google Scholar
  10. Ellison, S., and C. Wolfram. 2000. Pharmaceutical prices and political activity, Working Paper 8482. Cambridge, MA: NBER.Google Scholar
  11. Ellison, S., I. Cockburn, Z. Griliches, and J. Hausman. 1997. Characteristics of demand for pharmaceutical products: An examination of four cephalosporins. RAND Journal of Economics 28: 426–446.CrossRefGoogle Scholar
  12. Griliches, Z., and I. Cockburn. 1995. Generics and new goods in pharmaceutical price indexes. American Economic Review 84: 1213–1232.Google Scholar
  13. Hellerstein, J. 1998. Importance of the physician in the generic versus trade-name prescription decision. RAND Journal of Economics 29: 108–136.CrossRefGoogle Scholar
  14. Henderson, R., and I. Cockburn. 1996. Scale, scope and spillovers: Determinants of research productivity in the pharmaceutical industry. RAND Journal of Economics 27: 32–59.CrossRefGoogle Scholar
  15. Kyle, M. 2005. Pharmaceutical price controls and entry strategies. Mimeo, Duke University.Google Scholar
  16. Scott Morton, F. 1997. The strategic response by pharmaceutical firms to the Medicaid most-favored-customer rules. RAND Journal of Economics 28: 269–290.CrossRefGoogle Scholar
  17. Scott Morton, F. 1999. Entry decisions in the generic drug industry. RAND Journal of Economics 30: 421–440.CrossRefGoogle Scholar
  18. Stern, S., and M. Trajtenberg. 1998. Empirical implications of physician authority in pharmaceutical decisionmaking, Working Paper 6851. Cambridge, MA: NBER.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Sara Fisher Ellison
    • 1
  1. 1.