2002 Volume 11 Pages 43-62
In Japan, the cost calculation method is used to determine innovative drugs' prices. The method, therefore, makes impacts on newly emerging industries as well as R&D-oriented pharmaceutical firms. This paper focuses on the method and analyzes the difficulties of cost calculation, the effects caused by the difficulties, and the effects on R&D incentives and business behaviors (PMS and promotion of innovative drugs). Then, the validity of the method, as a drug pricing method of innovative drugs, is examined. This paper finds some fundamental reasons not to support the method. One reason is that a parameter used in calculating drug prices under the method can hardly reflect the “average” image of R&D-oriented pharmaceutical firms. This suggests that only modification of the parameter is not sufficient to fundamentally improve the drug pricing method of innovative drugs.
