New pharmaceuticals: public research combines efficiency with contained costs

June 29, 2020

Is the basic research that goes into the development of new drugs more efficiently conducted by public-sector scientists, pharmaceutical firms, or independent private laboratories? What role do each of these groups play in determining prices of innovative pharmaceuticals, which have risen steeply over the last years? To answer these questions, economists Francesca Barigozzi, of the University of Bologna, and Izabela Jelovac, of the CNRS,* designed and studied a model inspired by game theory.** In an article recently published in Health Economics, they demonstrate that basic research is most cost-effective when carried out either in a public research laboratory or a pharmaceutical firm. If basic and applied research are highly complementary--where improving the quality of one benefits the other--public research units outperform pharmaceutical companies in the conduct of basic research. Furthermore, the price of new drugs is lowest when basic research takes place in public labs. These findings therefore condition the validity of the economic assumption that greater efficiency in research necessarily results in a more expensive end product.*** In some cases, public-sector basic research is the most efficient and leads to the lowest drug prices.
-end-
Notes

* member of the Groupe d'analyse et de théorie économique Lyon - Saint-Etienne (CNRS/Université Claude Bernard Lyon 1/Université Jean Monnet/Université Lumière Lyon 2/ENS de Lyon).

** The three players here are the public authorities, which may subsidize the new drug and provide research funding; the pharmaceutical firm, in charge of applied research and marketing of the drug product; and the laboratory where the basic research was undertaken, which may be a public research unit, a pharmaceutical company facility, or an independent operation, such as a start-up. Negotiations between these parties determines how research is funded and how much the new drug will cost.

*** This is what occurs when basic research is performed within a pharmaceutical firm.

CNRS

Related Game Theory Articles from Brightsurf:

Secrets behind "Game of Thrones" unveiled by data science and network theory
What are the secrets behind one of the most successful fantasy series of all time?

A memory game could help us understand brain injury
A Boston University team created a memory game for mice in order to examine the function of two different brain areas that process information about the sensation of touch and the memory of previous events.

Is video game addiction real?
A recent six-year study, the longest study ever done on video game addiction, found that about 90% of gamers do not play in a way that is harmful or causes negative long-term consequences.

Game theory suggests more efficient cancer therapy
Cornell mathematicians are using game theory to model how this competition could be leveraged, so cancer treatment -- which also takes a toll on the patient's body -- might be administered more sparingly, with maximized effect.

Kids eat more calories in post-game snacks than they burn during the game
A new study led by Brigham Young University public health researchers finds the number of calories kids consume from post-game snacks far exceeds the number of calories they actually burn playing in the game.

Can exercise improve video game performance?
Time spent playing video games is often seen as time stolen from physical activities.

APS tip sheet: Dark matter's galactic emissions and game theory of vaccination
The APS Tip Sheet highlights noteworthy research recently published in the Physical Review Journals.

Get your game face on: Study finds it may help
Could putting on a serious face in preparation for competition actually impact performance?

Researchers use game theory to successfully identify bacterial antibiotic resistance
Washington State University researchers have developed a novel way to identify previously unrecognized antibiotic-resistance genes in bacteria.

How random tweaks in timing can lead to new game theory strategies
Most game theory models don't reflect the relentlessly random timing of the real world.

Read More: Game Theory News and Game Theory Current Events
Brightsurf.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.