13 - Pharmaceutical Innovation and Health Outcomes: Empirical Evidence from Taiwan

Summary

Introduction

Each year new pharmaceutical products are introduced as a consequence of technological advances. For example, in the United States, between 1990 and 2004, the U.S. Food and Drug Administration approved 431 new drugs with new molecular entities (NMEs). On average, nearly 29 NMEs are introduced in the U.S. pharmaceutical market annually. These new drugs extend the capability of medicine to treat diseases. New drugs developed in the United States and other high-income countries are often soon introduced in other countries, particularly if the new drug is a life-saving innovation or represents a substantial improvement over existing drugs. Improving the public's health of population is a universal goal around the world, albeit limited by many countries' ability to afford the most recently developed pharmaceuticals.

Adopting new and more effective drugs is costly. In recent years the growth rate of spending on pharmaceuticals in many countries has far exceeded the growth rate of overall health spending. Taking the median of OECD (Organization for Economic Cooperation and Development) countries as an example, during 1990–2000 the average annual growth rate of spending per capita on pharmaceuticals was 4.5%, while the average annual growth rate of health care expenditure per capita was only 3.1% (Anderson et al. 2003). As a result, increased spending on pharmaceuticals has become a major driving force of rising personal health care expenditures in many countries.