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The pharmaceutical industry is undergoing a period of uncertainty. Profits are being squeezed by increasing costs and competitive pressures, and new drug production is slowing down. This Perspective reviews two policies that could assist in realigning incentives toward genuine innovation while also keeping drug spending growth under check. Value-based pricing can incentivize genuinely new discoveries and align research and development with social welfare. Public funding of clinical trials likewise can reduce both pharmaceutical costs and prices and direct research effort in a manner that is more socially productive than the current state of affairs.

Two Ideas To Increase Innovation And Reduce Pharmaceutical Costs And Prices