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Pharmaceutical Pricing and R&D as a Global Public Good
H E Frech1, Mark V Pauly2,3, William S Comanor4
1Department of Economics, University of California, Santa Barbara, California, USA.
Health Economics
|April 7, 2026
Summary
This study reveals that larger countries contribute more to the global public good of pharmaceutical information, though smaller nations still engage in some free-riding. A cooperative policy approach could optimize contributions and improve global health outcomes.
Area of Science:
- Health Economics
- Pharmaceutical Policy
- International Relations
Background:
- Pharmaceutical pricing varies internationally.
- Country contributions to the global public good of therapeutic information are not fully understood.
- Existing theories predict undersupply of public goods and exploitation of large countries.
Purpose of the Study:
- To examine international variations in branded pharmaceutical prices.
- To assess national contributions to the global public good of therapeutic information.
- To evaluate the impact of country size on these contributions.
Main Methods:
- Analysis of short-run profits (quasi-rents) as national contributions.
- Application of Samuelson-Lindahl criteria for optimal contributions.
- Comparison with Nash noncooperative equilibrium predictions (Olson-Zeckhauser theory).
- Utilizing data from a RAND report for calculations.
Main Results:
- Pharmaceutical prices and contributions vary significantly across countries.
- While lower than the US, other countries' contributions are not entirely absent.
- Country size is a strong predictor, with larger nations contributing disproportionately more.
- Evidence supports the theory of public goods undersupply and potential exploitation.
Conclusions:
- International pharmaceutical pricing reflects varying contributions to a global public good.
- Larger countries bear a greater share of the cost for therapeutic information.
- A cooperative policy framework is proposed to enhance global health benefits and achieve more optimal contributions.
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