How Japan Throttles Drug Prices

Price controls on drugs--a Clinton Administration threat and the b te noire of the pharmaceutical industry--may not be as hard on drug innovation as critics say. Look at Japan, which has controlled drug prices since the 1960s. Researchers at the Universities of Michigan and Illinois and Tokyo's Keio University studied government-mandated price reductions in Japan from 1981 through 1992. Their finding: Research and development spending by Japan's drugmakers grew steadily from 6.6% of sales in 1981 to 8.6% in 1990. What's more, the number of drug-related patents climbed sharply.

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