Yale School of Management

Prof. Fiona Scott Morton Discusses Competition in the Pharmaceutical Markets at Brookings Institution Forum

Fiona Scott Morton, the Theodore Nierenberg Professor of Economics at Yale SOM, was one of a number of experts who spoke at a forum on drug pricing at the Brookings Institution on May 2. 

The forum, titled “Reining in prescription drug prices,”  was hosted by Brookings’ Hutchins Center on Fiscal and Monetary Policy and the Center for Health Policy.  

Presenting a paper authored with Yale SOM statistician Lysle Boller, Scott Morton argued that greater competition, not price regulation, is needed to bring down prices and maintain innovation. 

“I think it’s well acknowledged that we have a bit of a problem in the United States with the spending we have on pharmaceuticals,” she said. “Competition can bring down prices and also generate the kind of innovation that people value, so it’s a really good solution to a lot of these problems. However, because it is so very effective, manufacturers attempt to avoid it.”

Scott Morton and Boller outline a series of factors limiting competition. For example, in the fast-growing biologic category, generic drugs do not exist; “biosimilars,” which can provide competition, are slow to enter the market because of U.S. regulations. More generally, consumers often do not have the information or the financial incentives to choose the cheapest drug; pharmaceutical companies limit competition further by artificially excluding generic competitors and manipulating incentives for consumers—for example, by giving them financial assistance with co-payments. 

Watch Scott Morton’s presentation beginning at 1:46:45:

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