The high cost of R&D makes pharmaceuticals vulnerable to aggressive price regulation. Yet even stringent price regulation has not controlled drug expenditures. Public policy, the author states, must balance controlling health care spending today and preserving incentives for innovative R&D for tomorrow.

The author examines the effect of existing foreign regulation on U.S. firms, the major producers of innovative drugs. She explores the indirect spillovers from the regulatory use of international price comparisons and the increasing threat from parallel trade. The analysis concludes that competition promises more efficiency and incentives.

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