Pharmacologic-technical progress and the economics of growth

Over the past 200 years, the real GDP in western industrialized countries rose continuously. The decisive factor of long-term economic growth is technical progress. Beside its macroeconomic importance it is the key vehicle of competition between research-based pharmaceutical companies. Further innovative drugs are an integral part of national health care systems in most industrialized countries. Innovative medicines contribute to the increase in life expectancy and an improved quality of life. To evaluate the share of pharmacologic-technical progress in the increase in life expectancy at the micro- and macroeconomic level it is initially helpful to clarify the economic relevance of technical progress in general. This will be the purpose of chapter two. Furthermore, the discussion encompasses the different approaches to define pharmacological innovations and the associated difficulties to discriminate between the different types of innovation. The focus of chapter three is the description of incentive mechanisms, which are fundamental to the Research and Development (R&D) activities leading to innovative pharmaceuticals. Beyond that, the micro- and macroeconomic positive effects of pharmaceutical innovations will be represented and interpreted with the help of existing results stemming from selected empirical studies. The last chapter gives a detailed overview on the current empirical results, which illustrate the versatile interdependencies on macroeconomic level between health and growth. It demonstrates the channels through which better health can have growth-enhancing effects.