Abstract

The federal government indirectly subsidizes the pharmaceutical industry by funding basic research, various tax credits and deductions, patent rules, grants of market exclusivity, and other means, in order to spur drug development, promote public health, and improve medical care. But today, the pharmaceutical industry often neglects these goals and sometimes even undermines them, due to what Lawrence Lessig refers to as institutional corruption — that is, widespread or systemic practices, usually legal, that undermine an institution’s objectives or integrity. A key source of institutional corruption is improper dependence by the institution or its key actors on the actions of third parties that have fundamentally different interests. It is the health care system’s improper dependency on pharmaceutical firms that allows them to displace some public policy goals and to compromise the attainment of others.