FIGURE 8.1 How government actions may affect pharmaceutical innovation.

official attitudes toward generic products will also be important. However, what the government takes away with one hand it may give back with the other in the form of preferential pricing and other subsidies for research.

Thus, the effects of government action on pharmaceutical innovation are more extensive and more complex than they might at first appear. This is not all. Europe is fragmented along national lines. The differences in pharmaceutical production and consumption among European countries (as shown in Table 8.2 ) are quite large. Moreover, under the Treaty of Rome, 1 health care is left to the individual member countries. The European Commission has in practice managed to engineer the convergence of national regulations in some areas, but in others (e.g., pricing policies) large differences between one state and another continue to evolve. Thus, it often makes little sense to talk about “Europe ”; rather, one has to talk about the situation in France, West Germany, the United Kingdom, and so on. To overcome this problem, this paper adopts a comparative approach. The salient facts about national markets and industries are summarized in Table 8.1, Table 8.2, and Table 8.3. The following discussion focuses on the major European countries and on current developments.

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