Through much of the last half century, Medicare and Medicaid have not for the most part supported research intended to lead to new drugs. For their role in drug development, we need to look to infrastructure and incentives. The record of the National Institutes of Health (NIH) illustrates the potential of both for pharmaceutical innovation. The current budget of NIH, the big elephant in the zoo of the federal biomedical enterprise, is $30 billion, but apart from a dozen small programs devoted to targeted drug development, most of these billions are not aimed directly at pharmaceutical innovation.
Kevles, Daniel J.
"Medicare, Medicaid, and Pharmaceuticals: The Price of Innovation,"
Yale Journal of Health Policy, Law, and Ethics:
1, Article 15.
Available at: http://digitalcommons.law.yale.edu/yjhple/vol15/iss1/15