The WTO TRIPS agreement grants pharmaceutical companies patent rights on new innovative drugs. Patents give these companies the opportunity to charge higher prices for their drugs in order to recover their R&D expenses. For developing countries this is one of the reasons why people in developing countries do not have good access to drugs. In this context this paper was written. The aim of this paper was to examine the problem above from a cost-accounting perspective. To clarify the position of the different actors in the field the first part of the paper describes the broader scope of the problem. Here the characteristics of the pharmaceutical industry, a model for drug prices and the role of the WTO TRIPS agreement are described. The second part of the paper gives a conceptual framework of cost accounting techniques. Also an empirical study is done after the use of these techniques in practice. The question this paper aimed to answer was: ‘how does the industry calculate it cost prices and can they improve the accuracy of their cost prices?’ Considering the pharmaceutical industry with its high indirect costs and innovative character one would expect innovative and state-of-the-art cost accounting principles. In this research that expectation has not come true.
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|Published - 2002