Pharmaceutical Economics and Policy

by Stuart O. Schweitzer

Overview

The pharmaceutical industry is praised as a world leader in high technology innovation and the creator of products that increase both longevity and quality of life for people throughout the world. At the same time, the industry is also criticized for its marketing and pricing practices and for its apparent anticompetitive responses to generic competition. Even its research and development priorities are criticized as being too closely driven by the goal of maximizing shareholder value, rather than the health of the public. Unfortunately, many of the critics of the industry fail to understand the complexities of the industry and its role in the nations healthcare system. This book uses the tools of economic analysis to explore the conflicting priorities and aims of the pharmaceutical industry, from both an American and worldwide perspective. This is the second edition of a uniquely comprehensive and balanced discussion of pharmaceutical policy issues. All the chapters of the former edition have been fully re-written and extensively updated. In addition, the book includes six new chapters on emerging topics such as the broadened role of FDA regulations and the increasing diversity of the industry. An entire chapter is devoted to the biotechnology industry and one to alternative medicines, often called "nutraceuticals." Another new chapter discusses segments of the industry that specialize in particular activities including generic drugs and drug delivery systems. The recent controversial expansion of Medicare to cover outpatient drugs is discussed in depth. The introduction is also updated to address the volatile pace of pharmaceutical innovation and how the pharmaceutical industry has responded to the emergence of managed care.

Product Details

ISBN-13:	9780190293796
Publisher:	Oxford University Press
Publication date:	11/02/2006
Sold by:	Barnes & Noble
Format:	eBook
File size:	3 MB

About the Author

Stuart O. Schweitzer, Ph.D., is Professor of Health Services at the UCLA School of Public Health. His research in health economics deals primarily with the application of new technology to health care. Dr. Schweitzer is a frequent consultant to health organizations both in the U.S. and abroad.

Table of Contents

Introduction     3
The Supply of Pharmaceuticals     5
The Demand for Pharmaceuticals     7
Pharmaceutical Prices     8
The Multinational Pharmaceutical Industry     11
International Price Comparisons     12
Timing of Pharmaceutical Approvals     12
Government Intervention in the Pharmaceutical Sector     13
The Industry
The Pharmaceutical Industry     21
Pharmaceutical Research and Development     22
The Competitive Structure of the Pharmaceutical Industry     23
Pharmaceutical Research and Development and Prices     27
The Pharmaceutical Research Process     29
Product Liability     38
Conclusions     40
The Biotechnology Industry     44
Background     44
Product Development in the Biotechnology Industry     47
The Natural History of Biotechnology Firms     48
Case Studies of Alliances     53
Regulation     55
Case Studies of Biotechnology Firm Growth     57
Conclusions     60
Other Firms in the Pharmaceutical Industry     63
Generic Drugs and Their Manufacturers     63
Outsourcing Firms     68
Conclusions     78
Marketing Pharmaceuticals     82
Size of Marketing Effort     85
Does It Work?     85
Types of Promotion     87
Disguising Marketing as Research     93
Marketing in an Era of Managed Care     94
Pharmacy Benefit Managers     95
Direct-to-Consumer Advertising     97
Over-the-Counter Drugs     100
Joint Marketing     103
Disease Management     103
Roles of the U.S. Food and Drug Administration in Marketing     104
False and Misleading Claims     105
The Consumer
The Demand for Pharmaceuticals     115
How Is Demand Determined?     116
The Changing Structure of the Pharmaceutical Market     117
Conclusions     131
The Market
Pharmaceutical Prices     137
The Problem of Pharmaceutical Prices     138
Pharmaceutical Prices over Time     139
Measuring Drug Prices     141
How Are Drug Prices Determined?     143
Cost Structure of Pharmaceutical Firms     144
Is the Pharmaceutical Industry Monopolistic?     149
How Drug Quality Influences Price      153
The Worldwide Market for Pharmaceuticals     157
Geographic Patterns of Pharmaceutical Production and Sales     158
Pharmaceutical Research and Development: An International View     159
Does Government Drug Price Setting Influence R&D?     166
Worldwide Manufacturing and Sales     167
Access to Appropriate Drugs in Developing Countries     170
Effect of the World Trade Organization Treaty     173
Pricing Pharmaceuticals in a World Environment     177
Why Do Drug Prices Vary Across Country?     178
Comparisons of International Drug Prices     180
How Do We Measure Drug Prices across Countries?     184
Why Drug Price Differences Persist     186
Policy Implications     186
The Timing of Drug Approvals in the United States and Abroad     191
The Timing of Pharmaceutical Approvals and Health Policy     192
The Drug Approval Process in the United States     193
Recent Initiatives to Expedite Drug Approvals     198
Is There a U.S. Drug Lag?     199
Intervention in the Pharmaceutical Market: Public and Private
Pharmaceutical Regulation and Cost Containment by the Public Sector     209
Evolution of the U.S. Food and Drug Administration      2110
Medicaid     211
State Cost-Containment Efforts     213
Medicare     214
Regulation by the Private Sector     222
Cost-Containment Mechanisms     222
Cost Containment in Managed Care     230
Pharmaceutical Regulation in Europe     238
The Pharmaceutical Industry in Europe     238
History of Regulation in Europe     239
Move Toward a Single Market     240
Structure and Role of the European Medicines Evaluation Agency     240
Drug Review under the European Medicines Evaluation Agency     241
Current Regulatory Structure     242
The Centralized Procedure for Marketing Authorization     243
The Mutual-Recognition Procedure     245
Performance of Europe's Centralized Drug Approval     246
Rules on Labeling of Medicinal Products     247
Advertising Regulations     248
Pharmacovigilance     248
Generic Drugs     249
Patent Protection     252
Patent Law     253
Patentability and Patent Categories     254
How Are Patents Obtained?     255
What Protection Does a Patent Confer?     256
Duration of Patent Protection     256
Infringement of Patents     258
International Patent Treaties     258
Patent Procedures under International Conventions     260
Shortcomings of the Patent System     260
Patents and Societal Choice     261
Social Benefits of the Patent System     261
Evaluating New Drugs     263
Optimizing Production of Health     263
Cost-Benefit Analysis     266
Cost-Effectiveness Analysis     270
Cost-Utility Analysis     272
Policy Applications     274
Interpretation and Misinterpretation of Cost-Effectiveness Studies     277
Complementary and Alternative Medicines     280
Who Uses Complementary and Alternative Medicines?     282
Manufacturers and Distributors of Complementary and Alternative Medicines     282
Dietary Supplements     283
Food Additives     293
Medical Foods     296
Concluding Remarks on Complementary and Alternative Medicines     300
Pharmaceuticals and Health Policy: A Look Ahead     304
Structure of the Pharmaceutical Industry     304
Health System Reform     306
Drug Prices     308
Drug Imports     308
Patent Protection     309
Drug Approvals     310
Managed Care and Restricted Access to Pharmaceuticals     311
The U.S. Food and Drug Administration     313
Genetically Targeted Drugs     314
Conclusions     315
Index     317

Editorial Reviews

2 Stars from Doody

This book is the first in-depth evaluation of the economics of the U.S. and world-wide pharmaceutical industry in more than 25 years. It evaluates the pharmaceutical industry, marketing strategies of the pharmaceutical industry, the demand for pharmaceuticals, the pharmaceutical market, and interventions in the pharmaceutical market, including regulation, patient protection, new drug evaluation, and future health policy. The purpose is to explore conflicting priorities and aims of the pharmaceutical industry. This text, using an economic framework, examines the supply and demand sides of the pharmaceutical market as well as policies that attempt to alter market performance. The audience for this book is broad and will include healthcare professionals and students interested in health economics, health administration, pharmacy administration, and public policy. In addition, individuals working for healthcare regulatory agencies, pharmaceutical industry, health delivery organizations and healthcare insurance providers will find this information valuable. Highlights of the text include an in-depth discussion of pharmaceutical industry research and development practices, pharmaceutical marketing strategies, pharmaceutical pricing strategies, and patient protection issues. This book represents a worthwhile effort in discussing the economics and market forces that shape the pharmaceutical industry in the U.S. and abroad. Although some of the chapters appear to be disjointed from others, each contains useful and relevant information. The discussion of foreign regulatory affairs, foreign drug development, and pharmacoeconomic evaluations of new drugs tend to be less in-depth than otherissues. The book may have faired better if the global perspective were eliminated. Given these relatively minor detractions, the text is a welcome addition to those readers who deal with the pharmaceutical industrial and public policy issues.

Daniel E. Hilleman

Reviewer: Albert I Wertheimer, BS, MBA, PhD (Temple University School of Pharmacy)
Description: This is a wonderfully comprehensive examination of the internal and external economic forces affecting the pharmaceutical industry. It includes the biotechnology, generic, and international sectors and provides thorough reviews on the impact of regulations, price controls, patents, and marketing policies. This second edition is up-to-date and complete.
Purpose: The pharmaceutical sector is essential in all healthcare systems and yet most studies or reports only deal with selected topics or questions. This book reviews the entire industry and its components. It is useful for students in pharmacy, medicine, public health, health administration, and economics as well as for health planners, regulators, and those working in health policy. The book is much needed as there are few places where one can find a thorough, organized, and integrated treatise on this topic. The book even has a section on complementary and alternative medicines and a look into the future for pharmaceuticals and health policy. The author has succeeded in providing a one-stop resource for information about the economic and regulatory environment facing the pharmaceutical industry.
Audience: The author suggests that the book should be useful for students in related fields as well as for persons working in these areas. The book is useful in pharmaceutical marketing, public relations, lobbying, for persons preparing lectures, and persons in the various regulatory agencies. The information is accurate, objective, and current and is presented with appropriate perspective. It is very useful for anyone involved in the pharmaceutical realm.
Features: One may find fine information on the approval of new drugs, their marketing, price controls, the use of patents, pricing, and most aspects of the conduct of the industry in these areas. What is best about the book is its comprehensiveness. It covers topics little written about, such as nongovernmental price regulations, timing information about government approvals, and detailed data about alternative medicines, and a superb interpretation of the conduct of the marketplace in the U.S. and abroad. A more detailed index would be the only thing I would suggest if there is to be a third edition.
Assessment: This is a welcome addition to the market. It is extremely well organized and written and has precise information. The listed citations are abundant enough to enable the serious student to locate further information.

Doody's Review Service