Price intervention

Three submarkets of the pharmaceutical market can be distinguished innovative patented products sold by prescription, products whose patent has expired and are sold by prescription, and products sold without a prescription. The public regulation of prices in the first of these submarkets, and often also in the second, is a fact that can be observed in most Western countries, with certain notable exceptions such as the USA. Concern about the particular characteristics of the pharmaceutical market (for example, the existence of patents and the pharmaceutical industry s rate of return), together with the desire to provide the majority of the population with access to medicines, regardless of their ability to pay (in many countries the public sector is the main buyer in this market), has led to the fairly widespread adoption of more or less strict price intervention and control policies for pharmaceuticals. 

There is a long-standing habit in the health economics literature of supporting the need to regulate health care services in market failures such as information asymmetries, complexity and uncertainty, indivisibilities and externalities. These imperfections are also present in the market of a resource that is very important in the health service production process pharmaceutical products. However, the pharmaceutical market also presents certain specific characteristics that are of particular importance and have been used as arguments in favour of the need to adopt public policies of price intervention and regulation. 

The drug price intervention system in place in Spain since 1991 is based on the fixing of the price of each product by the health authorities, calculated according to its cost . This system allows for the possibility of excluding certain products or therapeutic groups from the price intervention system. It would be desirable to apply this exclusion principle to those products that are subject to a reasonable level of competition. Briefly, the main features of the Spanish system of price regulation are as follows ... 

Very strict price control systems can give rise to higher prices at the time of introduction of a new product and the weakening of potential price reductions on expiry of a product s patent (the case for 88 per cent of products in the USA). These observations support the idea that it does not appear to be at all efficient to continue with the system of product-by-product price intervention currently in force in Spain. A regulation system that gives the company flexibility of pricing and excludes products that are subject to competition would be far more recommendable.1... 

Dodd, S.A. (2007) TheEffect of the Drug Price Intervention on Retail Pharmacy in South Africa, mini-dissertation submitted in partial fulfilment of the requirements for the degree Masters in Business Administration. North-West University. Available from http //dspace.nwu.ac.za/bitstream/handle/10394/4297/dodd sa(l).pdf sequence=l [accessed 30 April 2015]. 

As decommissioning approaches and all well intervention opportunities to increase productivity have been exploited, enhanced recovery processes may be considered as a means of recovering a proportion of the remaining hydrocarbons. However, such techniques are generally very sensitive to the oil price, and whilst some are common in onshore developments they can rarely be justified offshore. 

Current production of NR is about 5.2 X 10 tonnes. For some years it has enjoyed a premium price over SBR because of its desirable characteristics described above and, compared with other large tonnage polymers, a somewhat restricted supply. Clearly it is difficult to substantially increase the production of such a material in a short period of time and indeed the attractions of other crops such as palm oil as well as the desire to move away from a monoculture economy mitigate against this. The indications are that, unless there is undue intervention of political factors, the future of natural rubber as a major elastomer remains secure. 

To be useful to those concerned with choices in the allocation of health and social care resources, the data for economic evaluations need to be timely, relevant, credible and accurate (Davies, 1998). As a minimum, the costs associated with the interventions should be estimated from activity data, which quantify resources used, and price or unit cost data. Often evidence from well-controlled prospective trials with high internal validity is required to establish whether differences in economic end points are directly attributable to the interventions. However, the economic evaluations of acetylcholinesterase inhibitors estimated costs from retrospective analysis of available datasets Qonsson et al, 1999b), analysis of published literature (e.g. Stewart et al, 1998) and expert opinion (e.g. O Brien et al, 1999 Neumann et al, 1999). This means that it is not clear whether differences in costs were due to the anticholinesterase inhibitors or to other factors such as availability of services in different areas, the living situation of the patient, or disease severity. 

And third, given that regulatory intervention generates both benefits and costs, the benefits of price control might be more than cancelled out (welfare loss) by its costs in the form of administrative costs, transaction costs and distortions in incentives derived from the regulation itself.5 The costs of an imperfect market cannot be compared with those of a perfect one, and pharmaceutical price regulation failures must be taken into account. 

In all EU countries except Germany and Denmark, some form of regulation or intervention in the individual prices of medicines is used as the principal cost containment policy, ranging from systems that fix the price of each product to profit control systems (as in the UK). Price regulation... 

In the following section of this chapter we analyse the various types of market structure that occur in the case of pharmaceuticals, and we review the different factors that can limit the functioning of price competition in this market on both the supply side and the demand side. Finally, we analyse possible forms of intervention, in particular mechanisms to encourage price competition in pharmaceutical markets, and discuss the extent to which they might improve efficiency and social welfare. 

Government intervention is not the only source of price variation between countries. Fluctuations in the exchange rate, price discrimination by the producer and indeed each country s health care system all contribute to perpetuate and extend these differences. 

For the moment, then, it is not appropriate to talk of a world pharmaceutical market as such, as there are fragmented domestic markets corresponding to each country s geographical boundaries, each characterized by its own system of price regulation and intervention. 

In general, however, this initial analysis is open to doubt, in view of the high degree of intervention in Spanish drug prices and the fact that authorized prices are regarded as maximum prices, although this is not always sufficiently stressed. These two factors complicate any forecast of the possible outcome of the competition induced by RP in the Spanish pharmaceutical market. 

First, the author recommends opting for innovation, which may entail strong patents, high prices and public financing, but with social intervention in... 

The "offered price" for Skodawerke had been extremely low, but the Austrians accepted it because Farben had promised protection for their hves. In one case at least, protection of the Skodawerke officials by someone was possible A Dr. Rottenberg was saved by the intervention of a non-Farben friend whose hfe he had once saved. But Farben did not try to save the two Jewish directors. 

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